Legal Guidelines and Professional Responsibilities

Question 1

typical structures of for-profit business

Answer 1

1) sole proprietorship
2) partnership
3) corporation

Question 2

the structure that the vast majority of for-profit business operate under

Answer 2

sole proprietorship

Question 3

T/F: Creating a sole proprietorship doesn’t require any formal paperwork.

Answer 3

True

Question 4

T/F: A partnership can be created without filing paperwork.

Answer 4

True

However, this is not recommended, and there should be legal documents that clearly establish rules of operation, partners’ rights, etc.

Question 5

a type of general partnership that can be created by a contract between the parties (formal)

Answer 5

express partnership

Question 6

a type of general partnership created and recognized by the judicial system if individuals act as partners (e.g., sharing a company checking account or jointly signing a business loan) [informal]

Answer 6

implied partnership

Question 7

events that automatically terminate a partnership

Answer 7

1) a partner dies
2) a partner becomes bankrupt
3) partner(s) engage in illegal activity
4) courts can discontinue if one partner is deemed mentally incapacitated

Question 8

most typical type of corporation used by personal-training businesses that do not operate as a sole proprietorship or partnership

Answer 8

S-corporation

Question 9

requirements of an S-corp

Answer 9

1) must be based in the US
2) only up to 100 investors
3) all investors must be from the US
4) can only issue one form of stock

Question 10

major benefit of LLCs/LLPs in comparison to S-corps

Answer 10

more simplified paperwork

Question 11

T/F: There are not any national standards regarding the operation of LLCs or LLPs.

Answer 11

True

States govern these in a variety of ways

Question 12

sole proprietorship advantages and disadvantages

Answer 12

Advantages:

• easily created and managed
• flow-through taxation

Disadvantages:

• personal liability
• raising capital

Question 13

partnership advantages and disadvantages

Answer 13

Advantages:

• easily created
• flow-through taxation

Disadvantages:

• potential management disputes
• personal liability (except for LPs)

Question 14

S-corps advantages and disadvantages

Answer 14

Advantages:

• flow-through taxation
• limited liability

Disadvantages:

• limited number of potential investors
• costs of formation and operation

Question 15

LLC/LLP advantages and disadvantages

Answer 15

Advantages:

• flow-through taxation
• limited liability

Disadvantages:
- undefined operating standards in states

Question 16

C-corps advantages and disadvantages

Answer 16

Advantages:

• limited liability
• unlimited number of investors

Disadvantages:

• cost of formation and operation
• double taxation

Question 17

advantages of owning and operating a franchise

Answer 17

1) obtaining the rights to a recognized brand that will assist the PT in creating a strong presence in a specific market
2) access to the business and operating systems created by the franchiser (e.g., floor plans, equipment layouts, equipment discounts, operating plans, marketing information)
3) access to national advertising programs
4) ability to control the business as long as the needs and requirement of the parent franchise are met
5) franchisers will provide training and advice on all aspects of marketing and operating the business

Question 18

disadvantages of owning and operating a franchise

Answer 18

1) upfront costs for the franchise fee and ongoing costs to maintain the association with the parent brand of the franchise
2) annual costs of maintaining the franchise
3) association with a particular brand if other franchisees perform poorly or are unethical
4) franchisee’s limited ability to adapt to changing market forces due to having to follow the franchise’s operating model

Question 19

a personal trainer who is an independent contractor should be able to:

Answer 19

1) choose when and where to work
2) charge variable fees for different situations
3) begin working without extensive guidance
4) maintain autonomy in training decisions

Question 20

elements that are necessary to create a binding contract

Answer 20

1) an offer and acceptance with a mutual agreement of terms
2) consideration (an exchange of valuable items, such as money for services)
3) legality (acceptable under the law)
4) ability of the parties to enter into a contract with respect to legal age and mental capacity

Question 21

this is typically signed as a component of the initial contract

Answer 21

waiver

Question 22

when the statute of frauds become applicable

Answer 22

1) agreement involves real estate or goods or services worth $500 or more, OR
2) requires more than one year to complete

Question 23

what the statute of frauds requires

Answer 23

a written contract for the agreement to be valid

Question 24

the 4 elements a plaintiff must establish to substantiate a charge of negligence in court

Answer 24

1) the defendant had a duty to protect the plaintiff from injury
2) the defendant failed to uphold the standard of care necessary to perform that duty
3) damage or injury to the plaintiff occurred
4) this damage or injury was caused by the defendant’s breach of duty (proximate causation)

Question 25

failing to perform as a reasonable and prudent person would under similar circumstances

Answer 25

negligence

Question 26

two ways a negligent act can occur

Answer 26

1) trainer fails to act (act of omission) | 2) trainer acts inappropriately (act of commission)

Question 27

example of an act of omission

Answer 27

failure to spot a client

Question 28

example of an act of commission

Answer 28

incorrect programming for a client who has known medical issues

Question 29

another name/term for vicarious liability

Answer 29

respondeat superior

Question 30

states that employers are responsible for the workplace conduct of their employees

Answer 30

vicarious liability (respondeat superior)

Question 31

clause in the waiver liability that bars the injured party from potential recovery

Answer 31

exculpatory clause

Question 32

T/F: A waiver that is valid in one state will be valid in other states.

Answer 32

False

Question 33

T/F: Waivers do not protect a personal trainer from injuries caused by gross negligence.

Answer 33

True

Question 34

an action that demonstrates recklessness or a willful disregard for the safety of others

Answer 34

gross negligence

Question 35

when gross negligence typically occurs

Answer 35

when someone deliberately acts in a manner that extends beyond the scope of employment or fails to meet the accepted standard of care (i.e., something that should never occur in normal course of employment/care)

Question 36

T/F: Contributory negligence laws may prevent a plaintiff from receiving any remuneration due to playing some role in the injury.

Answer 36

True

Question 37

instead of contributory negligence, the majority of states utilize this

Answer 37

comparative negligence

Question 38

governs when multiple parties are responsible for injury and the court apportions guilt and any subsequent award for damages

Answer 38

comparative negligence

Question 39

designed to protect the personal trainer from a client claiming to be unaware of the potential risks of physical activity

Answer 39

agreement to participate

Question 40

T/F: An agreement to participate is not typically considered a contract.

Answer 40

True

Question 41

when an agreement to participate is typically utilized

Answer 41

group/class settings

Question 42

details that should be outlined in an agreement to participate

Answer 42

1) nature of the activity 2) potential risks to be encountered 3) expected behaviors of the participant

Question 43

T/F: Typically, agreements to participate are incorporated into other documents like informed consent forms and waivers.

Answer 43

True

Question 44

utilized by a personal trainer to demonstrate that a client acknowledges that he or she has been specifically informed about the risks associated with the activity

Answer 44

informed consent

Question 45

issues that should be considered when inspecting facilities

Answer 45

1) different floor surfaces are used for different activities 2) sufficient free space available to protect the client from others and from hurting themselves on equipment 3) functional lighting must be sufficient 4) functional heating and A/C systems 5) proximity to drinking fountains and bathrooms

Question 46

T/F: A trainer can be held partially liable if the fitness club/facility does not correct an unsafe condition.

Answer 46

True

Question 47

T/F: Utilizing a fitness center for training sessions without notifying management is an unethical business practice and, in some areas, against the law.

Answer 47

True

Question 48

ACE recommended amount of personal liability insurance

Answer 48

at least $1 million

Question 49

a special addition to typical insurance policy provisions that is recommended for PTs using their own home or the client's home for workouts, or for workouts outside

Answer 49

insurance rider

Question 50

insurance for PTs who also sell products

Answer 50

product liability insurance

Question 51

the insurance policy recommended by most agents for PTs

Answer 51

umbrella liability policy

Question 52

insurance policy that provides added coverage for all of the other insurance (e.g., home, auto, professional liability)

Answer 52

umbrella liability policy

Question 53

T/F: If a PT is sued and the judgment exceeded the professional liability coverage, the umbrella liability policy would cover the shortfall.

Answer 53

True

Question 54

insurance policy designed to compensate the business for the loss of a person who performs a unique and valuable function

Answer 54

keyman insurance

Question 55

if these certain words/phrases are not specified in the insurance policy, the policy only covers the trainer to the extent the services provided were inadequate or improper

Answer 55

"failure to render" or "omission"

Question 56

3 critical components of an insurance policy related to coverage

Answer 56

1) legal fees 2) settlements 3) defense charges

Question 57

these liabilities are often specifically excluded in fitness professional insurance policies

Answer 57

1) abuse 2) molestation 3) cancer (resulting from tanning) 4) libel 5) slander

Question 58

addendum to a policy that covers acts committed prior to the policy purchase

Answer 58

prior acts coverage

Question 59

addendum to a policy that covers claims made in the future after the policy has ended/been canceled for injuries during the policy period

Answer 59

extended reporting endorsement

Question 60

5 steps of risk management protocol

Answer 60

1) risk identification 2) risk evaluation 3) risk management approach selection (plan) 4) implementation 5) evaluation

Question 61

the different approaches for risk management

Answer 61

1) avoidance: remove the risk by eliminating the activity 2) transfer: move the risk to others through a waiver, insurance policy, etc. 3) reduction: modify the risk by removing part of the activity 4) retention