Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
Business liabilities -
correct answer ✅Paying the rent for the building, paying the rent
for the equipment, paying for supplies, paying for all the utilities
you use...AKA normal business bills.
tax liabilities -
correct answer ✅Money owed the government for taxes.
(CRA can catch you easily - Ex: GST, collection of provincial sales tax
and payment, income tax).
Vicarious Liability -
correct answer ✅Legal responsibility placed on one person for the
acts of another.
o Employers are vicariously liable for the torts committed by
employees in the course of their employment - important to know
who the employer is. (AKA I'm liable for this and you are also liable
for this) (Ex: you could be sued as well for what that person did). (If
you are vicarious liability, you are also liable).
,Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
o Rule that applies: the employer might be a partnership or
corporation, but employers are vicarious liability for the torts
committed by their employees (usually negligence) in the course of
their employment (while they are doing they job). If it is a sole
proprietorship, then you might want to take some steps to limit
your liability.
Sole Proprietorship -
correct answer ✅Unincorporated business (not a corporation)
owned by a single individual. There can be other people that work
for them but the business is just owned by a single individual.
- The simplest form of business organization out there.
- All of the benefits that come to the business really go to the
owner. (Ex: Profits).
buuuut...
- The reverse is also true. All of the debts and obligations and
liabilities of the business are the same for the owner. So if you sue
the Sole Proprietorship, you are suing the owner. This is called:
,Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
"Unlimited Personal Liability" (everything the business is liable for,
the owner is as well).
Pros and Cons of Sole Proprietorship -
correct answer ✅Pros:
♣ Incredibly easy to properly start a sole proprietorship (almost no
legal formality) Just need to reserve and register a business name.
Can reserve the name online.
♣ Very inexpensive. (Maybe $105) (Reserving your name is the
only legal requirement).
♣ Incredibly fast to get.
Cons:
♣ "Unlimited Personal Liability" (everything the business is liable
for, the owner is as well). (Sue the business and go after the owner
as well).
, Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
How can Sole Proprietorship Owners limit liability? -
correct answer ✅1. Liability insurance → (The riskier the business,
the more expensive the liability insurance is).
2. Waiver → can limit the liability through contract - customer signs
contract (court hate this, so try and get around it any way possible -
consult a lawyer)
3. Creditor Proofing -what if you transfer all the assets to your
spouse?
> This is not a way of limiting your liability
>> You still owe, but you have nothing to give, your home cannot be
taken away
>>> You cannot do this once a liability has been committed → that
would be fraudulent.
Partnership and the three sources of Partnership Law -
correct answer ✅Partnership is another type of business
organization (co-ownership).
Three sources:
Questions With 100% Verified Answers
Business liabilities -
correct answer ✅Paying the rent for the building, paying the rent
for the equipment, paying for supplies, paying for all the utilities
you use...AKA normal business bills.
tax liabilities -
correct answer ✅Money owed the government for taxes.
(CRA can catch you easily - Ex: GST, collection of provincial sales tax
and payment, income tax).
Vicarious Liability -
correct answer ✅Legal responsibility placed on one person for the
acts of another.
o Employers are vicariously liable for the torts committed by
employees in the course of their employment - important to know
who the employer is. (AKA I'm liable for this and you are also liable
for this) (Ex: you could be sued as well for what that person did). (If
you are vicarious liability, you are also liable).
,Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
o Rule that applies: the employer might be a partnership or
corporation, but employers are vicarious liability for the torts
committed by their employees (usually negligence) in the course of
their employment (while they are doing they job). If it is a sole
proprietorship, then you might want to take some steps to limit
your liability.
Sole Proprietorship -
correct answer ✅Unincorporated business (not a corporation)
owned by a single individual. There can be other people that work
for them but the business is just owned by a single individual.
- The simplest form of business organization out there.
- All of the benefits that come to the business really go to the
owner. (Ex: Profits).
buuuut...
- The reverse is also true. All of the debts and obligations and
liabilities of the business are the same for the owner. So if you sue
the Sole Proprietorship, you are suing the owner. This is called:
,Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
"Unlimited Personal Liability" (everything the business is liable for,
the owner is as well).
Pros and Cons of Sole Proprietorship -
correct answer ✅Pros:
♣ Incredibly easy to properly start a sole proprietorship (almost no
legal formality) Just need to reserve and register a business name.
Can reserve the name online.
♣ Very inexpensive. (Maybe $105) (Reserving your name is the
only legal requirement).
♣ Incredibly fast to get.
Cons:
♣ "Unlimited Personal Liability" (everything the business is liable
for, the owner is as well). (Sue the business and go after the owner
as well).
, Commercial Law - Final Exam Prep
Questions With 100% Verified Answers
How can Sole Proprietorship Owners limit liability? -
correct answer ✅1. Liability insurance → (The riskier the business,
the more expensive the liability insurance is).
2. Waiver → can limit the liability through contract - customer signs
contract (court hate this, so try and get around it any way possible -
consult a lawyer)
3. Creditor Proofing -what if you transfer all the assets to your
spouse?
> This is not a way of limiting your liability
>> You still owe, but you have nothing to give, your home cannot be
taken away
>>> You cannot do this once a liability has been committed → that
would be fraudulent.
Partnership and the three sources of Partnership Law -
correct answer ✅Partnership is another type of business
organization (co-ownership).
Three sources:
