WEEK 7- BUSINESS ORGANIZATIONS

Business Law and Ethics

An agent injures a customer while performing assigned work duties. Liability falls on the:
A) Principal
B) Agent only
C) Third party
D) Franchisee

A) Principal

A partner in a general partnership signs a contract on behalf of the business. Liability is:
A) Joint and several among all partners
B) Only on the signing partner
C) Only on limited partners
D) Only on the agent

A) Joint and several among all partners

An agent acts outside the scope of authority and causes harm. Liability is:
A) On the agent personally
B) On the principal
C) On the franchise
D) On the state

A) On the agent personally

Shareholders of a corporation are generally liable for:
A) Only the amount of their investment
B) All corporate debts
C) Employee actions
D) Criminal penalties of officers

A) Only the amount of their investment

An LLC member is sued for business debt. Liability is:
A) Limited to the member’s investment
B) Unlimited and personal
C) Automatically on all members
D) Determined by shareholders

A) Limited to the member’s investment

A franchise business injures a customer due to local staff negligence. Liability is usually on the:
A) Franchisee
B) Franchisor
C) Agent
D) Director

A) Franchisee

A partner leaves the partnership but is sued for debts created before leaving. Liability is:
A) Still on the former partner
B) Eliminated immediately
C) Shifted to limited partners only
D) Not enforceable

A) Still on the former partner

A corporate officer commits fraud for personal gain. Liability is:
A) On the officer personally
B) On all shareholders
C) On all employees
D) On the board equally

A) On the officer personally

A court holds shareholders personally liable because they abused the corporate form. This is:
A) Piercing the corporate veil
B) Joint partnership liability
C) Limited franchise liability
D) Agency ratification

A) Piercing the corporate veil

A principal accepts the benefits of an unauthorized contract made by an agent. This is:
A) Ratification
B) Duress
C) Conversion
D) Revocation

A) Ratification

A limited partner participates in management decisions. Liability becomes:
A) Personal liability like a general partner
B) Still limited
C) Eliminated
D) Only joint

A) Personal liability like a general partner

An agent must follow instructions from the principal. This duty is:
A) Duty of obedience
B) Duty of accounting
C) Duty of loyalty
D) Duty of compensation

A) Duty of obedience

A partner’s negligence harms a customer. Liability is:
A) On all general partners
B) Only on the negligent partner
C) Only on the principal
D) On the LLC

A) On all general partners

A principal must reimburse an agent for authorized expenses. This is the duty of:
A) Reimbursement
B) Loyalty
C) Accounting
D) Ratification

A) Reimbursement

Two partners share equal control and profit. Their business type is a:
A) General partnership
B) LLC
C) Corporation
D) Limited partnership

A) General partnership

A franchisee violates safety rules and injures a customer. Liability generally:
A) Falls on the franchisee
B) Falls on the franchisor automatically
C) Falls on shareholders
D) Falls on agents

A) Falls on the franchisee

An employee commits negligence during work duties. Liability is based on:
A) Respondeat superior
B) Parol evidence
C) Accord and satisfaction
D) Caveat emptor

A) Respondeat superior

A principal terminates an agency but fails to notify third parties

and the agent makes a deal. Liability is:
A) On the principal
B) On the agent
C) On the state
D) On shareholders

A limited partnership has two partner types. Liability for limited partners is:
A) Limited unless they manage
B) Unlimited
C) Joint and several
D) Not recognized by law

A) Limited unless they manage

Corporate profits distributed to shareholders are called:
A) Dividends
B) Premiums
C) Allowances
D) Fees

A) Dividends

An LLC combines:
A) Limited liability with partnership tax benefits
B) Unlimited liability with corporate taxation
C) No liability with strict formalities
D) Joint liability with double taxation

A) Limited liability with partnership tax benefits

A principal gives written authority to an agent. This is:
A) Express authority
B) Apparent authority
C) Implied authority
D) Secondary liability

A) Express authority

An agent performs an action necessary to carry out express instructions. This is:
A) Implied authority
B) Joint authority
C) Limited delegation
D) Apparent authority

A) Implied authorit