Entrepreneur's Options Flashcards
Cal sells “DownSize,” a weight-reduction program, from a Web site, in competition with Eat-Less Inc.’s product “Fit ‘n Trim.” Eat-Less files a suit against Cal, alleging in part that he is a sole proprietor, but his enterprise should be deemed a different form of business. Cal’s enter¬prise should most likely be considered
a. a corporation because DownSize is sold online.
b. a franchisee because DownSize is sold in competition to Fit ‘n Trim.
c. a sole proprietorship because Cal is a sole proprietor.
d. no form of business entity because Cal has no formal organization.
c. a sole proprietorship because Cal is a sole proprietor.
Leigh wants to go into the business of construction contracting. Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be
a. its greater organizational flexibility.
b. its limited liability.
c. its perpetual existence.
d. the ease of transferring the business to other family members.
a. its greater organizational flexibility.
Phillipa is the sole proprietor of Incredible Floral Arrangements. As a sole proprietor, on Incredible’s profits, Phillipa
a. does not pay income taxes.
b. pays only personal income taxes.
c. is taxed twice.
d. pays both personal and sole proprietor income taxes.
b. pays only personal income taxes.
Julia owns and operates Collectable Dolls without creating a separate business organization. She receives all the profits from the doll sales. Collectable Dolls is most likely a
a. a corporation.
b. a limited liability company.
c. a partnership.
d. a sole proprietorship.
d. a sole proprietorship.
Robert owns Textbooks Plus, a sole proprietorship that sells textbooks. When Robert dies, Textbooks Plus will
a. be automatically dissolved.
b. pass directly to his oldest child.
c. pass directly to the state.
d. be evenly divided among all Robert’s heirs.
a. be automatically dissolved.
Jody owns KuppaJava Kiosks, a sole proprietorship. Jody’s liability is
a. limited by state statute and varies from state to state.
b. limited to the extent of capital expenditures.
c. limited to the extent of his or her original investment.
d. unlimited.
d. unlimited.
Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid. Because of this agreement, the Circle C is Ben’s
a. partner.
b. creditor.
c. agent.
d. joint venturer.
b. creditor.
Will and Jay form Northwest Air Express, a general partnership. The essential elements of this partnership do not include
a. a sharing of profits and losses.
b. a joint ownership of the business.
c. an equal right to management in the business.
d. goodwill.
d. goodwill.
Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is
a. express, but not from an agreement that is implied.
b. implied, but not from an agreement that is express.
c. express or implied.
d. written, but not otherwise express or implied.
c. express or implied.
Sweet Stuff is a general partnership that sells candy, cards, and flowers. Sweet Stuff has ten partners. Jill and Amy each have a 25 percent interest in the firm. The other partners each have a 10 percent interest. In management matters
a. each partner has one equal vote. b. each partner votes in proportion to his or her interest. c. only the two partners with the largest interests have votes. d. only a partner charged with managing the firm has a vote.
a. each partner has one equal vote.
Cody is a partner in Delta Accounting Service. Cody can inspect
a. all of Delta’s books and records.
b. Delta’s books and records only as the firm’s management permits.
c. Delta’s books and records only for a reasonable purpose.
d. Delta’s books and records relating to Cody’s capital contribution only.
a. all of Delta’s books and records.
Mabel and Nicol do business as One World Realty. In acting on the firm’s behalf in a deal with Property Acquisition Company, Mabel fails to account for the profit. To her firm, Mabel is
a. liable for breach of the duty of care.
b. liable for breach of the duty of economic sense.
c. liable for breach of the duty of loyalty.
d. not liable.
c. liable for breach of the duty of loyalty.
Hollister and Gladys do business as partners in Frothy Confections. For federal income tax purposes, Frothy Confections would be treated as
a. a pass-through entity.
b. a natural person.
c. a tax-paying entity.
d. a partnership by estoppel.
a. a pass-through entity.
Newt is considering forms of business organization for Newton Design, an ar¬chitectural firm. An advantage of a limited liability partnership is that partners can avoid personal liability for
a. their own wrongful acts.
b. only other partners’ malpractice.
c. only partnership obligations that exceed capital contributions.
d. only partnership obligations that fall within capital contributions.
b. only other partners’ malpractice.
Fern and Gray want to form a limited partnership to manage two restaurants, Café Latte and Deli Delite. In most states, a limited partnership will be created when
a. a certificate of limited partnership is filed.
b. a partnership agreement is executed.
c. the business for which the firm is formed actually begins.
d. the partners make their capital contributions.
a. a certificate of limited partnership is filed.
Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lucy is personally liable for the debts
a. in proportion to the number of partners in the firm.
b. to no extent.
c. to the extent of her capital contribution.
d. to the full extent.
c. to the extent of her capital contribution.
Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she
a. acts as the firm’s manager.
b. does not participate in the firm’s management.
c. invests in Unified Fund, one of Venture’s competitors.
d. votes on the firm’s sale or dissolution.
a. acts as the firm’s manager.
Dani is considering forms of business organization for her financial advisory firm. Like most states, Dani’s state requires that to form a limited liabil¬ity company, she must file with a central state agency
a. articles of certification.
b. articles of formation.
c. articles of organization.
d. no specific documents.
c. articles of organization.
Coco is considering forms of business organization for her concessions business—Coco’s Cupcakes. Most states require that a limited liability company have
a. no minimum number of members.
b. at least one member.
c. at least two members.
d. at least three members, including at least one general partner.
b. at least one member.
Location! Realty LLC is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of
a. all states.
b. every state in which its members are citizens.
c. no state.
d. only the state in which it was formed.
b. every state in which its members are citizens.
Jordana is a member of Klondike Coffee, LLC, a limited liability company. Jordana is liable for Klondike’s debts
a. in proportion to the total number of members.
b. to the extent of her capital contribution.
c. to the extent that the other members do not pay the debts.
d. to the full extent.
b. to the extent of her capital contribution.
Jumbo Jumpin’ Jelly Beans, LLC, is a limited liability company. Unless indi¬cated otherwise on Jumbo’s federal tax form, the firm will be taxed as
a. a cooperative.
b. a corporation.
c. a joint venture.
d. a partnership.
d. a partnership.
Homer’s Remodeling, LLC, is a limited liability company. Among the mem¬bers, a dispute arises that their operating agreement does not cover. No statute applies. The dispute is most likely governed by the principles of
a. corporate law.
b. partnership law.
c. sole proprietorship law.
d. joint venture law.
b. partnership law.
Kristal is a member of Laboratory CSI Services, LLC, a limited liability company. Kristal can participate in the firm’s management
a. only to the extent that she assumes liability for the firm’s debts.
b. only to the extent of her investment in the firm.
c. to any extent.
d. to no extent.
c. to any extent.
