QUESTION 1

An agent is not liable for any contracts made on behalf of a(n)

	a.	undisclosed principal.
	b.	partially disclosed principal.
	c.	unidentified principal.
	d.	fully disclosed principal.

4 points

QUESTION 2

Which of the following describes the duty of loyalty?

	a.	It requires managers to make decisions they reasonably believe to be in the best interest of the managers of the corporation.
	b.	It prohibits managers from making a decision that benefits them at the expense of the corporation.
	c.	It requires consideration of the interests of the surrounding community.
	d.	It requires using care that an ordinarily prudent person would take in a similar situation.

4 points

QUESTION 3

The person who creates a corporation is called the

	a.	promoter.
	b.	partner.
	c.	agent.
	d.	incorporator.

4 points

QUESTION 4

The concept of abandonment as it relates to scope-of-employment cases means

	a.	an act is within the scope of employment, even if expressly forbidden, if it is of the same general nature as that authorized or if it is incidental to the conduct authorized.
	b.	the principal is liable for the actions of the employee that occur while the employee is at work, but not for actions that occur after the employee has abandoned the principal's business.
	c.	the principal is liable for all of the actions of the employee, even after the employee has abandoned the principal's business.
	d.	the principal is liable if the employee is on a frolic of their own but not if the employee is simply on a detour from company business.

4 points

QUESTION 5

When a partner leaves a partnership, whether it be voluntary or by expulsion, death, or bankruptcy, it is called

	a.	dissociation.
	b.	termination.
	c.	detachment.
	d.	separation.

4 points

QUESTION 6

To comply with the Model Benefit Corporation Act, an organization must

	a.	state in its charter that it is a benefit corporation.
	b.	obtain approval of its charter from three-fourths of its shareholders.
	c.	measure its social benefit using a standard internally monitored by management.
	d.	preparea biannual benefit report assessing its performance in satisfying shareholder return expectations.

4 points

QUESTION 7

The principle of liability stating that an employer is liable for a physical tort committed by an employee acting within the scope of employment and a nonphysical tort of an employee acting with authority is called

	a.	the equal dignities rule.
	b.	respondeat superior.
	c.	fiduciary control.
	d.	apparent authority.

4 points

QUESTION 8

What is the best definition of a fiduciary relationship?

	a.	The principal pays the agent to act on their behalf.
	b.	The principal grants an agent permission to act, either by words or conduct.
	c.	A principal is liable for certain torts committed by an agent.
	d.	The trustee must act in the best interests of the beneficiary.

4 points

QUESTION 9

An organization that does not pay income tax on its profits but passes it through to its owners who pay the tax at their individual rates is called a

	a.	business corporation.
	b.	flow-through tax entity.
	c.	tax-free business venture.
	d.	professional corporation.

4 points

QUESTION 10

All of the following business forms have limited liability except the

	a.	limited liability company.
	b.	general partnership.
	c.	S corporation.
	d.	corporation.

4 points

QUESTION 11

In the case of an undisclosed principal, a third party

	a.	can only recover from the principal.
	b.	can only recover from the agent.
	c.	cannot recover at all.
	d.	can recover from either the agent or the principal.

4 points

QUESTION 12

What constitutes a social enterprise's "triple bottom line"?

	a.	Employees, customers, and profits
	b.	Assets, liabilities, and revenue
	c.	Social concerns, shareholders, and sales
	d.	People, planet, and profits

4 points

QUESTION 13

Chance is a traveling marketing representative for a publishing company. He is an independent contractor and was hired without negligence. One afternoon while driving to a meeting, Chance negligently runs a stop sign and causes an accident. Shayna is injured. Shayna can

	a.	hold both Chance and his company liable for her injury.
	b.	hold the company but not Chance liable.
	c.	hold Chance but not the company liable.
	d.	not hold Chance or his company liable for her injury.

4 points

QUESTION 14

What is the first step that must be taken to terminate a corporation?

	a.	Filing
	b.	Vote
	c.	Revocation
	d.	Winding up

4 points

QUESTION 15

Mohammed, Stella, and Emmanuel have been best friends and colleagues for over a decade. They decide to start an art curating business, called Art Curators LLC. Should they draft an operating agreement?

	a.	Yes, an operating agreement must be filed by a limited liability company (LLC) with the secretary of state in the home state of the company.
	b.	No, an operating agreement is not necessary between long-term friends and colleagues.
	c.	No, only partnerships must draft an operating agreement.
	d.	Yes, it is wise to have an operating agreement to control situations like the transfer of interests and dissolution.

4 points

QUESTION 16

A principal is liable for the physical torts of an agent unless the

	a.	principal took action to attempt to prevent the agent from misbehaving.
	b.	principal forbade the agent from engaging in the conduct.
	c.	agent is an independent contractor.
	d.	employee acted negligently.

4 points

QUESTION 17

Which of the following is true of an S corporation?

	a.	There can be no more than 50 shareholders.
	b.	There can be only oneclass of stock.
	c.	A majority of shareholders must agree the company should be an S corporation.
	d.	Only individuals can be shareholders.

4 points

QUESTION 18

Ivan operates a pool repair business in Tampa, Florida. Ivan wants to make sure that his personal assets are protected, but also wants to keep taxes and expenses down. When Ivan talks with an attorney about the right structure for the business, what should the attorney recommend?

	a.	General partnership
	b.	Limited liability company (LLC)
	c.	C corporation
	d.	Sole proprietorship

4 points

QUESTION 19

What federal agency requires that the seller of a franchise give the potential buyer a Franchise Disclosure Document (FDD) and audited financial statements?

	a.	Securities and Exchange Commission (SEC)
	b.	Interstate Commerce Commission (ICC)
	c.	Federal Trade Commission (FTC)
	d.	Franchise Sales Commission (FSC)

4 points

QUESTION 20

Congress created S corporations (S corps) to encourage entrepreneurship. Which of the following statements regarding S corps is true?

a.

Shareholders of S corps have both the limited liability of a corporation and the tax status of a flow-through entity.

b.

Shareholders of S corps have the liability of a partnership and the tax status of a flow-through entity.

c.

Shareholders of S corps have both the limited liability of a corporation and the tax status of a corporation.

QUESTION 1

An agent is not liable for any contracts made on behalf of a(n)

	a.	undisclosed principal.
	b.	partially disclosed principal.
	c.	unidentified principal.
	d.	fully disclosed principal.

4 points

QUESTION 2

Which of the following describes the duty of loyalty?

	a.	It requires managers to make decisions they reasonably believe to be in the best interest of the managers of the corporation.
	b.	It prohibits managers from making a decision that benefits them at the expense of the corporation.
	c.	It requires consideration of the interests of the surrounding community.
	d.	It requires using care that an ordinarily prudent person would take in a similar situation.

4 points

QUESTION 3

The person who creates a corporation is called the

	a.	promoter.
	b.	partner.
	c.	agent.
	d.	incorporator.

4 points

QUESTION 4

The concept of abandonment as it relates to scope-of-employment cases means

	a.	an act is within the scope of employment, even if expressly forbidden, if it is of the same general nature as that authorized or if it is incidental to the conduct authorized.
	b.	the principal is liable for the actions of the employee that occur while the employee is at work, but not for actions that occur after the employee has abandoned the principal's business.
	c.	the principal is liable for all of the actions of the employee, even after the employee has abandoned the principal's business.
	d.	the principal is liable if the employee is on a frolic of their own but not if the employee is simply on a detour from company business.

4 points

QUESTION 5

When a partner leaves a partnership, whether it be voluntary or by expulsion, death, or bankruptcy, it is called

	a.	dissociation.
	b.	termination.
	c.	detachment.
	d.	separation.

4 points

QUESTION 6

To comply with the Model Benefit Corporation Act, an organization must

	a.	state in its charter that it is a benefit corporation.
	b.	obtain approval of its charter from three-fourths of its shareholders.
	c.	measure its social benefit using a standard internally monitored by management.
	d.	preparea biannual benefit report assessing its performance in satisfying shareholder return expectations.

4 points

QUESTION 7

The principle of liability stating that an employer is liable for a physical tort committed by an employee acting within the scope of employment and a nonphysical tort of an employee acting with authority is called

	a.	the equal dignities rule.
	b.	respondeat superior.
	c.	fiduciary control.
	d.	apparent authority.

4 points

QUESTION 8

What is the best definition of a fiduciary relationship?

	a.	The principal pays the agent to act on their behalf.
	b.	The principal grants an agent permission to act, either by words or conduct.
	c.	A principal is liable for certain torts committed by an agent.
	d.	The trustee must act in the best interests of the beneficiary.

4 points

QUESTION 9

An organization that does not pay income tax on its profits but passes it through to its owners who pay the tax at their individual rates is called a

	a.	business corporation.
	b.	flow-through tax entity.
	c.	tax-free business venture.
	d.	professional corporation.

4 points

QUESTION 10

All of the following business forms have limited liability except the

	a.	limited liability company.
	b.	general partnership.
	c.	S corporation.
	d.	corporation.

4 points

QUESTION 11

In the case of an undisclosed principal, a third party

	a.	can only recover from the principal.
	b.	can only recover from the agent.
	c.	cannot recover at all.
	d.	can recover from either the agent or the principal.

4 points

QUESTION 12

What constitutes a social enterprise's "triple bottom line"?

	a.	Employees, customers, and profits
	b.	Assets, liabilities, and revenue
	c.	Social concerns, shareholders, and sales
	d.	People, planet, and profits

4 points

QUESTION 13

Chance is a traveling marketing representative for a publishing company. He is an independent contractor and was hired without negligence. One afternoon while driving to a meeting, Chance negligently runs a stop sign and causes an accident. Shayna is injured. Shayna can

	a.	hold both Chance and his company liable for her injury.
	b.	hold the company but not Chance liable.
	c.	hold Chance but not the company liable.
	d.	not hold Chance or his company liable for her injury.

4 points

QUESTION 14

What is the first step that must be taken to terminate a corporation?

	a.	Filing
	b.	Vote
	c.	Revocation
	d.	Winding up

4 points

QUESTION 15

Mohammed, Stella, and Emmanuel have been best friends and colleagues for over a decade. They decide to start an art curating business, called Art Curators LLC. Should they draft an operating agreement?

	a.	Yes, an operating agreement must be filed by a limited liability company (LLC) with the secretary of state in the home state of the company.
	b.	No, an operating agreement is not necessary between long-term friends and colleagues.
	c.	No, only partnerships must draft an operating agreement.
	d.	Yes, it is wise to have an operating agreement to control situations like the transfer of interests and dissolution.

4 points

QUESTION 16

A principal is liable for the physical torts of an agent unless the

	a.	principal took action to attempt to prevent the agent from misbehaving.
	b.	principal forbade the agent from engaging in the conduct.
	c.	agent is an independent contractor.
	d.	employee acted negligently.

4 points

QUESTION 17

Which of the following is true of an S corporation?

	a.	There can be no more than 50 shareholders.
	b.	There can be only one class of stock.
	c.	A majority of shareholders must agree the company should be an S corporation.
	d.	Only individuals can be shareholders.

4 points

QUESTION 18

Ivan operates a pool repair business in Tampa, Florida. Ivan wants to make sure that his personal assets are protected, but also wants to keep taxes and expenses down. When Ivan talks with an attorney about the right structure for the business, what should the attorney recommend?

	a.	General partnership
	b.	Limited liability company (LLC)
	c.	C corporation
	d.	Sole proprietorship

4 points

QUESTION 19

What federal agency requires that the seller of a franchise give the potential buyer a Franchise Disclosure Document (FDD) and audited financial statements?

	a.	Securities and Exchange Commission (SEC)
	b.	Interstate Commerce Commission (ICC)
	c.	Federal Trade Commission (FTC)
	d.	Franchise Sales Commission (FSC)

4 points

QUESTION 20

Congress created S corporations (S corps) to encourage entrepreneurship. Which of the following statements regarding S corps is true?

	a.	Shareholders of S corps have both the limited liability of a corporation and the tax status of a flow-through entity.
	b.	Shareholders of S corps have the liability of a partnership and the tax status of a flow-through entity.
	c.	Shareholders of S corps have both the limited liability of a corporation and the tax status of a corporation.
	d.	Shareholders of S corps have both the liability and the tax status of a partnership.

r

d.

Shareholders of S corps have both the liability and the tax status of a partnership.