Business Law exam 2024/2025 with 100% correct answers
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Course
Business Law ki
Institution
Business Law Ki
Consider when choosing a business entity correct answers- Ease of Creation
- Owners Liability
- Tax considerations
- Need for Capital
Sole Proprietorship correct answersthe owner is the business; anyone who does business without creating a separate business organization has a sole proprietors...
Consider when choosing a business entity correct answers- Ease of Creation
- Owners Liability
- Tax considerations
- Need for Capital
Sole Proprietorship correct answersthe owner is the business; anyone who does business without
creating a separate business organization has a sole proprietorship
* No entity so no filing with the state
* No distinguishing from you and the business
Advantages of sole proprietorship correct answers1. Owner is in complete control and receives all profits
(you are sole decision maker)
2. more flexible
3. easy to create/maintain
4. sole proprietor pays only personal income taxes on business profits b/c they are reported as personal
income
Disadvantages of sole proprietorship correct answers1. Owner is personally liable for all losses or
liabilities incurred by the business enterprise
2. Personal assets at risk: creditors can pursue the owner's personal assets to satisfy any business debt
3. Lack of continuity after death of proprietor - when owner dies so does the business
4. debt is the only way to expand the business - difficult to raise financing
Franchise correct answersContract in which franchisor (owner of trademark, trade name or copyright)
licenses franchisee to use the trade mark, trade name or copyright in the sale of goods or services
*Can operate as an independent business person but still obtain the advantages of a regional or national
organization
,Types of Franchises correct answers1. Distributorship (car or beer) - licensing; not forming anything at
the governmental level; a contractual relationship
2. chain stores
3. manufacturing agreement - not as common; example: coca-cola
Laws governing Franchising correct answers- primarily governed by contract law
- UCC Art. 2 governs franchises for sale of goods
- Federal regulation of franchises: industry-specific standards: protect franchisee from unreasonable
demands and bad faith termination; does not guarantee return on investment but will mandate
disclosure on certain information
*Franchise Rule: disclosure of material facts for informed decision
- State Protection for Franchisees: protection from unfair trade practices and bad faith terminations;
disclosure documentation including costs of operation, recurring expenses, profits earned, and
substantiating of these figures; state law may prohibit termination without "good cause"
Franchise Contract correct answers**MUST be in writing
b/w franchisor and franchisee includes type of business entity including capital structure, sales quotas
and record keeping, business premises leased/purchased, location of the franchise, quality control (a
legitimate issue for franchisor because of good will, reputation, and trademark value)
**Courts will not question franchisor's strict supervision but franchisor may be liable for torts of agents
**Pricing arrangements: franchisor cannot set prices of goods sold
Advantages of Franchises correct answersCentralized management
Disadvantages of Franchises correct answers1. Franchise Fee
2. Have to follow all corporate rules
**Potential problem if too many rules are too rigidly enforced the franchisor could be liable under
respondeat superior
,Termination correct answersUsually a franchise agreement sets our conditions of termination
*Notice requirements - reasonable time to "wind up" business
*give franchisee opportunity to cure an ordinary, curable breach within a certain time period
*Constructive discharge claim
Wrongful Termination correct answersGenerally termination provisions favor the franchisor who owns
the trademark
Importance of Good faith and fair dealing correct answersCourts usually try to balance rights of both
parties; if franchisor arbitrarily or unfairly terminates a franchise, franchisee may be able to sue for
wrongful termination
Most courts will not consider the termination "wrongful" if:
1. Franchisor's decision to terminate was made in normal course of business, and
2. reasonable notice of termination was given to franchisee
Agency Concepts and Partnership Law correct answersPartnerships governed by common law and
statutory laws
Partners are AGENTS and FIDUCIARIES of each other
Uniform Partnership Act correct answersGap Filler; governs the operation of partnerships in the absence
of express agreement
Partnership correct answersassociation of two or more persons to carry on a business for profit
*treated as an entity for most purposes; can sue or be sued, hold title to real or personal property in its
name rather than in the names of individual partners
, Essential elements of partnership correct answers1. sharing of profits/losses
2. joint ownership of the business
3. an equal right to be involved in management of business
**No partnership is profits were received as payment for:
1. debt by installments or interest
2. Wages of an employee
3. rent to a landlord
4. annuity to a surviving spouse or representative of a deceased partner
5. sale of a business or property's goodwill
Tax treatment of partnerships correct answerspass through entity - a business entity that has no tax
liability; income is passed through to the owners of the entity who pay income taxes on it; pass through
on a pro-rata basis to the partners
*tax reporting entity; only responsible for filing an information return with the IRS to figure out what
owners need to pay
**When a partnership has an excess of revenue over expenses it doesn't show a profit for tax purposes
General characteristics of a partnership correct answers1. Name if Entity
2. Owners = general partners
3. Partnership treated as an independent person under the law for being sued/suing
4. will hold title to property like a corporation
Partnership agreement correct answersCan be written or oral, unless the statute of frauds requires a
written agreement (If the partnership will acquire real property it must be in writing)
*also called articles of partnership; can include almost any terms unless illegal or contrary to public
policy/statute
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