The Law of Corporations and Other Business Organizations 6th Edition by Angela Schneeman – Test Bank

The Law of Corporations and Other Business Organizations 6th Edition by Angela Schneeman – Test Bank

Test Bank

CHAPTER 1 Introduction to Agency and Business Organizations …………………………………………………………. 112 CHAPTER 2 Sole Proprietorships ……………………………………………………………………………………………………… 114 CHAPTER 3 Partnerships ………………………………………………………………………………………………………………… 116 CHAPTER 4 Limited Partnerships …………………………………………………………………………………………………….. 119 CHAPTER 5 Limited Liability Partnerships and Limited Liability Limited Partnerships ………………………….. 121 CHAPTER 6 Limited Liability Companies …………………………………………………………………………………………. 123 CHAPTER 7 Corporations ……………………………………………………………………………………………………………….. 125 CHAPTER 8 Incorporations ……………………………………………………………………………………………………………… 127 CHAPTER 9 The Corporate Organization ………………………………………………………………………………………….. 129 CHAPTER 10 The Corporate Financial Structure ………………………………………………………………………………….. 131 CHAPTER 11 Public Corporations and Securities Regulations ……………………………………………………………….. 133 CHAPTER 12 Mergers, Acquisitions, and Other Changes to the Corporate Structure ………………………………… 136 CHAPTER 13 Foreign Corporation Qualification ………………………………………………………………………………….. 138 CHAPTER 14 Corporate Dissolution …………………………………………………………………………………………………… 140 CHAPTER 15 Employee Benefits and Employment Agreements ……………………………………………………………. 142
112 ©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
CHAPTER 1
Introduction to Agency and Business Organizations

MULTIPLE CHOICE 1. Agency is a legal relationship in which A. the principal acts on behalf of the agent. B. the principal becomes personally liable for all actions of the agent. C. a written contract must specify all authority of the agent. D. the agent acts for or represents the principal by the principal’s authority. ANS: D 2. When used in relation to the agency relationship, the master A. retains some control over his or her servant (employee). B. gives his or her servant (employee) full discretion to act on the master’s behalf. C. hires the employee for a specific task for which the master is not responsible. D. is not liable for any actions taken on his or her behalf by the servant (employee). ANS: A 3. A special type of power of attorney designed to continue for certain purposes even after the incapacity of the principal is referred to as a A. special power of attorney. B. will power of attorney. C. durable power of attorney. D. general power of attorney. ANS: C 4. An agency relationship may not be created A. by express contract. B. by conduct of the principal and agent. C. without the principal’s knowledge or consent. D. by ratification. ANS: C 5. When the principal intentionally or negligently causes a third party to reasonably believe that an individual is acting as the principal’s agent, and the third party relies on that belief, then A. no agency relationship exists. B. an express agency agreement is created.
C. the purported agent assumes personal liability for his or her actions. D. an apparent agency may exist. ANS: D 6. An agent’s duties to the principal include A. the duty of loyalty. B. the duty to act without compensation. C. the duty to perform any tasks requested by the principal. D. the duty to compensate the principal. ANS: A 7. The principal’s duties to the agent do not include A. the duty to compensate the agent as agreed on. B. the duty to cooperate with the agent. C. the duty to exercise reasonable care to avoid placing the agent in harm’s way. D. the duty to always put the agent’s interests first. ANS: D 8. A principal is not liable for the torts of his or her agent if the A. tort is committed by the agent acting in the scope of his or her employment by the principal. B. agent’s action is unrelated to the agency relationship. C. principal is negligent or reckless in supervising the agent. D. agent is acting under the principal’s direction when committing the tort. ANS: B

TRUE/FALSE
9. Disputes concerning agency law are typically resolved under the contract or common law of the state where the agency was created. ANS: T 10. A power of attorney need not be put in writing. ANS: F
CHAPTER 1 Introduction to Agency and Business Organizations 113
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11. Unlike most contracts, consideration need not be exchanged to form an agency relationship. ANS: T 12. An agency may be created by ratification when the principal accepts the benefits derived from the agent acting on his or her behalf. ANS: T 13. An apparent agency can be created by the actions of an apparent agent alone, without any action by the principal. ANS: F 14. The doctrine of respondeat superior applies to the relationship between an employer and employee and not to the relationship between an employer and an independent contractor. ANS: T
15. Under the doctrine of respondeat superior, an agent is not responsible for torts committed while working for an employer. ANS: F 16. Partners act as agents for the partnership and the other partners. ANS: T

114 ©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
CHAPTER 2
Sole Proprietorships

MULTIPLE CHOICE 1. A sole proprietorship is considered to be A. an entity formed to protect the small businessperson from personal liability. B. an extension of the individual sole proprietor. C. any business organization that is owned, managed, and operated by only one individual. D. an entity that is easily transferred from one individual to another. ANS: B 2. The number of sole proprietorships in the United States is A. greater than the number of corporations. B. less than the number of corporations. C. less than the number of partnerships. D. about the same as the number of partnerships. ANS: A 3. The income of sole proprietorships in the United States is A. greater than the income of corporations. B. less than the income of corporations. C. less than the income of partnerships. D. about the same as the income of corporations. ANS: B 4. Advantages to transacting business as a sole proprietorship include A. double taxation on the income of sole proprietors. B. limits on the sole proprietor’s personal liability. C. the ease and low cost of starting the business. D. the sole proprietor’s lack of responsibility for actions by employees or agents. ANS: C 5. Disadvantages to transacting business as a sole proprietorship include A. double taxation of the sole proprietor’s income.
B. personal liability for the debts and obligations of the business. C. the limited duration of the sole proprietorship allowed by state law. D. costly filing fees for forming the sole proprietorship. ANS: B 6. When hiring an employee, the sole proprietor must A. file a certificate of assumed name. B. file a notice with the secretary of state or other appropriate state official. C. obtain a federal employer identification number. D. amend the business’s certificate of assumed name. ANS: C 7. Paralegals who are assisting in providing services to a sole proprietorship should not A. advise the sole proprietor with regard to the income tax consequences of doing business as a sole proprietor. B. assist with the preparation of state and federal forms to comply with state and federal taxation requirements. C. draft and file an application for a certificate of assumed name when that document is required. D. draft and file an application for employer identification number when that document is required. ANS: A 8. The application for employer identification number must be filed with the A. secretary of state. B. State Unemployment Insurance Department. C. Internal Revenue Service. D. U.S. Department of Labor. ANS: C 9. The sole proprietor’s liability for the actions of his or her employee is best described as which of the following:

CHAPTER 2 Sole Proprietorships 115
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A. A sole proprietor is never responsible for torts committed by the sole proprietor’s employee. B. A sole proprietor is responsible for actions taken by an employee while the employee is acting on behalf of the employer in the normal course of business. C. Both the sole proprietor and the employee may be liable for torts committed by the employee. D. Both B and C. ANS: D 10. A certificate of assumed name is filed to A. form a sole proprietorship. B. form an assumed-name entity. C. create a trademark. D. give notice of your intent to transact business under a name other than your own. ANS: D

TRUE/FALSE

11. A sole proprietorship certificate must be obtained from the secretary of state’s office before a sole proprietor can begin transacting business. ANS: F 12. When a sole proprietor uses an assumed name, some states require that a notice of intent to transact business under an assumed name be published. ANS: T
13. A sole proprietor may hire any number of employees. ANS: T 14. The rules of ethics that apply to attorneys may apply to the paralegals who work for them. ANS: T 15. A sole proprietor may delegate management and decisions concerning the business to agents and employees. ANS: T 16. A sole proprietor may transfer his or her business to another individual by selling all of his or her shares of stock to that individual. ANS: F 17. Sole proprietorships are created and governed by state statute. ANS: F 18. Sole proprietors can attract new employees by offering shares of their business as compensation. ANS: F 19. The sole proprietorship is dissolved by filing a certificate of dissolution with the secretary of state. ANS: F

116 ©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
CHAPTER 3
Partnerships

MULTIPLE CHOICE 1. A partnership is not required to have ________ to be valid. A. at least two partners B. a written partnership agreement C. partners who co-own the partnership business D. the purpose of earning a profit ANS: B 2. The number of partnerships in the United States is A. greater than the number of corporations. B. about the same as the number of corporations. C. greater than the number of sole proprietorships. D. less than the number of both corporations and sole proprietorships. ANS: D 3. The income of partnerships in the United States is A. about the same as the income of corporations. B. greater than the income of corporations. C. less than the income of corporations. D. greater than the income of sole proprietorships. ANS: C 4. Under the Uniform Partnership Act (1997), partners do not have the right to A. an equal share in the profits of the partnership. B. participate in the management of the partnership. C. receive a salary paid by the partnership. D. inspect the books and records of the partnership. ANS: C 5. Under the Uniform Partnership Act (1997), the partnership is considered to be a(n) A. separate entity for some purposes, and an aggregate of its partners for other purposes.
B. aggregate of its partners. C. entity separate and distinct from its partners for income tax purposes. D. extension of the sole proprietors who form it. ANS: A 6. A ________ is a type of business organization that is very similar to a partnership, but is usually formed for one particular event or purpose, instead of an ongoing concern. A. limited liability partnership B. joint venture C. joint partnership D. limited venture ANS: B 7. Partners have ________ authority to act on behalf of the partnership with regard to actions in the ordinary course of business. A. accrued B. actual C. fiduciary D. express ANS: B 8. Partners act as agents A. for third parties when dealing with the partnership. B. for the partnership only when that authority is expressly given. C. only to the extent that authority is granted in the partnership agreement. D. of the partnership and the other partners when dealing with third parties. ANS: D 9. The ________ theory suggests that a partnership is the totality of the persons engaged in a business, and not a separate entity. A. aggregate B. totality C. agency D. entity ANS: A