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Exam 30: Sole Proprietorships and Franchises

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Question 21

True/False

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Among the factors an entrepreneur will consider in selecting an organizational form for a business is the liability of the owners for the acts of the firm.

A) True
B) False

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Question 22

Multiple Choice

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Sandor wants to go into the business of construction contracting. Among the reasons that might convince Sandor to set up his business as a sole proprietorship would be

A) its greater organizational flexibility.
B) its limited liability.
C) its perpetual existence.
D) the ease of transferring the business to other family members.

E) B) and D)
F) B) and C)

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Question 23

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Anyone who does business must create a separate business organization.

To avoid conflicts with the First Amendment, no state requires a franchisor to submit ads aimed at prospective franchisees to the state for approval.

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Flynn is interested in buying a franchise from Gas Up Inc. The franchisor must disclose material facts that Flynn needs to make an informed decision concerning this purchase, according to

The Franchise Rule requires a franchisor to provide potential earnings figures to its prospective franchisees.

Mai-Lin's Martial Arts, Inc., grants a franchise to Naomi to operate a Mai-Lin's school. Mai-Lin's may require Naomi to pay the franchisor a percentage of her

Tasty Wings LLC wants to present information in "disclosure documents" via the Internet to prospective franchisees. Among other legal requirements with which the franchisor must comply, prospective franchisees must

Lara owns and operates Market Place, a venue for growers, crafters, and others to sell their goods, without creating a separate business organization. She receives all the profits from the vendors' fees and concession sales. This is most likely

As a means of controlling quality, a franchise agreement can limit the franchisee's ability to sell the franchise to another party.

A franchisee's breach of the duty of honesty and fidelity is not enough to allow a franchisor to terminate a franchise if their contract contains a notice-and-cure provision.

To protect franchisees against arbitrary or bad faith termination, a state law may require certain procedures be followed in terminating a franchise.

Because a franchise can involve the license of a trademark, a trade name, or a copyright, the law governing intellectual property may apply in some situations.

Teresa buys a franchise from Urgent Care Clinics, LLC. If their agreement is like most franchise agreements, it will specify that Urgent can terminate the franchise

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision to do so was made in the normal course of business.

In a sole proprietorship, the owner is not the business.

A proprietor's opportunity to raise capital for a sole proprietorship is limited.

Rugged Adventures Inc. wants to terminate its franchise arrangement with Stillwater Kayaking. Their contract does not provide for notice of termination or set a time for winding up the business. This means that to wind up, Stillwater

A franchisee can operate as an independent businessperson and choose any business form but still obtain the advantages of a regional or national organization.