Chapter 39 Special Business Forms

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____ 1. Cody and Edith, the respective owners of two development companies, wish to combine their expertise and knowledge to build a single housing development. The most appropriate legal entity for this project might be
a. a business trust.
b. a cooperative.
c. a joint stock company.
d. a joint venture.

____ 2. Best Construction, Inc., and General Real Estate Corporation form a joint venture. A joint venture is usually formed for
a. an implied duration of not more than six months.
b. a single activity or transaction.
c. a stated duration of not more than one year.
d. perpetual existence.

____ 3. Ace Property, Inc., and Build-Rite Construction Corporation combine their efforts to build an office and warehouse complex. Their form of business organization is
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.

____ 4. Owen, Paula, Quinn, and Sara get together to finance the building of a shopping mall. Their selected form of business organization is an investment group, or
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.

____ 5. Ron, Sue, and Tom form a syndicate to buy a professional football team. This syndicate could be set up as
a. a corporation only.
b. a partnership only.
c. a corporation or a partnership.
d. none of the above.

____ 6. Exotic Products Company and First Pier, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This business organization is
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.

____ 7. Downwind Properties Corporation and Eastern Investments Company transfer their property to Financial Management, Inc., which manages the property and distributes the profits to Downwind and Eastern. This form of a business organization is
a. a business trust.
b. a joint stock company.
c. a joint venture.
d. a syndicate.

____ 8. Farmers in Washington County form a business organization to provide, without profit, an economic service to its members. This form of business organization is
a. a business trust.
b. a cooperative.
c. a franchise.
d. a joint stock company.

____ 9. Joan, Kyle, and other consumers form Metro Purchasing Cooperative. This form of business organization makes it possible for these individuals to
a. avoid personal liability for the acts of the cooperative.
b. obtain an exemption from state laws governing corporations.
c. pool their resources to gain an advantage in the market.
d. all of the above.

____ 10. Great Sports Corporation licenses its trademark to Personality Products, Inc., to use in selling caps, sweatshirts, t-shirts, and similar goods. This is
a. a business trust.
b. a cooperative.
c. a franchise.
d. a joint stock company.

____ 11. National Capital Corporation and International Investments, Inc., form a joint stock company. The ownership of a joint stock company is represented by
a. partnership certificates.
b. shares of stock.
c. trust certificates.
d. none of the above.

____ 12. Interstate Transport, Inc., and Nationwide Trucking Company form a joint stock company. Its owners are
a. agents of each other only.
b. shareholders only.
c. agents of each other and shareholders.
d. none of the above.

____ 13. Resource Development Company and Western Mining Corporation form a joint stock company. Like most joint stock companies, it is managed by
a. directors and officers.
b. general partners.
c. managing members.
d. trustees.

____ 14. Larry, Michel, and Nancy are investors in Oceanic Exploration, a business trust. A business trust is managed by
a. directors and officers.
b. general partners.
c. managing members.
d. trustees.

____ 15. Excel Auto Sales Company and Fine Used Cars Corporation form a joint stock company. A joint stock company can be formed for, at the most,
a. an implied duration of not more than six months.
b. a single activity or transaction.
c. a stated duration of not more than one year.
d. perpetual existence.

____ 16. Trust Management Company is a business trust. The concept of a business trust originated in
a. California.
b. Massachusetts.
c. New Jersey.
d. New York.

____ 17. Kim is a beneficiary of a business trust. As a beneficiary, Kim is required
a. to distribute the profits.
b. to manage the property.
c. to terminate the trust on the death of one of the other beneficiaries.
d. none of the above.

____ 18. International Shipping Corporation and Overseas Transport, Inc., form a business trust. A business trust is created by
a. an act of a state legislature.
b. an informal understanding.
c. an oral trust agreement.
d. a written trust agreement.

____ 19. Jill is the sole owner and manager of a business trust. Under the terms of a business trust, Jill is not required to
a. distribute the profits.
b. manage the property.
c. terminate the trust on the death of one of the beneficiaries.
d. none of the above.

____ 20. Buyers Club is a incorporated cooperative. Like other incorporated cooperatives, Buyers Club distributes profits to its owners on the basis of
a. the amount of capital they contribute.
b. the degree to which they participate in the management of the cooperative.
c. their transactions with the cooperative.
d. none of the above.

____ 21. Instead of setting up a business to market his own products, Adam is considering buying a franchise. A franchise could involve the licensing to Adam of
a. a copyright only.
b. a trademark only.
c. a copyright or a trademark.
d. none of the above.

____ 22. European Autos & Trucks, Inc., licenses Fine Vehicles Corporation, an automobile dealership, to sell its products. This is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. none of the above.

____ 23. Fast Food, Inc., licenses Greg to operate a restaurant under the Fast Food name. This is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. none of the above.

____ 24. National Realtors, Inc. (NRI), grants a franchise to County Property Sales Company. NRI is
a. a franchisee.
b. a franchisor.
c. an agent.
d. a principal.

____ 25. Mellow Coffee Shops, Inc., grants a franchise to Nora's Cafe. Nora's Cafe is
a. a franchisee.
b. a franchisor.
c. an agent.
d. a principal.

____ 26. Chicago Coca-Cola Bottling Company is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. none of the above.

____ 27. Ira buys an exclusive territory in which he is authorized to set up a plant to manufacture Smooth Yogurt Company products. After receiving the essential formula, Ira begins manufacturing. This is
a. a chain-style franchise.
b. a distributorship franchise.
c. a manufacturing franchise.
d. none of the above.

____ 28. To enable Bob, a potential franchisee, to make an informed decision concerning the purchase of a Great Store franchise, regulations requiring Great Stores to disclose material facts were issued by
a. the Federal Trade Commission.
b. the National Conference of Commissioners on Uniform State Laws.
c. the U.S. Franchise Agency.
d. none of the above.

____ 29. Mike operates Mike's PennCo Service Station under a franchise granted by PennCo Corporation. To provide protection for gas station franchisees, Congress enacted
a. the Automobile Dealers Franchise Act.
b. the Gas and Oil Sales Act.
c. the Gasoline Dealers Act.
d. the Petroleum Marketing Practices Act.

____ 30. Pete's Pizza, Inc., grants a franchise to Rob to operate a Pete's Pizza restaurant. Pete's Pizza may charge Rob
a. a franchise fee only.
b. a price for supplies only.
c. a franchise fee and a price for supplies.
d. none of the above.

____ 31. Hale enters into a franchise agreement with Zippy Burgers in which he is allotted a territory that includes all of Washington County. Zippy Burgers later grants additional franchises in the same territory to other individuals. Hale's lawsuit to stop the other franchisees from operating Zippy restaurants in Washington County will probably
a. succeed if Hale paid a higher franchise fee.
b. succeed if Hale can show that he was the first franchisee to have been allotted the Washington County territory.
c. fail if Hale does not have exclusive rights to operate in Washington County.
d. fail because Hale's suit would make it possible for him to exclude potential competitors from the marketplace and thus violate the antitrust laws.

____ 32. Excelsior Bowling Company grants a franchise to Fran to operate an Excelsior Bowling Center. Excelsior may charge Fran a percentage of
a. advertising costs only.
b. annual sales or volume of business only.
c. advertising costs and annual sales or volume of business.
d. none of the above.

____ 33. Comfort Wear, Inc., a franchisor of shoe stores, wishes to standardize the pricing practices of its franchisees that have engaged in price-cutting to increase their respective shares of the market. The most prudent remedy might be for Comfort to
a. reduce the quantity of the products that it sells to its franchisees.
b. suggest the prices at which its franchisees sell their products.
c. terminate the franchisees who cut prices.
d. undercut the business of those franchisees who cut prices by opening competing stores in the franchisees' territory.

____ 34. Tina buys a Sports Grill franchise. The franchisor requires that its franchisees buy Sports Grill products for every phase of their operations. Because Tina wishes to buy less expensive products, she challenges the requirement. Her best argument is probably that the requirement violates
a. the commerce clause.
b. the Equal Protection Clause.
c. the federal antitrust laws.
d. the First Amendment.

____ 35. A franchise agreement between Digital Software Company and Computer Games, Inc., is silent on a time for termination of the franchise by Digital. Digital may
a. never terminate.
b. terminate at any time.
c. terminate on reasonable notice.
d. terminate on thirty days notice.