Answer True/False:

1) A director must always vote on a proposed transaction in which he or she has a personal interest.??

2) A partner is liable for honest errors in judgment in conducting partnership business.?

3) A limited liability company that has two or more members can be taxed as a corporation.?

4) A sole proprietorship lacks continuity on the death of the proprietor.

5) A sole proprietor is free to make any decision he or she wishes concerning the business.?

6) An involuntary bankruptcy occurs when a debtor’s creditors are forced to accept a discharge of the debtor’s debts.?

7) An agent’s duties to the principal are implied from the agency relationship only if the identity of the principal is disclosed to a third party.

8) An agent is authorized to act on behalf and instead of a principal in doing business with third parties.?

9) Where and how to perfect a security interest sometimes depends on the classification of the collateral.?

10) A director or officer must exercise due care in performing their duties, including acting in good faith.?

11)? In a manufacturing arrangement, a franchisor transmits to a franchisee the essential ingredients or formula to make a particular product.

12) A majority of the states treat a partnership as an entity for most purposes.

Multiple Choice Questions:

1) ?Natural Gas, LP, is a limited partnership to which its partners have contributed capital. Natural Gas’s creditors include Precision Piping, Inc. On Natural Gas’s dissolution, its assets will be distributed to pay

a. ?Precision Piping before the partners.

b. ?the partners before Precision Piping.

c. ?the partners and Precision Piping proportionately.

d. ?none of the choices.

2) ?Sweet Selections, a general partnership, operates as a gift shop. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. With respect to management decisions

a. ?both Jill and Amy must agree.

b. ?the senior partner decides.

c. ?30 percent of the partners must agree.

d. ?a majority of the partners must agree.

2) Without authorization, Rolf contracts on behalf of Sari to have Tige paint the interior and exterior of Sari’s house. Sari ratifies the contract. Later, Sari tries to rescind the part of the contract relating to the exterior. This attempt will be?

a. ?totally successful.

b. ?partly successful.

c. ?partly unsuccessful.

d. ?totally unsuccessful.