Understanding Business and Personal Law
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Unit 6: Starting a Business
      
  1.A person who goes into business as a sole proprietor must operate under  
  a.   his or her name.  
  b.   a fictitious name.  
  c.   either his or her name or a fictitious name.  
  d.   both his or her name and a fictitious name.  
      
  2.A winding up always follows a dissolution of a LLC.  
  a.   TRUE  
  b.   FALSE  
      
  3.An example of insider trading is the buying or selling of stock just before some major development occurs which will affect the price of the stock.  
  a.   TRUE  
  b.   FALSE  
      
  4.The Williams Act requires that a suitor who plans to acquire more than five percent of a target, must file a statement with the SEC.  
  a.   TRUE  
  b.   FALSE  
      
  5.If someone does something that leads others to believe a partnership exists, then a court may treat the arrangement as a  
  a.   general partnership.  
  b.   partnership by estoppel.  
  c.   dormant partnership.  
  d.   partnership by proof of existence.  
      
  6.A corporation is considered foreign if it  
  a.   does business overseas.  
  b.   does business outside the state in which it was incorporated.  
  c.   is incorporated in another country but does business in this country.  
  d.   operates as a private organization utilizing public funds.  
      
  7.Limited partners are investors who have no control in managing the partnership and have limited liability.  
  a.   TRUE  
  b.   FALSE  
      
  8.Corporations are managed by directors who  
  a.   deal with the day to day operations of the business.  
  b.   are entitled to notice of all regular and special meetings.  
  c.   are considered the owners of the corporation.  
  d.   are responsible for seeing that the corporation acts within its powers.  
      
  9.Dissolution of a partnership brings the business to an end.  
  a.   TRUE  
  b.   FALSE  
      
  10.A stock acquisition is also considered a hostile takeover bid.  
  a.   TRUE  
  b.   FALSE  
      
  11.A sole proprietorship is the easiest form of business association to form.  
  a.   TRUE  
  b.   FALSE  
      
  12.The board of directors are entitled to notice of every regular meeting.  
  a.   TRUE  
  b.   FALSE  
      
  13.In an asset acquisition  
  a.   one corporation continues its existence and absorbs another corporation.  
  b.   two or more companies join to form a new corporation.  
  c.   an individual or corporation purchases enough shares of stock to control it.  
  d.   one corporation agrees to purchase the property of a second corporation.  
      
  14.A corporation is a(n)  
  a.   partnership that has filed special papers.  
  b.   body formed and authorized by law to act as a single person.  
  c.   large organization with more than 50 employees.  
  d.   organization that is exempt from government regulations.  
      
  15.The biggest disadvantage of a sole proprietorship is  
  a.   limited capital.  
  b.   limited human resources.  
  c.   limited lifetime.  
  d.   unlimited liability.  
      
  16.There is no fiduciary duty between those who run the LLC and the LLC itself.  
  a.   TRUE  
  b.   FALSE  
      
  17.When a corporation ends  
  a.   the shareholders are the first to be paid.  
  b.   the officers are the first to get paid.  
  c.   the creditors are the first to get paid.  
  d.   the board of directors are the first to get paid.  
      
  18.A dormant partner has unlimited liability for the partnership's debts.  
  a.   TRUE  
  b.   FALSE  
      
  19.Member-managed LLCs are run by  
  a.   the owners.  
  b.   outside managers.  
  c.   a board of directors.  
  d.   the corporate officers.  
      
  20.A merger is two or more companies who join together to form a new corporation.  
  a.   TRUE  
  b.   FALSE  
      
  21.It is legal for shareholders to solicit the proxies of other shareholders in order to control the election of the board of directors.  
  a.   TRUE  
  b.   FALSE  
      
  22.The Sherman Antitrust Act was passed by Congress to try and stop the formation of monopolies.  
  a.   TRUE  
  b.   FALSE  
      
  23.Each shareholder has one vote for each share of stock that he or she owns.  
  a.   TRUE  
  b.   FALSE  
      
  24.Piercing the corporate veil means that the courts will deny shareholders the benefits of limited liability.  
  a.   TRUE  
  b.   FALSE  
      
  25.The federal government can regulate  
  a.   businesses that earn over $500,000 per year.  
  b.   any business activity that affects interstate commerce.  
  c.   companies that do not conduct business overseas.  
  d.   only businesses that are incorporated.  
      
  26.If an error is inadvertently made while filing the articles of incorporation, the law says that the corporation exists in fact (de facto).  
  a.   TRUE  
  b.   FALSE  
      
  27.A corporation's board of directors follow the business judgment rule which  
  a.   prohibits insider trading.  
  b.   protects directors from negligent liability.  
  c.   requires that a director disclose how much personal stock he or she owns.  
  d.   focuses on how business decisions are made.  
      
  28.A disadvantage of a corporation is that  
  a.   a corporation's income may be taxed more than once.  
  b.   the corporation has a limited lifetime.  
  c.   the stockholders have unlimited liability.  
  d.   the corporation has limited access to capital.  
      
  29.Stockholders may not sue a corporation in order to enforce their rights as shareholders.  
  a.   TRUE  
  b.   FALSE  
      
  30.Shareholders have the right to  
  a.   receive dividends when the corporation has made a profit.  
  b.   transfer or sell their stock.  
  c.   vote only if they own preferred stock.  
  d.   participate in the board of director's meetings.  
      
  31.The articles of partnership are known as the  
  a.   partnership agreement.  
  b.   the liability agreement.  
  c.   registered liability agreement.  
  d.   the general agreement.  
      
  32.Holders of common stock are the first shareholders to be paid dividends.  
  a.   TRUE  
  b.   FALSE  
      
  33.A major function of the SEC is to  
  a.   prevent the formation of monopolies.  
  b.   protect businesses from the wrongful acts of other business firms.  
  c.   make sure potential investors are informed about the nature of their investments.  
  d.   make rules and regulations that define specific activities as unfair or deceptive.  
      
  34.In a stock acquisition, the corporation making the tender offer is referred to as the  
  a.   suitor.  
  b.   target.  
  c.   hostile bidder.  
  d.   prospectus.  
      
  35.Corporate officers  
  a.   are appointed by the board of directors.  
  b.   suggest business policy.  
  c.   are considered the owners of the corporation.  
  d.   are responsible for seeing that the corporation acts within its powers.  
      
  36.Directors can take business opportunities for themselves if they disclose the opportunity to the corporation.  
  a.   TRUE  
  b.   FALSE  
      
  37.A sole proprietorship is a  
  a.   business that does not require a license to operate.  
  b.   form of business owned by one person.  
  c.   business which is exempt from zoning requirements.  
  d.   form of business whose profits are exempt from federal tax laws.  
      
  38.All corporations issue  
  a.   preferred stock.  
  b.   bonds.  
  c.   common stock.  
  d.   dividends.  
      
  39.A sole proprietor can chose to operate under a fictious name.  
  a.   TRUE  
  b.   FALSE  
      
  40.A limited liability company (LLC)  
  a.   combines the best features of a partnership and a corporation.  
  b.   combines the best features of a sole proprietorship and a corporation.  
  c.   allow the owners to have limited liability and double taxation.  
  d.   calls the people who run the LLC members.  
      
  41.The RLLP was designed to  
  a.   exempt partnerships from taxation.  
  b.   allow a dissolution of the partnership.  
  c.   eliminate joint and several liability.  
  d.   protect partnerships from bankruptcy.  
      
  42.The federal government derives its power to regulate business from the  
  a.   Supreme Court.  
  b.   FTC.  
  c.   Congress.  
  d.   Commerce Clause of the U.S. Constitution.  
      
  43.An article of incorporation is a corporation's official authorization to do business in the state.  
  a.   TRUE  
  b.   FALSE  
      
  44.A pooling agreement allows shareholders to  
  a.   vote by proxy.  
  b.   transfer their voting rights to a trustee.  
  c.   vote a certain way on a particular issue.  
  d.   attend the stockholder's meetings and vote in person.  
      
  45.The Environmental Protection Agency (EPA) is responsible for implementing laws that deal with air, water, and noise pollution.  
  a.   TRUE  
  b.   FALSE  
      
  46.The articles of incorporation  
  a.   are bylaws under which the corporation operates.  
  b.   allow a corporation to choose a name without the words "corporation, incorporated, or company."  
  c.   are only required for public corporations.  
  d.   describes a corporation's organization, powers and authority.  
      
  47.Sole proprietors pay taxes personally and also as a business.  
  a.   TRUE  
  b.   FALSE  
      
  48.A corporation is considered a legal person created by the state.  
  a.   TRUE  
  b.   FALSE  
      
  49.The Federal Trade Commission Act  
  a.   was designed to protect businesses from the wrongful acts of other businesses.  
  b.   prevents businesses from attempting to reduce competition.  
  c.   requires sellers to treat all buyers equally.  
  d.   provides the procedures for companies to merge.  
      
  50.The members of a limited liability company can initiate its dissolution by two-thirds majority vote.  
  a.   TRUE  
  b.   FALSE  

 
 
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