QUESTION 1

For those wishing to purchase a franchise, the Federal Trade Commission acts as a guardian ensuring that the business idea is sound and that the information in the Franchise Disclosure Document is accurate.

True

False

QUESTION 2

Most franchisors and franchisees are

a.partnerships.

b.sole proprietorships.

c.social enterprises.

d.corporations or LLCs.

QUESTION 3

Jill owns a retail business by herself and was sued by a customer who fell in the store. The customer claimed the business was negligent in caring for its floors. Which statement best describes Jill's potential liability?

a.Jill has no potential liability to the customer.

b.Jill can only be liable up to the amount she initially invested in the business.

c.Jill can be held personally liable to the customer since she is the owner.

d.Jill cannot be held personally responsible; the woman's insurance must pay for the claim.

QUESTION 4

Which 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.All of these are correct.

QUESTION 5

Corporations have perpetual existence.

True

False

QUESTION 6

Debra wanted to form a partnership with Lawrence. He agreed and they became co-owners in an equal partnership. This year, after expenses, the partnership had a profit of $200,000. How will the taxation of this profit be handled?

a.Debra and Lawrence must both pay tax on the business's profit.

b.The business will pay half of the tax liability, and Debra and Lawrence will pay the other half.

c.Since the partnership was Debra's idea, she will pay income tax on the profit on her personal tax return.

d.The business itself will pay the taxes on the business's profit.

QUESTION 7

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

a.social concerns, shareholders, and sales

b.assets, liabilites, and revenue

c.people, planet, and profits

d.employees, customers, and profits

QUESTION 8

All the business forms listed below have limited liability EXCEPT the

a.corporation.

b.limited liability company.

c."S" corporation.

d.general partnership.

QUESTION 9

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

a.separation.

b.detachment.

c.dissociation.

d.termination.

QUESTION 10

Which is an advantage of a sole proprietorship?

a.It can offer multiple classes of stock.

b.It offers its owner limited liability.

c.It is very easy to form.

d.It can attract a wide variety of shareholders.