CH. 13: Ownership & Management

Question 1

Clause in the purchase agreement to restrict the seller from competing with the business for a reasonable amount of time w/in a reasonable geographical loation

• may be found in employment contracts–> restrict employee from using trade secrets, confidential info. & trade connections

Answer 1

Noncompetition/ nonsolicitation clauses

Question 2

Purchaser assumes all assets & liabilities of the business (better for the seller)

Answer 2

Share/ stock purchase agreement

Question 3

Buyer can pick & choose assets he/ she wants to purchase & assume liabilities of those assets only (better for buyer)

Answer 3

Asset purchase agreement

Question 4

real property

Answer 4

land and fixtures

Question 5

personal property

Answer 5

chattels & intangibles

Question 6

Intangibles

Answer 6

neither real property nor chattels, but are things like:

• shares debts intruments
• goodwill in a business
• trademark ownership
• rights to insurance proceeds
• rights under a contract

Question 7

5 tiers of the corporate structure:

Answer 7

1. shareholders
2. employees
3. board of directors
4. statutory officers
5. creditors

Question 8

3 ways to finance a new/ existing business

Answer 8

1. Equity/ stock financing
2. Debt financing
3. Sale of assets

Question 9

chattel mortgage on inventory= situation in which the creditor can swoop down & immobilize inventory still in stock upon default

Answer 9

Floating Charge

Question 10

What may happen if you default on your mortgage:

Answer 10

1. Foreclosure
2. Power of sale
3. Taking possession of the property
4. Action on the covenant
5. Seizure & sale of the property at auction

Question 11

four conditions of adverse possession (squatter’s rights)

Answer 11

1. Open & notorious- possessor may not posses land in secret but make it known to the owner
2. Unchallenged- owner’s aware of possession & allows it to continue w/out asserting rights of ownership
3. Exclusive- possessor must be only non-owner in possession & cannot have competing claims
4. Continuous- if possession’s interrupted before required time period, claim of adverse possession will fail

Question 12

Advantages & disadvantages of a franchise

Answer 12

• can acquire instant goodwill, training & procedural & operational guidance & support
• disadvantage: problems arise if there’s a weak operation, strict rules

Question 13

Advantages & disadvantages of a Stand- alone operation

Answer 13

• few government formalities
• disadvantages: income must be reported on owner’s individual tax form

Question 14

Selling A/R at a discount

Answer 14

Factoring

Question 15

Time required to pay off principal completely at a set interest rate

Answer 15

Amortization period

Question 16

business owned by one individual

Answer 16

sole proprietorship

Question 17

“with bread”

Answer 17

cum panis

Question 18

The right to encumber land owned by another security for the performance of the land owner’s obligation

Answer 18

Land lien

Question 19

intangible intellectual property; a symbol word, name or device adopted to id a company or its product

Answer 19

Trademark