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Exam 35: Forms of Business Organization

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Question 21

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Define a joint venture and set forth two differences under the law between a joint venture and a partnership.

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A joint venture is a relationship betwee...

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Question 22

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"Peanut Allergy." Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy. Unfortunately, Bitsy was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and told her to leave out the peanuts in Bobby's batch because of the allergy. Cathy, however, forgot about the peanut allergy and proceeded to make Bobby's cookies with peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Bobby and Bitsy, Kitty discusses her problems with the bakery with her parents. Kitty's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities. -Which of the following would be an appropriate form of business organization for Kitty and her parents such that her parents could invest but not participate in management?

A) General partnership
B) Limited partnership
C) Managed partnership
D) Combined partnership
E) Family-Based partnership

F) B) and C)
G) B) and D)

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Question 23

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A sole proprietor is considered a separate legal entity.

"Tutoring Concerns." Wally and Sally want to go into business together and plan on offering a tutoring service to high school and college students. Wally proposes that they share control of the business and split profits equally and not bother with a written agreement. Sally, however, is concerned about being able to pay their debts since they will have to rent tutoring space, and purchase computers and supplies. She is also concerned about parents and students who may sue if their test scores do not improve. She tells Wally that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells Wally that they should form a corporation to shield their personal assets. Wally, however, tells their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would even result in tax being imposed twice. -Is Wally correct that with his proposal that they share control of the business and split profits equally there could be no personal liability for debts?

In China, which of the following is defined as "an organization which possesses civil legal capacity for civil acts and which, according to the law, independently enjoys civil rights and assumes civil obligations"?

Which of the following isfalse regarding limited liability partnerships in Japan?

Which of the following is a group that comes together for the explicit purpose of financing a specific large project?

The Mexican limited liability company is derived from the model in which of the following countries?

"Peanut Allergy." Kitty, who had a love of baking, decided to open her own bakery. She decided that she did not need and did not want to pay for a lawyer to advise her on different forms of ownership. Unfortunately, Kitty had not paid attention in business law class. She proceeded, with little thought, to simply open her business called Kitty's Baking. Bobby came in to order some cookies for his girlfriend, Bitsy. Unfortunately, Bitsy was allergic to peanuts. Bobby told Kitty that he needed some cookies for Bitsy but that Bitsy had allergies to peanuts. Kitty told him not to worry because she would make up a special batch just for him. Kitty had hired some assistants because she was so busy. She told an assistant, Cathy, to make up several batches of cookies for different customers including Bobby and told her to leave out the peanuts in Bobby's batch because of the allergy. Cathy, however, forgot about the peanut allergy and proceeded to make Bobby's cookies with peanuts. Bobby picked up the cookies and gave one to Bitsy in the car while they were on the way to the movie in Bobby's new car. Bitsy became violently ill, vomited in Bobby's car, and had to have her stomach pumped. Bobby and Bitsy sought recovery from Kitty who told them that Bitsy's doctor bill and Bobby's car cleaning bill were business debts, that the business was new and not making any money at the moment, and that she had no personal liability. Following the incident involving Bobby and Bitsy, Kitty discusses her problems with the bakery with her parents. Kitty's parents would like to invest in her business and share in any profits, but they do not want to share in the management responsibilities. -Which of the following is true regarding Kitty's statement that she had no personal liability?

In which of the following does the franchise operate under the franchisor's business name and act subject to the franchisor's standards and methods of business operation?

A franchisee is the owner of a trade name or trademark who is a party to an arrangement, whereby another party sells goods or services under the trade name or trademark.

Which of the following is an organization formed by individuals, who usually pool their resources, to market products?

Which of the following is true regarding S corporations?

"Chocolate Chips." Molly makes great chocolate chip cookies and sells them in her café called "Molly's Famous Chocolate Chips." Some of her friends express interest in selling her cookies. They want to use her name and identify the cookies as "Molly's Famous Chocolate Chips." Seeing a business opportunity, Molly agrees to bake the cookies and provide them in a frozen state to her friends who will open other cafés under her café's name. Molly strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers pursuant to her agreements with them. Suzette, one of Molly's friends who entered into an agreement with Molly to open a café and sell the cookies, was not being sufficiently careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Fred, becoming ill. Fred threatens to sue both Suzette and Molly. Molly is so exasperated that she cancels all the franchise contracts on the basis of aggravation. Although the franchise agreements provide that so long as requirements are met, the franchise agreements are good for a period of two years, Molly takes the position that the cookies involve a personal service using a trade secret and that she cannot be held liable for discontinuation. -What type of arrangement did Molly make with her friends?

Which of the following is a relationship between two or more persons or corporations created for a specific business undertaking?

Which of the following is false regarding franchises?

"Chocolate Chips." Molly makes great chocolate chip cookies and sells them in her café called "Molly's Famous Chocolate Chips." Some of her friends express interest in selling her cookies. They want to use her name and identify the cookies as "Molly's Famous Chocolate Chips." Seeing a business opportunity, Molly agrees to bake the cookies and provide them in a frozen state to her friends who will open other cafés under her café's name. Molly strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers pursuant to her agreements with them. Suzette, one of Molly's friends who entered into an agreement with Molly to open a café and sell the cookies, was not being sufficiently careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Fred, becoming ill. Fred threatens to sue both Suzette and Molly. Molly is so exasperated that she cancels all the franchise contracts on the basis of aggravation. Although the franchise agreements provide that so long as requirements are met, the franchise agreements are good for a period of two years, Molly takes the position that the cookies involve a personal service using a trade secret and that she cannot be held liable for discontinuation. -Will Molly likely be held liable to Fred?

Which of the following is false regarding limited liability companies?

Which of the following is responsible for managing the business of a corporation?

Which of the following governs partnerships in most states in the absence of an express agreement?