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LAW 531 Week 1 Knowledge Check -
1. Identify an accurate statement about a sole proprietorship.
A. It is a form of business that is seldom found in the United States.
B. It is a form of business that has only one owner.
C. It is a separate legal entity, distinct from an owner.
D. It is a business form in which the owner enjoys limited liability.
2. Sara and Cilia run a café together. They share ownership of and liability for the café and have come to an agreement about how the profits from the cafe should be divided between them. If the café runs into debt, both Sara and Celia are responsible for the debt.
What form of business is best demonstrated in this scenario?
A. A sole proprietorship
B. A corporation
C. A general partnership
D. A limited liability company
3. What criterion under the Uniform Partnership Act (UPA) must be met by a business, for it to qualify as a general partnership?
A. The objective of the partnership should be to create profits.
B. One of the owners must be willing to assume completely liability of the business.
C. The partnership should not involve more than two persons.
D. Only one owner should take up the legal responsibility of contracts.
4. What is true about a limited partnership?
A. All the partners are personally liable for partnership debts.
B. The partnership cannot involve more than two individuals.
C. The general partners do not invest capital or participate in the management of the business.
D. The limited partners are not personally liable for partnership debts beyond the amount invested by them.
5. Who among the following is most likely to be a limited partner in a limited partnership?
A. David, who takes up the task of work delegation in the business.
B. Kiara, who makes contracts with suppliers for the partnership.
C. Kevin, who does not have to make up for losses if a contract made by the partnership fails.
D. Nelson, who is required to use his personal wealth to pay for any debts incurred by the partnership.
6. Who has unlimited liability for the debts and obligations of limited partnerships?
A. Limited partners
B. General partners
D. Board of directors
7. What is a characteristic of a corporation?
A. It is a separate legal entity.
B. It is dissolved after the death of any one shareholder.
C. Its shareholders have unlimited liability.
D. Its existence cannot be ended by the choice of its shareholders.
8. Identify the type of corporations in which there are thousands of shareholders and the shares are traded on national stock exchanges.
A. Not-for-profit corporations
B. Sole proprietorships
C. Limited partnerships
D. Publicly held corporations
9. Alpha Corp. has very few shareholders and all of the shareholders belong to a single family. The shareholders are involved in the operations of the business and frequently make management decisions. What type of corporation does Alpha Corp. best represent?
A. A closely held corporation
B. A government-owned corporation
C. A private corporation
D. A publicly held corporation
10. Identify the true statement about limited liability companies.
A. They are created by federal and not state laws.
B. They are not separate legal entities like corporations.
C. They can be taxed as partnerships.
D. They are incorporated business entities.
11. What is true about the formation of limited liability companies?
A. Doctors and lawyers most frequently form limited liability companies.
B. Owners can establish their limited liability company in only one state.
C. Owners of limited liability companies cannot conduct business in other states.
D. Sole proprietors cannot form limited liability companies in any state.
12. Delta Group is a business firm created by a team of doctors. The business was formed as per the state's laws and is not taxed as a separate entity. The owners of the business are not personally liable for the losses, debts, and obligations of the firm. Identify the business form that is best illustrated in the scenario.
A. A limited liability company
B. A general partnership
C. A corporation
D. A limited liability partnership
13. Nutristar is a soft drink manufacturing company that wishes to expand its business. The company has licensed another firm to manufacture its soft drinks and provided the firm with the necessary confidential information about manufacturing. The licensed company manufactures the soft drinks and distributes them. What type of franchise is best illustrated in this scenario?
A. A processing plant franchise
B. A distributorship franchise
C. An area franchise
D. A chain-style franchise
14. Identify the business arrangement that involves two business firms pooling resources to work on a single, mostly temporary, business project.
B. Sole proprietorship
D. Joint venture
15. Gamma Inc. has permitted another firm to operate under its name and use its trademarks and service marks. This firm can now use the intellectual property of Gamma Inc. to produce and distribute products. What business concept is best illustrated in this scenario?
16. Identify the true statement about negotiation as an alternative form of dispute resolution.
A. The final decision is always approved by a third party.
B. The two parties involved may be represented by attorneys.
C. The court does not permit the parties to negotiate before the trial.
D. The court has to approve an agreement before it is signed by the two parties.
17. Identify the form of alternative dispute resolution in which the two involved parties go to a neutral third party, who makes the final decision.
18. Synergy Inc. is involved in a dispute with Alpha Corp. Both companies have agreed to conduct a private proceeding involving representatives from each side. They have also appointed lawyers to present their arguments to these representatives. What type of alternative dispute resolution is most likely being used in this scenario?