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Exam 30: Sole Proprietorships and Franchises

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Question 31

Multiple Choice

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Ford is the sole proprietor of Go, a game subscription service. As a sole proprietor, on the business's profits, Ford pays

A) no income taxes.
B) only personal income taxes.
C) only business income taxes.
D) both personal and business income taxes.

E) None of the above
F) B) and C)

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Question 32

Multiple Choice

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Raceway LLC licenses the trademarks to its products to Stadium Markets Inc. to reproduce on clothing and other goods for sale. This is

A) a franchise.
B) none of the choices.
C) a partnership.
D) a sole proprietorship.

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

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Question 33

Multiple Choice

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Bayard organized, and owns and operates, Cypress Tours in the simplest form of business organization. This is

After notice of termination, a franchisee must be given a reasonable time to wind up the business.

Riki contracts to buy a franchise from Sushi Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by

A franchisor does not have good cause to terminate a franchise for a franchisee's failure to meet specified sales quotas.

To prevent deception, all representations by a franchisor to a prospective franchisee must have a reasonable basis at the time they are made.

The duration of a franchise is a matter set by state law, not to be otherwise determined between the parties.

Owen plans to open Owen's Pets, a pet sales and supplies outlet, and to hire Quimby and Ruth. Owen will invest only his own money. He does not expect to make any profit for at least two years and to make almost no profit for the first three years, but he hopes to expand eventually. Which form of business organization would be most appropriate? What are the chief characteristics, advantages, and disadvantages of this form of business organization? If Owen wants to obtain additional capital to expand the business, but does not want to lose control of the firm, what is his best option?

In a sole proprietorship, the proprietor bears the burden of any liabilities incurred by the business enterprise.

Because each type of franchise relationship is similar, franchise contracts tend to be similar.

Cathy buys an exclusive territory in which she is authorized to set up a plant to make Delite dairy products. After receiving the recipes, Cathy begins making Evie's-brand yogurt and other Delite products. This is

eSports Inc. offers entrepreneurs the opportunity to operate a franchise under the eSports trade name as the owner of a game-playing venue. To possible franchisees, eSports makes earnings claims. For those claims, the franchisor

A court may decide that a franchisor has wrongfully terminated a franchise if the franchisor's decision was arbitrary.

Espresso Brew Inc. uses a Web site to provide downloadable information to prospective franchisees. This electronic information is the equivalent of an offer that must comply with

Bob buys a Club Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally

State regulation of franchising is often aimed at protecting franchisees from unfair practices.

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Omar. This is

Anyone who does business without creating a separate business organization has a franchise.

Sam buys a franchise from Taco Mission Inc. This relationship, like all other franchise relationships, is governed by