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EXAM 3 STUDY QUESTIONS

1.

Sole proprietorships must file a tax return.

2.

Ownership in a partnership is not transferrable.

3.

Creditors of a partnership must first seek recovery from partnership assets


before going after the personal assets of a partner.

4.

In both a limited partnership and a limited liability partnership, the partners are
not personally liable for the debts of the partnership.

5.

Venture capitalists often require companies they own to become LLCs before
going public.

6.

Assuming all other requirements are met, a corporation may elect to be treated as an S
corporation under the Internal Revenue Code if it has:
(a)
Both common and preferred stockholder
(b)
A partnership as a stockholder
(c)
100 or fewer stockholders
(d)
The consent of a majority of the stockholders

7.

A limited liability partnership:


(a)
Has ownership interests that cannot be transferred.
(b)
Protects the partners from liability for the debts of the partnership
(c)
Must pay taxes on its income
(d)
Permits a limited number of partners

8.

A limited liability company:


(a)
Is regulated by a well-established body of law
(b)
Pays taxes on its income
(c)
May issue stock options
(d)
Must register with state authorities
(e)
Protects the owners from personal liability for their own misdeeds

9.

Joint and several liability means that:


(a)
A creditor of the partnership must sue all of the partners together
(b)
A creditor of the partnership must sue the partnership and all of the partners
together
(c)
A creditor of the partnership can recover the full amount owed from the
partnership or from any partner
(d)
A creditor of the partnership can recover the full amount owed from the
partnership or from any partner, even if this results in the creditor receiving
more than his original debt.
(e)
A creditor of the partnership can recover from the partners individually, but not
from the partnership.
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10. T

A corporation can be formed in any state or under the federal corporate code.

11. T

Shareholders and stockholders are the same thing.

12. T

Most companies use a very broad purpose clause in their charter.

13. T

Shareholders have the right to manage the corporate business.

14. T

A company must include in its proxy materials the names of all shareholder
nominees for the board of directors.

15. A promoter is liable for any contract he signs on behalf of a corporation before it is formed,
unless:
(a)
The corporation adopts the contract
(b)
The promoter notifies the other party that the corporation has not yet been
formed.
(c)
The promoter signs the contract on behalf of the corporation
(d)
The promoter forms the corporation within 72 hours of signing the contract
(e)
The other party agrees to a novation
16.

A corporate stockholder is entitled to which of the following rights?


(a)
Elect officers
(b)
Receive annual dividends
(c)
Approve dissolution
(d)
Prevent corporate borrowing

17.

Generally, a corporations articles of incorporation must include all of the following except:
(a)
The name of the corporations registered agent
(b)
The name of each incorporator
(c)
The number of authorized shares
(d)
Quorum requirements

18. Generally, a corporations bylaws include all of the following except:


(a)
Par value of the stock
(b)
The date of the shareholders meeting
(c)
The number of directors
(d)
The titles of the officers
(e)
The date of the fiscal year

19. Under the duty of care, directors will be liable if they:


(a)
Make a decision that has a rational business purpose
(b)
Use the same care as an ordinarily prudent person
(c)
Make informed decisions
(d)
Engage in illegal behavior that is profitable to the company
(e)
Make an informed decision that ultimately harms the company
20. Property that individual debtors can keep for themselves:
(a)
(b)
(c)
(d)
(e)

Discharge
Fraudulent transfer
Exempt Property
Reaffirmation
Voidable preference

21. Debtors are not liable for money owed before the filing:
(a)
(b)
(c)
(d)
(e)

Discharge
Fraudulent transfer
Exempt Property
Reaffirmation
Voidable preference

22. Debtors promise to pay a debt after discharge:


(a)
(b)
(c)
(d)
(e)

Discharge
Fraudulent transfer
Exempt Property
Reaffirmation
Voidable preference

23. Payment to a creditor immediately before filing:


(a)
(b)
(c)
(d)
(e)

Discharge
Fraudulent transfer
Exempt Property
Reaffirmation
Voidable preference

24. Payment made within the year before a petition is filed with the goal of
hindering creditors:
(a)
(b)
(c)
(d)
(e)

Discharge
Fraudulent transfer
Exempt Property
Reaffirmation
Voidable preference

25. T

One of the primary goals of the Code is to teach the debtor a lesson.

26. T

Each of the Codes Chapters has one of two objectives rehabilitation or


liquidation.

27. T

A creditor is not permitted to force a debtor into bankruptcy.

28. T

The bankruptcy court issues an order for relief to give the debtor a chance to
file a petition.

29. T
F
The Code permits individual debtors (but no organizations) to keep some
property to themselves.
30. When two parties make no agreement in advance about the duration of their agreement, it is
called:
(a)
Term agreement
(b)
Apparent authority
(c)
Agency at will
(d)
A duty of an agent
(e)
Implied authority
31. When an agent has authority to perform acts that are necessary to accomplish an assignment,
it is called:
(a)
Term agreement
(b)
Apparent authority
(c)
Agency at will
(d)
A duty of an agent
(e)
Implied authority
32. When two parties agree in advance on the duration of their agreement, it is called:
(a)
Term agreement
(b)
Apparent authority
(c)
Agency at will
(d)
A duty of an agent
(e)
Implied authority

33. When behavior by a principal convinces a third party that the agent is authorized, even
though she is not, it is called:
(a)
Term agreement
(b)
Apparent authority
(c)
Agency at will
(d)
A duty of an agent
(e)
Implied authority
34. Duty of loyalty is:
(a)
Term agreement
(b)
Apparent authority
(c)
Agency at will
(d)
A duty of an agent
(e)
Implied authority
35. T
F
A principal is always liable on a contract, whether he is fully disclosed,
unidentified, or undisclosed.
36. T
F
When a contract goes wrong, a third party can always recover damage from the
agent, whether the principal is fully disclosed, unidentified, or undisclosed.
37. T
F
An agent may receive profits from an agency relationship even if the principal
does not know about the profits, so long as the principal is not harmed.
38. T

An agent may never act for two principals whose interests conflict.

39. T
F
An agent has a duty to provide the principal with all information in her
possession that she has reason to believe the principal wants to know, even if he does not
specifically ask for it.
40. Someone painting the outside of a building you own crashed through a window, injuring a
visiting executive. Which of the following questions would your lawyer not need to ask to
determine if the painter was your employee?
(a)
Did the painter work full time for you?
(b)
Had you checked the painters references?
(c)
Was the painter paid by the hour or by the job?
(d)
Were you in the painting business?
(e)
Did the painter consider herself your employee?
41. Which of the following duties does an agent not owe to her principal?
(a)
Duty of loyalty
(b)
Duty to obey instructions
(c)
Duty to reimburse
(d)
Duty of care
(e)
Duty to provide information

42. Finn learns that, despite his stellar records, he is being paid less than other salespeople at
Barry Co. So he decides to start his own company. During his last month on the Barry
payroll, he tells all of his clients about his new business. He also tells them that Barry is a
great company, but his fees will be lower. After he opens the doors of his new business,
most of his former clients come with him. Is Finn liable to Barry?
(a)
No, because he has not been disloyal to Barry he praised the company
(b)
No, because Barry was underpaying him.
(c)
No, because his clients have the right to hire whichever company they choose
(d)
Yes, Finn has violated his duty of loyalty to Barry
43. A federal statute that ensures safe working conditions
(a)
Employee at will
(b)
Public policy rule
(c)
FLSA
(d)
Wrongful discharge
(e)
OSHA
(f)
Whistleblower
44. Happens when an employee is fired for a bad reason
(a)
Employee at will
(b)
Public policy rule
(c)
FLSA
(d)
Wrongful discharge
(e)
OSHA
(f)
Whistleblower
45. An employee who discloses illegal behavior on the part of his employer
(a)
Employee at will
(b)
Public policy rule
(c)
FLSA
(d)
Wrongful discharge
(e)
OSHA
(f)
Whistleblower
46. An employee without an explicit employment contract
(a)
Employee at will
(b)
Public policy rule
(c)
FLSA
(d)
Wrongful discharge
(e)
OSHA
(f)
Whistleblower

47. A federal statute that regulates wages and limits child labor
(a)
Employee at will
(b)
Public policy rule
(c)
FLSA
(d)
Wrongful discharge
(e)
OSHA
(f)
Whistleblower
48. States that an employer may not fire a worker for refusing to violate the law, performing a
legal duty, exercising a legal right, or supporting basic societal values
(a)
Employee at will
(b)
Public policy rule
(c)
FLSA
(d)
Wrongful discharge
(e)
OSHA
(f)
Whistleblower
49. T

An employee may be fired for a good reason, a bad reason, or no reason at all.

50. T
F
An employee may be fired if she disobeys a direct order from her boss not to
join a labor union.
51. T

Promises made by the employer during the hiring process are not enforceable.

52. T
F
In some states, employers are not liable for false statements they make about
former employees unless they know these statements are false or are primarily motivated by
ill will.
53. T
F
are safe.

The federal government has the right to inspect workplaces to ensure that they

54. T
F
test.

Any employer has the right to insist that employees submit to a lie detector

55. T

Federal law limits the number of hours every employee can work.

56. T

Children under 16 may not hold paid jobs.

57. T
F
Only workers, not their spouses or children, are entitled to benefits under the
social security system.

58. Brook moved from Denver to San Francisco to take a job with an advertising agency. His
employment contract stated that he was at will and could be terminated at any time. After
28 months with the company, he was fired without explanation. Which of the following
statements is true?
(a)
His contract implied that he could only be fired for cause.
(b)
Because he had a contract, he was not an employee at will.
(c)
He could only be fired for a good reason.
(d)
He could be fired for any reason.
(e)
He could be fired for any reason except a bad reason.
59. Under the FMLA:
(a)
Both men and women are entitled to take a leave of absence from their
jobs for childbirth, adoption, or a serious health condition of their own or
in their immediate family.
(b)
An employee is entitled to 12 weeks of paid leave
(c)
An employee is entitled to leave to care for any member of his household,
including pets.
(d)
An employee who takes a leave is entitled to return to the exact job she
left.
(e)
All employees in the country are covered.
60. Which of the following statements is true under the public policy doctrine?
(a)
An employee can be fired for any reason.
(b)
An employee can be fired for threatening a coworker.
(c)
An employee can be fired for filing a workers compensation claim.
(d)
An employee can be fired for violating company policy, even if he does so
to save someones life.
(e)
An employee can be fired for refusing to lie under oath on the witness stand.
61. A whistleblower is:
(a)
always protected by the law
(b)
never protected by the law
(c)
always protected when filing suit under the False Claims Act
(d)
always protected if she is an employee of the federal government
(e)
always protected if she works for a private company
62. George was furious when Hermione left the company in the middle of a very busy sales
period. He vowed that he would get even with her. Another employer called to check
Hermiones references. Which of the following statements should George make, if his goal
is to limit his companys potential liability?
(a)
Hermione was generally a good worker, but she was often late arriving at the
office (This is true.)
(b)
Hermione tried to run over a coworker with her care. (This is true.)
(c)
Hermione wore inappropriate clothing. (This is not true.)
(d)
Hermione doesnt know her debits from her credits. (This is not true.)
(e)
Hermione worked for this company for a year and a half. Her title was chief
knowledge officer. (This is true.)
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63. Statute that prohibits an employee from being paid at a lesser rate than employees of the
opposite sex for equal work.
(a)
Equal Pay Act
(b)
Right to sue letter
(c)
ADEA
(d)
Title VII
(e)
ADA

64. Statute that prohibits discrimination on the basis of race, color, religion, sex for equal work.
(a)
Equal Pay Act
(b)
Right to sue letter
(c)
ADEA
(d)
Title VII
(e)
ADA
65. Permission from the EEOC for a plaintiff to proceed with a case
(a)
Equal Pay Act
(b)
Right to sue letter
(c)
ADEA
(d)
Title VII
(e)
ADA
66. Statute that prohibits age discrimination
(a)
Equal Pay Act
(b)
Right to sue letter
(c)
ADEA
(d)
Title VII
(e)
ADA
67. Statute that prohibits discrimination against the disabled
(a)
Equal Pay Act
(b)
Right to sue letter
(c)
ADEA
(d)
Title VII
(e)
ADA
68. T
F
In a disparate impact case, an employer may be liable for a rule that is not
discriminatory on its face.
69. T
F
Title VII applies to all aspects of the employment relationship, including
hiring, firing, and promotion.
70. T
F
If more whites than Native Americans pass an employment test, the test
necessarily violates Title VII.
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