blaw 3391 TTU exam 3 Questions With Verified Answers
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Blaw 3391
Institution
Blaw 3391
blaw 3391 TTU exam 3 Questions With Verified Answers
Sole Proprietorship
is the simplest form of business organization. Anyone who does business without creating a separate business entity is a sole proprietor. The owner is the business. The owner pays personal income taxes on all profits and...
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blaw 3391 TTU exam 3 Questions With
Verified Answers
Sole Proprietorship
is the simplest form of business organization. Anyone who does business without
creating a separate business entity is a sole proprietor. The owner is the business. The
owner pays personal income taxes on all profits and is personally liable for all business
debts.
Distributorships
for example, automobile dealerships
Chain-style business operations
fast-food chains)
Manufacturing or processing-plant arrangements
Soft drink bottling companies
laws governing franchising
Franchises are governed by contract law. They are also governed by federal and state
statutory laws, as well as agency regulations.
The Franchise Contract
The franchise relationship is defined by a contract between the franchisor and the
franchisee. The contract normally spells out the following terms:
Payment for the franchise
Ordinarily, the contract requires the franchisee (purchaser) to pay an initial fee or lump-
sum price for the franchise license.
business premises
The contract may specify whether the business premises will be leased or purchased by
the franchisee and which party will provide the equipment and furnishings.
Location of the franchise
The franchisor typically specifies the territory to be served by the franchisee.
Quality control
,The franchisor may require the franchisee to abide by certain standards of quality
relating to the product or service offered.
Pricing arrangements
The franchisor may require the franchisee to purchase certain supplies from the
franchisor at an established price but cannot set retail resale prices.
Franchise termination
Usually, the contract specifies the duration and conditions of termination of the franchise
arrangement. Both federal and state statutes attempt to protect franchisees from
franchisors who unfairly or arbitrarily terminate franchises
Disadvantages of sole proprietorship
The major disadvantage of the sole proprietorship is that the proprietor alone bears the
burden of any losses or liabilities incurred by the business enterprise. In other words,
the sole proprietor has unlimited liability, or legal responsibility, for all obligations
incurred in doing business.
advantages of sole proprietorship
that the proprietor owns the entire business and has a right to receive all of the profits
Agency concepts and partnership law
A partnership is similar to an agency relationship except that partners have an
ownership interest in the business and are obliged to bear a portion of ordinary
business losses.
The Uniform Partnership Act (UPA)—
Governs the operation of partnerships in the absence of an express agreement.
Definition of a partnership
An agreement by two or more persons to carry on, as co-owners, a business for profit.
Essential elements of a partnership
A sharing of profits and losses, a joint ownership of the business, and an equal right to
be involved in the management of the business.
Entity versus aggregate theory of partnerships—
A majority of the states follow the UPA and treat a partnership as an entity for most
purposes.
Tax treatment of partnerships—
, treated as an aggregate of the individual partners rather than as a separate legal entity
for federal income tax purposes. The partnership is a pass-through entity and not a tax-
paying entity.
the partnership agreement
Also called articles of partnership, the written agreement sets forth each partner's rights
and obligations with respect to the partnership.
duration of the partnership
A partnership specifically limited in duration is called a partnership for a term. If no fixed
duration is specified, the partnership is called a partnership at will
partnership by estoppel
Imposed by a court when a third person has reasonably and detrimentally relied on a
representation that a nonpartner was part of a partnership.
rights of partners
rights include (a) management, (b) interest in the partnership, (c) compensation, (d)
inspection of books, (e) accounting, and (f) property.
Fiduciary duties
(duty of care and duty of loyalty) may not be waived. Each partner must act consistently
with good faith and fair dealing.
In a traditional partnership,
partners are personally liable for the debts of the partnership.
A partner has the authority to bind the partnership in a contract
A partner may also subject the partnership to tort liability under agency principles. The
extent of implied authority is generally broader for partners than for ordinary agents
Events that cause dissociation
A partner's voluntarily giving notice of an "express will to withdraw."
The occurrence of an event agreed to in the partnership agreement.
Unanimous vote of the other partners under certain circumstances.
The order of a court or arbitrator if the partner engaged in wrongful conduct that affects
the business.
The partner's declaring bankruptcy, assigning his or her interest in the partnership for
the benefit of creditors, becoming physically or mentally incapacitated, or dying.
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