LGS 200- Abigail Hammond- Exam 3
Questions and Answers | 2026 Update |
100% Correct.
What are the three classification a franchise can fall into? - ✔️✔️1. Distributorships
2. Chain-style business operations
3. Manufacturing arrangements
Franchise: Distributorship - ✔️✔️A manufacturer (the franchisor) licenses a dealer (the
franchisee) to sell its product
What is an example of a distributorship? - ✔️✔️Automobile dealerships and beer
distributorships
Franchise: Chain-Style Business Operation - ✔️✔️A franchise operates under a
franchisor's trade name and is identified as a member of a select group of dealers that
engage in the franchisor's business
- Generally required to follow standard or prescribed methods of operation
- Franchisor insists that the franchisee maintain certain standards of performance
- May be required to obtain materials and supplies exclusively from the franchisor
Franchise: Manufacturing Agreement - ✔️✔️The franchisor transmits to the franchisee
the essential ingredients or formula to make a particular product and the franchisee then
markets the product either as wholesale or at retail with the franchisor's standards
What is an example of a manufacturing agreement? - ✔️✔️Soft-drink bottling
companies
How does the federal government regulate franchising? - ✔️✔️The federal government
does this through laws that apply to specific industries and through the franchise rule,
created by the FTC
Where must the owner of a sole proprietorship report business income? - ✔️✔️On
his/her personal income tax return
,Who is legally responsible for all debts and obligations incurred by the business? -
✔️✔️The owner
What kind of account is a sole proprietor allowed to establish that is tax-exempt until the
funds are withdrawn? - ✔️✔️Retirement accounts
The sole proprietor is free to make any decision she or he wishes concerning the
business, including: - ✔️✔️- What kind of business to pursue
- Whom to hire
- When to take a vacation
True or false: The sole proprietor can sell or transfer all or part of the business to
another party at any time without seeking approval from anyone else. - ✔️✔️True
Does a sole proprietorship allow less flexibility than a partnership or corporation? -
✔️✔️No, it allows more flexibility
What is the major disadvantage of a sole proprietorship? - ✔️✔️The proprietor alone
bears the burden of any losses or liabilities incurred by the business
Personal Assets at Risk - ✔️✔️Creditors can pursue the owner's personal assets to
satisfy any business debts.
Lack of Continuity and Limited Ability to Raise Capital - ✔️✔️- The sole proprietorship
has the disadvantage of lacking continuity after the proprietor's
- Another disadvantage is that in raising capital, the proprietor is limited to his or her
personal
funds and any loans that he or she can obtain for the business.
What happens when the owner of a sole proprietorship dies? - ✔️✔️The business dies
as well, it is automatically dissolved
Why might lenders be unwilling to make loans to sole proprietorships? - ✔️✔️The sole
proprietor risks unlimited personal liability and may not be able to pay
Partnership - ✔️✔️An agreement, expressed or implied, between two or more persons
to carry on a business for a profit
Partners: - ✔️✔️- Are co-owners of the business
- Have joint control over its operation
- Have the right to share in its profits
What kind of law are partnerships governed by? - ✔️✔️- Common law
- Statutory law
, Agency Concepts and Partnership Law - ✔️✔️When two or more persons agree to do
business as partners, their relationship is similar to an agency relationship
True or False: Each partner is deemed to be the agent of the other partners and of the
partnership. - ✔️✔️True
What concepts of agency law are applied to partnerships? - ✔️✔️The individuals
(agents) are charged with knowledge of, and responsibility for, acts carried out within
the scope of the partnership relationship
Are partners bound by fiduciary ties? - ✔️✔️Yes, this means they are required to act
primarily in the best interest of one another
How does partnership law differ from agency law? - ✔️✔️Each partner in a partnership
has an ownership interest in the firm
Can a corporation be a partner in a partnership? - ✔️✔️Yes, the UPA's definition of
"person" includes corporations
What is a key element of a partnership? - ✔️✔️Intent to associate
What is critical to the growth of most small businesses? - ✔️✔️Raising capital
What allows the owner to retain full ownership and control of his/her business? -
✔️✔️Obtaining a bank loan
Loans with desirable terms may be available from what? - ✔️✔️Small Business
Administration (SBA)
One SBA program provides loans up to $25,000 to the following businesspersons: -
✔️✔️- Women
- Low-income individuals
- Members of minority groups
Sole proprietorship - ✔️✔️The simplest form of business organization, in which the
owner is the business.
True or false: One can join a partnership without other partners consent - ✔️✔️False,
you must have all other partners consent
Questions and Answers | 2026 Update |
100% Correct.
What are the three classification a franchise can fall into? - ✔️✔️1. Distributorships
2. Chain-style business operations
3. Manufacturing arrangements
Franchise: Distributorship - ✔️✔️A manufacturer (the franchisor) licenses a dealer (the
franchisee) to sell its product
What is an example of a distributorship? - ✔️✔️Automobile dealerships and beer
distributorships
Franchise: Chain-Style Business Operation - ✔️✔️A franchise operates under a
franchisor's trade name and is identified as a member of a select group of dealers that
engage in the franchisor's business
- Generally required to follow standard or prescribed methods of operation
- Franchisor insists that the franchisee maintain certain standards of performance
- May be required to obtain materials and supplies exclusively from the franchisor
Franchise: Manufacturing Agreement - ✔️✔️The franchisor transmits to the franchisee
the essential ingredients or formula to make a particular product and the franchisee then
markets the product either as wholesale or at retail with the franchisor's standards
What is an example of a manufacturing agreement? - ✔️✔️Soft-drink bottling
companies
How does the federal government regulate franchising? - ✔️✔️The federal government
does this through laws that apply to specific industries and through the franchise rule,
created by the FTC
Where must the owner of a sole proprietorship report business income? - ✔️✔️On
his/her personal income tax return
,Who is legally responsible for all debts and obligations incurred by the business? -
✔️✔️The owner
What kind of account is a sole proprietor allowed to establish that is tax-exempt until the
funds are withdrawn? - ✔️✔️Retirement accounts
The sole proprietor is free to make any decision she or he wishes concerning the
business, including: - ✔️✔️- What kind of business to pursue
- Whom to hire
- When to take a vacation
True or false: The sole proprietor can sell or transfer all or part of the business to
another party at any time without seeking approval from anyone else. - ✔️✔️True
Does a sole proprietorship allow less flexibility than a partnership or corporation? -
✔️✔️No, it allows more flexibility
What is the major disadvantage of a sole proprietorship? - ✔️✔️The proprietor alone
bears the burden of any losses or liabilities incurred by the business
Personal Assets at Risk - ✔️✔️Creditors can pursue the owner's personal assets to
satisfy any business debts.
Lack of Continuity and Limited Ability to Raise Capital - ✔️✔️- The sole proprietorship
has the disadvantage of lacking continuity after the proprietor's
- Another disadvantage is that in raising capital, the proprietor is limited to his or her
personal
funds and any loans that he or she can obtain for the business.
What happens when the owner of a sole proprietorship dies? - ✔️✔️The business dies
as well, it is automatically dissolved
Why might lenders be unwilling to make loans to sole proprietorships? - ✔️✔️The sole
proprietor risks unlimited personal liability and may not be able to pay
Partnership - ✔️✔️An agreement, expressed or implied, between two or more persons
to carry on a business for a profit
Partners: - ✔️✔️- Are co-owners of the business
- Have joint control over its operation
- Have the right to share in its profits
What kind of law are partnerships governed by? - ✔️✔️- Common law
- Statutory law
, Agency Concepts and Partnership Law - ✔️✔️When two or more persons agree to do
business as partners, their relationship is similar to an agency relationship
True or False: Each partner is deemed to be the agent of the other partners and of the
partnership. - ✔️✔️True
What concepts of agency law are applied to partnerships? - ✔️✔️The individuals
(agents) are charged with knowledge of, and responsibility for, acts carried out within
the scope of the partnership relationship
Are partners bound by fiduciary ties? - ✔️✔️Yes, this means they are required to act
primarily in the best interest of one another
How does partnership law differ from agency law? - ✔️✔️Each partner in a partnership
has an ownership interest in the firm
Can a corporation be a partner in a partnership? - ✔️✔️Yes, the UPA's definition of
"person" includes corporations
What is a key element of a partnership? - ✔️✔️Intent to associate
What is critical to the growth of most small businesses? - ✔️✔️Raising capital
What allows the owner to retain full ownership and control of his/her business? -
✔️✔️Obtaining a bank loan
Loans with desirable terms may be available from what? - ✔️✔️Small Business
Administration (SBA)
One SBA program provides loans up to $25,000 to the following businesspersons: -
✔️✔️- Women
- Low-income individuals
- Members of minority groups
Sole proprietorship - ✔️✔️The simplest form of business organization, in which the
owner is the business.
True or false: One can join a partnership without other partners consent - ✔️✔️False,
you must have all other partners consent
