1. Which of the following is true about the choice of business entity for an entrepreneur?

The choice takes into account many factors, including finding an option that has all the characteristics desired.

The choice is determined by the Internal Revenue Service based on all the facts and circumstances.

The choice is determined solely by whether the primary business is services or goods.

The choice is determined solely by the amount of capital invested.

2. There are two general partners, each of whom contributes $5,000 in capital to a limited partnership. There are two limited partners, each of whom contributes $20,000. The total amount of capital contributed is $50,000. The limited partnership agreement does not stipulate how profits and losses are to be allocated. Assume that the limited partnership makes $300,000 in profits. Under the Revised Uniform Limited Partnership Act (RULPA), how much would each partner receive?

Each general partner would receive $120,000, and each limited partner would receive $30,000.

Each general partner would receive $30,000, and each limited partner would receive $120,000.

All partners would receive $75,000, regardless of whether he or she is a general or limited partner.

Each general partner would receive $50,000, and each limited partner would receive $100,000.

3. Which type of business formation is typically reserved for professionals such as accountants, lawyers, and doctors?

Limited Liability Partnership (LLP)

Limited Liability Company (LLC)

S-Corporation

Franchise

4. George has served Mary with a complaint alleging breach of contract. Mary has never been sued before and as such, she seeks your advice on what to do with the complaint. You advise that she

should not respond to George's complaint as an answer implies an admission

answer George's complaint by admitting or denying the allegations George has asserted against her

answer George's complaint but do not provide any affirmative defenses that George can use against her

write a letter to the judge saying that George is mistaken

5. Which of the following is true of a corporation?

Corporation shareholders are subject to unlimited personal liability.

A corporation is a separate legal entity.

Corporation owners are only taxed once on earnings.

A corporation terminates upon the death of an owner.

6. Which of the following is one of the major purposes of a settlement conference?

To facilitate the settlement of a case

To contest the local court rules

To structure a settlement payment schedule

To conduct discovery for a case

7. When parties agree in advance to adhere to an arbitrator's decision and award, it is known as

mediation

binding arbitration

arbitrator discretion

appealable

8. Which form of alternative dispute resolution occurs when the parties choose an impartial third party to hear and decide their dispute?

Conciliation

Mediation

Minitrial

Arbitration

9. Martha started a flower shop as a sole proprietor. After 1 year, she was forced to close the shop because business was so bad. At that time, the business assets totaled $50,000, but the business liabilities totaled $125,000. Which of the following statements is true?

Martha's business creditors can collect only the $50,000 of business assets.

Martha is personally liable for the additional $75,000 owed to business creditors.

Once Martha terminates the sole proprietorship, she is no longer liable for the $50,000.

Martha's business creditors can collect only the $50,000 now, but if Martha ever goes into business again, they can get the assets of the new business.

10. Which of the following is true in the creation of a general partnership?

The business cannot operate under a trade name.

The business name cannot be a fictitious name.

The name selected cannot indicate that it is a corporation.

The business name must have the names of all the partners.

11. The Black Squirrel limited partnership has been in operation for many years, but has recently fallen on hard times. The partners have decided to dissolve, although there are few assets remaining in the partnership. Shortly after the partnership filed its certificate of limited partnership, the partners had the foresight to incorporate into their partnership agreement a provision that, in the event of dissolution, the assets would be distributed in payment of claims first to limited partners, then to general partners, then to creditors. Hilda is a limited partner and feels relieved that she will receive at least a portion of her capital. Henry, one of the general partners, said that this provision is void and unenforceable. Which of the following best describes this situation?

The provision placing the partners ahead of creditors is not enforceable, but the priority of limited partners over general partners is enforceable.

The distribution of assets in the event of dissolution is one of the few provisions where the Revised Uniform Limited Partnership Act does not allow modification.

The provision placing limited partners ahead of general partners is unenforceable, thus all partners would be on an equal footing and ahead of creditors.

The distribution, as called for in the agreement, would be enforceable if it had been included in any filings related to the limited partnership.

12. Which of the following is true of arbitration?

One party usually drops the case.

A resolution may or may not be reached.

Parties can introduce evidence to support their case.

A judicial referee makes recommendations to the parties.

13. Which of the following is true regarding mediation?

A mediator does not make a decision or an award.

If a settlement agreement is not reached in mediation, then the parties hire a new mediator.

Was created by the Federal Mediation Act of 1925.

A settlement agreement is never reached with a mediator.

14. What is the effect of having a corporation as the general partner of a limited partnership?

Each shareholder of the corporation will be treated as a limited partner of the limited partnership.

The limited liability of the corporation will result in the limited partners having greater liability than they would otherwise.

The liability of the corporate general partner will be limited to the amount of its assets.

Each shareholder of the corporation will be treated as a general partner of the limited partnership.

15. Fred and Ginger are general partners in a business. They decide to purchase a building for the partnership. Ginger will put up the money for the building, and Fred will complete the remodeling. While inspecting the building, Fred is informed that the building is packed full of asbestos. He fails to tell Ginger of the presence of the substance. They buy the building and go into business. During the remodeling of the building, people from the neighborhood begin complaining about the dust from the building. Some of them even threaten to sue. Who is liable?

Fred is liable because he was put on notice of the presence of the substance. Ginger is not liable because she did not have actual knowledge.

Neither Ginger nor Fred are liable personally, nor is the partnership, as they did not put the substance in the building.

Both Ginger and Fred are liable, regardless of the circumstances, by virtue of the fact that they are partners.

Ginger is liable because she is the one who purchased the building. Fred is not liable, even though he had actual knowledge, because he did not purchase the building.

16. Which of the following is true of The Federal Arbitration Act?

It permits an appeal for all arbitration awards.

It governs all types of alternative dispute resolution.

It applies only to breach of contract disputes.

It provides that arbitration agreements are valid, irrevocable, and enforceable.