66) A ________ is a person who intentionally or unintentionally causes injury or death to
another person.
A) protagonist
B) supplanter
C) reversionist
D) tortfeasor
67) Which of the following is true of the management of an LLC?
A) Members cannot become managers of an LLC.
B) A manager-managed LLC shares management powers between members and managers.
C) A nonmember can become a manager of an LLC.
D) An LLC can be both member-managed and manager-managed simultaneously.
68) Which of the following is true of a member-managed LLC?
A) Each member has equal rights in the management of the business of the LLC.
B) The member with the highest capital contribution becomes the de facto manager of the LLC.
C) Any matter relating to the business of the LLC is decided by a unanimous vote of the
members.
D) Shareholders are not allowed to decide matters relating to the business of the LLC.
69) Mary, Harold, Harvey, and William form an LLC by contributing $20,000, $50,000,
$55,000, and $150,000 respectively. The LLC is designated to be member-managed. When a
decision is put to vote, Mary, Harvey, and Harold vote “yes,” whereas William votes “no”.
Which of the following is true in this context?
A) William’s decision prevails as he has invested the maximum capital.
B) No conclusion can be derived as the vote is not unanimous.
C) Mary, Harvey, Harold’s decision prevails due to simple majority.
D) The decision is put to vote among employees of the company.
70) Which of the following methods are used to appoint a manager of a manager-managed LLC?
A) appointed by the secretary of state
B) vote of majority of the members
C) unanimous vote of members
D) unanimous vote of shareholders
71) Which of the following actions requires voting of all members in a manager-managed LLC?
A) issuing a certificate of interest
B) admitting new members
C) converting an existing business into an LLC
D) expanding operations in another country
72) ________ is a duty owed by a member of an LLC to not act adversely to the interests of the
LLC.
A) Duty of discharge
B) Duty of restitution
C) Duty of loyalty
D) Duty of resolution
73) A(n) ________ is a special form of partnership in which all partners are limited partners, and
there are no general partners.
A) domestic LLC
B) proprietorship
C) LLC
D) LLP
74) ________ refers to the formal documents that must be filed at the secretary of state’s office
of the state of organization of an LLP to form the LLP.
A) Articles of LLP
B) Agreements of conversion
C) Articles of organization of LLP
D) Articles of amendment of LLC
75) A(n) ________ is established when one party licenses another party to use the first party’s
trade name, trademarks, commercial symbols, patents, copyrights, and other property in the
distribution and selling of goods and services.
A) proprietorship
B) franchise
C) implicit contract
D) general partnership
76) Which of the following is true of a franchise?
A) The franchisor and franchisee are established as separate legal entities.
B) A franchisee does not need a license to use the franchisor’s trademark.
C) The franchisee does not have access to the franchisor’s knowledge.
D) A franchise is considered as a joint venture.
77) In a(n) ________ franchise, the franchisor manufactures a product and licenses a retail dealer
to sell the product to the public.
A) processing plant
B) area
C) distributorship
D) chain-style
78) In which of the following types of franchise does a franchisor provide a secret formula or
process to the franchisee?
A) chain-style franchise
B) area franchise
C) distributorship franchise
D) processing plant franchise
79) Limonelle Corporation owns the secret formula for a popular beverage brand Limonelle. The
corporation operates through franchises in over 50 countries. It uses a secret formula to prepare
the drink concentrate which is dispatched to the franchises world over. These franchises then
prepare and bottle the beverage for distribution. Which of these types of franchises has
Limonelle adopted?
A) chain-style franchise
B) processing plant franchise
C) distributorship franchise
D) area franchise
80) In a ________ franchise, the franchisor licenses the franchisee to make and sell its products
or services to the public from a retail outlet serving an exclusive geographical territory.
A) chain-style
B) area
C) distributorship
D) processing plant
81) Rio-Werner Corporation owns Rio’s Sandwiches, a fast-food restaurant in New Jersey. It
wants to operate in five cities on the west coast by means of franchisees which make and sell all
menu items from Rio’s Sandwiches. Which of the following would best suit the Rio-Werner
Corporation’s franchise plan?
A) processing plant
B) area
C) distributorship
D) chain-style
82) In a(n) ________ franchise, the franchisor authorizes the franchisee to negotiate and sell
franchises on behalf of the franchisor.
A) chain-style
B) area
C) distributorship
D) processing plant
83) The area franchisee is also called a ________.
A) joint venturer
B) limited partner
C) subfranchisor
D) strategic partner
84) Which of the following is an instance of an area franchise?
A) McDonald’s franchises an independently owned restaurant to make and sell its products in
Pennsylvania.
B) Pepsi Co. ships Pepsi in the form of a drink concentrate which is prepared and bottled locally
in Canada.
C) Nokia licenses a retail dealer to retail its products in Jacksonville.
D) Burger King wants to start operating in Mexico and hires a Mexican subfranchisor to sell the
franchise on behalf of Burger King.
85) Which of the following documents sets forth the terms and conditions of a franchise?
A) the FTC disclosure document
B) the franchise agreement
C) the articles of incorporation
D) the articles of organization
86) Which of the following is true of the liabilities of a franchisor and a franchisee?
A) The franchisor is not liable for any tort arising out of the franchise.
B) Both franchisee and franchisor are jointly liable for torts committed by either.
C) Franchisees are only liable on their own contracts.
D) Franchisors are always liable for the torts of the franchisees.
87) Ubiquitous Enterprises is a franchisee of HotPan chain of restaurants. One afternoon, Linda,
an employee of a HotPan restaurant owned by the franchisee is mopping the floor. Gary, a
customer who enters the restaurant is talking on his cell phone and does not notice Linda
mopping the floor. He slips on the wet floor while walking to the counter and is injured. Who
among the following is liable for Gary’s injuries?
A) HotPan, for not providing a “Caution: Wet Floor!” sign
B) Ubiquitous Enterprises, for not having its own “Caution” sign
C) Linda, for not alerting Gary
D) Gary, for not noticing that the floor was wet
88) ________ is a business arrangement that occurs when the owner of intellectual property
contracts to permit another party to use the intellectual property.
A) General partnership
B) Leasing
C) Licensing
D) Joint venturing
89) The party who grants a license is known as the ________.
A) licensee
B) licensor
C) grantee
D) grantor
90) The party to whom a license is granted is known as the ________.
A) licensee
B) licensor
C) grantee
D) grantor
91) YouKnow Inc. is a corporation that creates educational resources. It grants Middlewest
Public School the right to exclusively use its online encyclopedias for three years, in return for a
fee. In this arrangement, YouKnow Inc. is the ________.
A) donor
B) trustee
C) grantor
D) licensor
92) Intrepid Creations is a product design institute which provides educational courses in
package design. It manages to acquire the right to use simulation software from Marco Software
for a payment of $2,000 a year. There is no clause of expiration on this arrangement and the right
to access the software is renewed annually. Which of the following kinds of business
arrangements does the aforementioned scenario indicate?
A) a licensing arrangement
B) a general partnership
C) a limited partnership
D) a franchise
93) Explain the process which exempts members of an LLC from double taxation.
94) What is a distributional interest? Explain the terms of its transfer.
95) Distinguish between a member-managed and a manager-managed LLC. Mention the
exceptional actions that cannot be delegated to managers.
96) Explain in brief the four basic types of franchises.
97) What are the steps a prospective franchisee must take in order to acquire a franchise? What
properties are generally licensed by franchisors?
98) Explain the extent of liability of a franchisor and a franchisee with an example.
99) A ________ is an unincorporated business entity that combines the most favorable attributes
of general partnerships, limited partnerships, and corporations.
100) The creation of an LLC is pursuant of laws stated by the ________ government.
101) The ________ codifies LLC laws and tries to establish comprehensive LLC law that is
uniform throughout the United States.
102) An LLC is formed by delivering ________ to the office of the secretary of state of the state
of organization for filing.
103) A member’s ownership interest in an LLC is known as a ________.
104) A person who intentionally or unintentionally (negligently) causes injury or death to
another person is called a(n) ________, and is liable to persons he or she injures and to the heirs
of persons who die because of his or her conduct.
105) In a(n) ________ LLC, each member has equal rights in the management of the business of
the LLC, regardless of the size of his or her capital contribution.
106) In a(n) ________ LLC, the managers have authority to bind the LLC to contracts, but
nonmanager members cannot bind the LLC to contracts.
107) A nonmanager member of a(n) ________ LLC is treated equally to a shareholder in a
corporation.
108) A company operating its business as a(n) ________ cannot have more than 100
shareholders.
109) An LLP has a(n) ________ tax benefit, where no taxis paid at the partnership level, and all
profits and losses are reported on the individual partners’ income tax returns.
110) Ford Motor Company manufactures automobiles and franchises independently owned
automobile dealers (franchisees) to sell them to the public. This is an example of ________
franchise.
111) In a(n) ________ franchise, the franchisor provides a secret formula or the like to the
franchisee. The franchisee then manufactures the product at its own location and distributes it to
retail dealers.
112) A type of franchising where the franchisor licenses the franchisee to make and sell its
products or services to the public from a retail outlet serving an exclusive geographical territory
is known as ________ franchise.
113) In an area franchise, the franchisor authorizes the franchisee to negotiate and sell franchises
on behalf of the franchisor. The area franchisee is called a(n) ________.
114) A franchisee acquires a(n) ________ from a franchisor which allows the franchisee to use
the franchisor’s trademarks, service marks, trade names, and other intellectual property in the
distribution of goods, services, software, and digital information.