LEB exam practice

What are 3 major factors an entrepreneur considers when choosing a business form?

ease of creation, taxation, control and magmt

What business structures are most common for entrepreneurs?

sole proprietorship

If someone wants FULL control and is okay with FULL risk

what business form should they choose?

What are 2 risks of a sole proprietorship?

unlimited personal liability and limited ability to raise capital

What protects a company’s logo or brand name?

trademark

What protects secret methods like the Coca-Cola recipe?

trade secret

What's one advantage of getting a loan over selling part of your company?

you keep full ownership and control

In a franchise relationship

who sets the rules: franchisor or franchisee?

What’s a real-world example of a "chain-style" franchise?

McDonald's

If a company lets you MAKE and sell their product

what type of franchise is that?

What does the Franchise Rule require?

franchisors must fully disclose important info to potential franchisees

True or False: Joint ownership of property automatically creates a partnership.

False

What are 3 main elements courts use to decide if a partnership exists?

sharing profits/losses

What does "pass-through entity" mean?

business profits are taxed only once on the owner's tax return

What document creates the official rules for a partnership?

articles of partnership

What is "partnership by estoppel"?

when people act like partners and others rely on that

What happens during the "winding up" phase of a partnership?

assets are collected

What's a major benefit of a limited liability partnership (LLP)?

partners are protected from personal liability for other partners' actions

Who must partners be in a Family Limited Liability Partnership (FLLP)?

family members

In a limited partnership

who has unlimited liability?

Who owns a corporation?

the shareholders

What’s the biggest difference between a domestic and foreign corporation?

domestic = incorporated and doing business in same state

foreign = doing business in a different state than incorporated

What type of corporation is formed in another country but operates in the US?

alien corporation

What does it mean to "pierce the corporate veil"?

holding shareholders personally liable for corporate debts due to misconduct

What’s the main reason companies sell stocks?

to raise money without taking on debt

What is crowdfunding?

raising small amounts of money from lots of people online to fund a business