MGT 401 Final 2026 Review Exam Questions and Answers
Trademark correct answers well-known symbol registered with U.S. Patent and Trademark
Office
Covenant not to compete correct answers party (employee) agrees not to enter into or start a
similar profession or trade in competition against another party (employer)
Sole Proprietorship correct answers owner is the business. assumes all risk and profits. Taxed as
individual's personal income
Partnership correct answers express or implied agreement b/w two or more to form a business for
profit.
Pass-through entity correct answers business entity with no tax liability
Partnership by estoppel correct answers when a third person has reasonably & detrimentally
relied on representation of a partnership by a non-partner
Duty of Care correct answers act in good faith, exercise the care ordinarily prudent person would
exercise in similar circumstances, believes actions would be in best interests of the corporation
Duty of Loyalty (Partnership) correct answers partner must account for any property profit or
benefit derived by business or use of business property
Partnership Joint Liabilty correct answers Third party must sue all members of partnership
Indemnification correct answers partner who commits tort reimburses partnership for damages
paid
Dissociation correct answers partner ceases association with business
Dissolution correct answers commencement of winding up process
Winding-Up correct answers actual process of collecting, liquidating, and distributing assets
Franchising correct answers owner of intellectual property licenses others to use it in selling
goods or services
Distributorship correct answers manufacturer licenses a dealer to sell its product
Chain-style correct answers form of business that follows standardized methods of operation.
Materials and supplies received from franchiser
Manufacturing Agreement correct answers Franchiser transmits recipe or formula for product
, Limited Liability Company correct answers combines limited liability aspects of corporations
and tax advantages of a partnership
Articles of Organization correct answers include business name, principal address, name &
address of registered agents, members' names, how LLC will be managed
Novation correct answers once corporation has been formed, corporation adopts pre-
incorporation contracts
Limtied Liabilty correct answers does not exceed the amount invested in a partnership or limited
liability company.
Member-managed LLC correct answers All members in corporation vote (majority control)
Manager-managed LLC correct answers Members designate person or group (including non-
members) to manage LLC
Operating Agreement correct answers Explains how management is chosen, profits are divided,
membership interests be transferred, whether dissociation of a member dissolves LLC, whether
formal meetings are held, how voting rights aportioned
Limited Liability Partnerships correct answers hybrid for professionals who normally does
business as partner in partnerships. allows it to be pass-through entity but limits personal liability
of partners
Limited Partnership correct answers consist of one general partner and limited partner
Limited Liability Limited Partnerships correct answers Liability of all partners limited to amount
of investments in firm
Corporations correct answers legal entity created and recognized by state law. comprised of
owners (shareholders) which can be individuals or other businesses
Piercing the corporate veil correct answers court imposes liability on shareholders or members
for corporation's obligations
Double taxation correct answers corporation taxed on profits. Shareholders then pay income tax
on any dividends distributed
Domestic Corporation correct answers corporation operating in its home state (must obtain
certificate authority)
Foreign Corporation correct answers corporation operating in a second state (must obtain
certificate authority)
Closed Corporation correct answers corporation in which shares held by a few ppl
Trademark correct answers well-known symbol registered with U.S. Patent and Trademark
Office
Covenant not to compete correct answers party (employee) agrees not to enter into or start a
similar profession or trade in competition against another party (employer)
Sole Proprietorship correct answers owner is the business. assumes all risk and profits. Taxed as
individual's personal income
Partnership correct answers express or implied agreement b/w two or more to form a business for
profit.
Pass-through entity correct answers business entity with no tax liability
Partnership by estoppel correct answers when a third person has reasonably & detrimentally
relied on representation of a partnership by a non-partner
Duty of Care correct answers act in good faith, exercise the care ordinarily prudent person would
exercise in similar circumstances, believes actions would be in best interests of the corporation
Duty of Loyalty (Partnership) correct answers partner must account for any property profit or
benefit derived by business or use of business property
Partnership Joint Liabilty correct answers Third party must sue all members of partnership
Indemnification correct answers partner who commits tort reimburses partnership for damages
paid
Dissociation correct answers partner ceases association with business
Dissolution correct answers commencement of winding up process
Winding-Up correct answers actual process of collecting, liquidating, and distributing assets
Franchising correct answers owner of intellectual property licenses others to use it in selling
goods or services
Distributorship correct answers manufacturer licenses a dealer to sell its product
Chain-style correct answers form of business that follows standardized methods of operation.
Materials and supplies received from franchiser
Manufacturing Agreement correct answers Franchiser transmits recipe or formula for product
, Limited Liability Company correct answers combines limited liability aspects of corporations
and tax advantages of a partnership
Articles of Organization correct answers include business name, principal address, name &
address of registered agents, members' names, how LLC will be managed
Novation correct answers once corporation has been formed, corporation adopts pre-
incorporation contracts
Limtied Liabilty correct answers does not exceed the amount invested in a partnership or limited
liability company.
Member-managed LLC correct answers All members in corporation vote (majority control)
Manager-managed LLC correct answers Members designate person or group (including non-
members) to manage LLC
Operating Agreement correct answers Explains how management is chosen, profits are divided,
membership interests be transferred, whether dissociation of a member dissolves LLC, whether
formal meetings are held, how voting rights aportioned
Limited Liability Partnerships correct answers hybrid for professionals who normally does
business as partner in partnerships. allows it to be pass-through entity but limits personal liability
of partners
Limited Partnership correct answers consist of one general partner and limited partner
Limited Liability Limited Partnerships correct answers Liability of all partners limited to amount
of investments in firm
Corporations correct answers legal entity created and recognized by state law. comprised of
owners (shareholders) which can be individuals or other businesses
Piercing the corporate veil correct answers court imposes liability on shareholders or members
for corporation's obligations
Double taxation correct answers corporation taxed on profits. Shareholders then pay income tax
on any dividends distributed
Domestic Corporation correct answers corporation operating in its home state (must obtain
certificate authority)
Foreign Corporation correct answers corporation operating in a second state (must obtain
certificate authority)
Closed Corporation correct answers corporation in which shares held by a few ppl
