Reference no: EM133388800
Questions
1. Franchisor Paige Gaming Inc. (Paige) offers entrepreneurs the opportunity to operate a franchise under the Paige trade name as the owner of a game-playing venue. To possible franchisees, Paige makes earnings claims. For those claims, the franchisor
can have a hypothetical basis.
must have a reasonable basis upon which to make the claim.
can have no basis to make the claims.
must have a warranty of profit
2. Coolio, Gil and Dre are the sole shareholders in a close corporation. To avoid sharing control with someone they do not know or like, it would be most effective for them to:
require more than a majority of directors approve any board action.
restrict the transferability of shares to outside persons.
reorganize into a sole proprietorship or partnership.
hold special shareholders' or directors' meetings on an annual basis.
3. Which of the following would be the most desirable reason to incorporate a business?
complying with the regulations of the Security and Exchange Commission
all of the answers are correct.
double taxation
limited liability
4. Slick owns Tex Burrito Corporation (Tex). Slick uses Tex's funds to pay her personal expenses and undercapitalizes Tex. Slick creates Beans Corporation to engage in the same business as Tex and then transfers all of Tex's assets to Beans and fails to pay Tex's creditors. Tex's creditors should
amend Tex's bylaws
ask a court to pierce the corporate veil of Tex and Beans
congratulate Slick for her brilliant financial maneuvers.
amend Beans articles of incorporation
5. Levon is a director of Motor Parts Corporation. Levon makes informed decisions with respect to Motor Parts in good faith, in what Levon believes is the firm's best interest, and without violating any duties owed to it. Despite these circumstances, Motor Parts fails turn a profit. Under the business judgment rule, Levon is
liable for negligence
can be charged with a crime
liable for any lost profits.
immune from liability under the business judgment rule