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Blaw Test 4 Review

Any suit against the business or its employees does not lead to unlimited personal liability for the owner of a sole proprietorship.
Clive, Domina, and Elgar are the first directors on the board of Face x Face Corporation, a social media host. Subsequent directors are elected by a majority vote of Face x Face’s
The corporation is a creature of the common law.
Stocks represent the borrowing of funds by firms.
A receiver is always appointed by a court if the dissolution of a corporation is involuntary.
Global Shipping Corporation and Harbor Warehouse Company transfer their property to Investment Managers, Inc., which manages the property and distributes the profits to Global Shipping and Harbor Warehouse. This form of a business organization is
business trust
Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm’s behalf.

Refer to Fact Pattern 20-1. Any damages recovered by Ray’s suit will go to

If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level.
To pierce the corporate veil means to shield the shareholders from personal liability.
Rita and Susan want to form and do business as Trips & Travel Agency, Inc. They will serve as the firm’s directors and officers, and will initially hold all of the stock in the company. A corporation is owned by
the shareholders
Qatar Global Investments is a foreign entity—a firm owned and operated by investors in a foreign country. With respect to a limited liability company in the United States, Qatar Global can
become a member
Doris wants to go into business as eBeats to market a new fitness app. Organizational fees are required to form all of the following business organizations except
?a sole proprietorship.
Fong contracts to buy a franchise from Genuine Asian Sushi House Company. In this contract, as in most franchise contracts, the determination of the territory to be served is made by
Genuine Asian Sushi House.
Smoke & Mirrors Inc. can be compelled to dissolve by
a court order.
Holly is a director of International Gourmet Spices, Inc. As a director, with respect to the corporation, Holly is
a fiduciary.
Finn and Glenda want to form and do business as Hobby Crafts Corporation. A corporation is
an artificial being
As a general rule, shareholders make daily business decisions for a corporation.
A court will pierce the corporate veil of a corporation that is formed to accomplish an illegitimate objective.
Craig, Donna, and Eve do business as FasTrak Career Consultants. Eve’s relationship to FasTrak ends, but the firm continues to do business. This is
Sweet Selections, a general partnership, operates as a gift shop. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. With respect to management decisions
a majority of the partners must agree.
A new position on a board of directors can be created by an amendment to the articles of incorporation.
A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members.
Most courts apply the same principles to joint ventures as they apply to partnerships.
Corbin organized, and owns and operates, Corbin’s Deep Sea Fishing Tours in the simplest form of business organization. This is
a sole proprietorship.
The duration of a franchise is a matter determined by federal or state statutes.
A director or officer must exercise due care in performing their duties, including acting in good faith.
Oberon buys a Pro Club Health & Fitness, Inc., franchise, which the franchisor later terminates. In determining whether the termination was proper, a court will generally
?balance the rights of both parties.
Like the shareholders of a corporation, the owners of a limited liability company enjoy limited liability.
A partner may pursue his or her own interests without automatically violating the partner’s fiduciary duties to the partnership and the other partners.
Directors must refrain from self-dealing.
Wren owns and operates Yoga Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center’s merchandise. Yoga Center is most likely
a sole proprietorship.
Ida, Jerzy, and Kit are the directors of Liberty Convenience Stores, Inc. Liberty has nine officers and forty-six shareholders. Dividends are ordered by the firm’s
board of directors
Ernst is a director of Fine Art Dealers, Inc. Ernst is trained in art valuation. Fine Art makes several purchases in which it pays too much for artwork. Ernst approves all the transactions without reading the details. Ernst is most likely liable for breach of
the duty of care
Greenway Corporation and Happy Trails, Inc., combine their efforts to build a network of biking and hiking trails along an unused railroad spur. Their form of business organization is
a joint venture
IT Apps, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is governed by
the applicable state LLC statute.
Ray is a shareholder of Small Biz Company (SBC). When the directors fail to undertake an action to redress a wrong suffered by SBC, Ray files a suit on the firm’s behalf.

Brandi is a shareholder of Cloud Servers & Routers Inc.. Brandi will be deemed to have a fiduciary duty to Cloud and its minority shareholders if she has a sufficient number of shares to

exercise de facto control.
Shannon is an officer for Turista Shirts Corporation. Due to a bad business decision on Shannon’s part, the company’s sales decrease. Shannon is most likely liable for breach of
none of the choices
Tech Talent & Personnel, Inc., is a corporation. Tech Talent’s implied powers enable it to
borrow and lend funds.
Jeri and Knute are members of Lighthouse Tours LLC, a limited liability company. With respect to Lighthouse Tours’s liability, as members, Jeri and Knute are shielded from
a personal liability
Wiley incorporates his business as Wiley Wire Corporation in Texas. He and his group of shareholders intend to make a profit from their sales of fencing wire. Wiley Wire Corporation is
a private corporation
Nora is a director of Outback Outfitters, Inc. Under the standard of due care owed by directors of a corporation, Nora’s decisions must be informed and
The articles of incorporation serve as a primary source of authority for the corporation’s future organization and business operations.
Dana is a member of Earthground Coffee, LLC, a limited liability company. Dana is liable for Earthground’s debts
?to the extent of her investment in the firm.
A partnership is a pass-through entity and a taxpaying entity.
A partner is liable to the partnership for honest errors in judgment in conducting partnership business.
Limited liability companies are entities apart from their owners.
Miracle Mobile Devices, Inc., is a private, for-profit corporation that is owned by five shareholders who are members of the same family. Miracle is
?a close corporation.
In choosing a form of business organization for a new enterprise, important factors include the ability to raise capital.
A partner always has the power but he or she may not have the right to dissociate from the partnership.
Orlando is a limited partner in Port of Call Exports, a limited partnership. By participating in the firm’s management, Orlando is liable for its obligations
to the full extent
For a defendant to be convicted in a criminal prosecution under the securities laws, there can be no reasonable doubt that the defendant knew he or she was acting wrongfully.?
World Metals, Inc., a U.S. firm, wants to file a suit in the United States against a Venezuela government agency, alleging a violation of certain international laws. Under the Foreign Sovereign Immunities Act, the agency is?
not immune from the jurisdiction of U.S. courts.
The definition of security in the Securities Act of 1933 does not include instruments commonly known as securities.?
Monopoly power may be proved by evidence that a firm used its power to control prices.
Bonds & Stocks Corporation, and its officers, directors, and shareholders, buy and sell securities. SEC Rule 10b-5 applies to the purchase or sale of
any security
Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd., a Canadian firm, to give Pharma the right to sell Optima’s products in Canada. This is?
a distribution agreement
The basis for Mexico to give effect to the laws and court decisions of the United States is primarily?
courtesy and respect
A party to a licensing agreement generally agrees to pay royalties on some basis.?
U.S. laws that prohibit discrimination in employment apply to U.S. employees working for U.S. firms located abroad.?
NuTrend Clothing Corporation is a public company whose securities are traded among investors. Under the Securities Act of 1933, a security is
almost any stake in the ownership or debt of a company.
To acquire monopoly power in its market, Global Condiments, Inc., sets its prices substantially below the normal costs of production. Under antitrust law, this is
a violation if the firm thereby acquires monopoly power.?
Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries, Inc., has assets of more than $50 mil-lion and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to
Gourmand Pastries only.
Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a contract with a choice-of-forum clause. The forum specified in the clause must be within the geographic boundaries of
neither the United States nor Britain.
OnSpec, Inc., and its officers, directors, and shareholders, buy and sell securities. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving
short-swing profits
Price discrimination occurs when a seller charges different prices to competing buyers for identical goods or services.
The simplest way for a U.S. firm to do business in a foreign market is to export its products directly to that market.
Joint refusals to deal are not subject to scrutiny under the Sherman Act.
Anyone who wrongfully obtains inside information and trades on it for his or her personal gain can be liable under SEC Rule 10b-5.?
Foreign exchange markets comprise a worldwide system for buying and selling currency.?
Business Universal Corporation, a U.S. firm, establishes a wholly owned subsidiary firm in Brazil. In this situation, Business Universal retains complete control and authority over?
all of the operations
Some countries provide insurance for their citizens’ investments abroad.?
Global Trade Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that Global Trade must?
file a registration statement with the SEC.
AgriWorld, a U.S. firm, owns property in Kenya. The government of Kenya seizes the property. AgriWorld claims that this is confiscation. The government of Kenya claims that it is expropriation. The burden of proof lies with?
the government of Kenya
In a joint venture, the parent company in the United States retains complete ownership and authority over all phases of the operation.?
The Securities Exchange Act of 1934 is a one-time disclosure law.?
When a U.S. firm wishes to increase its involvement in an international market, it normally establishes an agency relationship with a foreign firm.?
A restraint of trade is an agreement between firms that has the effect of reducing anticompetitive business practices.
Hawaiian Shirts, Inc., wants to issue stock of $4 million in a single offering. The corporation must provide disclosure documents that generally are the same as those used in registered offerings to
any unaccredited investors.
The United States taxes each barrel of imported oil at a flat rate. This is?
a tariff
State corporation statues set up the legal framework for corporate governance.?
The act of state doctrine provides that the executive branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory.?
Sun & Ski Tours Corporation is poised to issue securities that, under the Securities Act of 1933, are “exempt.” This means that the securities can be sold
without being registered
Eddie, an accountant for Fresh Dairy, Inc., learns of undisclosed company plans to market a new smooth-tasting, fat-free butter. Eddie buys 10,000 shares of Fresh Dairy stock. He reveals the company plans to Giselle, who buys 5,000 shares. Giselle tells Hong, who tells Irwin, each of whom buy 1,000 shares. They know that Giselle got her information from Eddie. When Fresh Dairy publicly announces its new product, Eddie, Giselle, Hong, and Irwin sell their stock for a profit.

Refer to Fact Pattern 21-2. If Eddie is liable under the Securities Ex-change Act of 1934, it will be because the information on which he based his purchase of Fresh Dairy stock was

not yet public
the Sherman Act is an example of legislation designed to curb anticompetitive business practices
Drilling Tools, Inc., wants to make an initial public offering of securi-ties. Drilling Tools believes that it qualifies for an exemption under Regulation A from the full registration requirement of the federal Securities Act of 1933.


Refer to Fact Pattern 21-1. If Drilling Tools is exempt from the federal registration requirement, Drilling Tools is

not necessarily exempt under a state registration requirement.
Any agreement among competitors to fix prices is subject to evaluation under the rule of reason.
The Foreign Sovereign Immunities Act spells out what a “foreign state” includes.
The chief aim of the European Union is to maximize trade barriers among its members.?
Liability can be imposed on those who are negligent in not discovering fraud in connection with a registration statement or prospectus.
A group boycott that is intended to eliminate competition is legal.
?International contracts rarely include arbitration clauses.
Most private, small-business, noninvestment company offers of securities are exempt from the registration requirements.?
Space Trips Inc. files a registration statement with the SEC before making an offering to the general public. The registration contains false, immaterial statements of which the investors are unaware. Space Trips is charged with violating the Securities Act of 1933. Space Trips’s best defense is
the untrue statements were not material.
Dredgers, Inc., is the major wholesale distributor of heavy equipment in the state of Georgia. Its closest competitor is Excavators Company, another Georgia firm. The two firms agree that Excavators will operate in southern Georgia and Dredgers will operate in northern Georgia. This is
a market division
Domestic Oil Company joins with a foreign cartel to control the price of oil. The cartel has a substantial effect on U.S. commerce. A suit for violation of U.S. antitrust laws can be brought against
all of the choices
According to the Foreign Sovereign Immunities Act, a foreign state that waived its immunity by implication is subject to the jurisdiction of the U.S. courts.?
A suit is filed against AgriSeeds Corporation, alleging that the firm committed the offense of monopolization. To determine whether AgriSeeds has monopoly power requires looking at
the relevant market
Size alone determines whether a firm is a monopoly.
Jack, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign entity?
for a tort allegedly committed in the United States or overseas.
Congress can use a variety of devices to restrict or encourage exports.?
Cattle Ranch Company offers its stock for sale only in a single state. The law in Cattle Ranch’s state is like the law in most states. Cattle Ranch’s offer is subject to state securities statutes that include
antifraud and disclosure provisions.
Expropriation occurs when a government seizes private property for a proper purpose and awards just compensation.?
Once a registration statement has been filed, a waiting period begins while the Securities and Exchange Commission reviews the statement.
Significant business develops in Spain for Graphic Comix, Inc., a U.S. firm. Graphic Comix appoints Comicas Graphico, Ltd., a Spanish firm, to act as Graphic Comix’s marketing representative in Spain. This is?
indirect exporting
Real World Sports Corporation (RWSC) is a U.S. firm with a workplace in Switzerland. Generally, RWSC must abide by U.S. anti-discrimination laws in Switzerland?
unless to do so would violate the law of Switzerland.
International law is a body of law that governs relations among nations.?
A group boycott that is intended to eliminate competition is legal.
Nick, a salesperson for Olive Grove Corporation, learns that Olive Grove will in-crease the dividend it pays to shareholders. Nick buys 10,000 shares of Olive Grove stock. When the dividend is announced to the public and the price of the stock increases, Nick sells his shares for a profit. Nick would not be liable for insider trading if the information about the dividend was
available to the public before Nick bought the stock
The Securities Act of 1933 is a one-time disclosure law.?
To obtain a contract with the Chinese government, Road & Bridge Engineering Corporation, a U.S. firm, gives a Chinese official a sport utility vehicle. This may violate?
the Foreign Corrupt Practices Act.
Discount Retail Corporation may be engaging in conduct that violates the Sherman Act. To bring an action against the firm requires that its conduct have a significant impact on
?interstate commerce.
If a security does not qualify for an exemption, an issuer cannot offer it to the public.?
The Sarbanes-Oxley Act of 2002 attempts to promote corporate accountability by imposing strict disclosure requirements and harsh penalties for securities laws.?
Guitar Factory Corporation files a registration statement and delivers a prospectus to the appropriate parties. These items are intended to enable the evaluation of certain financial risks by?A party to a licensing agreement generally agrees to pay royalties on some basis.?
?unsophisticated investors.
Nakeya and other foreign citizens allege environmental destruction committed overseas by the government of Cameroon on behalf of Earth Mining Company, a U.S. firm. To seek redress for their injuries in a U.S. court, these citizens can?
bring civil suits under the Alien Tort Claims Act.
The chief aim of the European Union is to maximize trade barriers among its members.?
Grip-All Tires, Inc., conditions the sale of one of its products on Harvey’s Service Stores agreeing to buy another of Grip-All’s products. This deal is legal
depending on its purpose and the effect on competition.
Most securities can be resold without registration.?
Spa Selectiva Company makes and sells beauty salon supplies. By selling its product at prices substantially below the normal cost of production, Spa Selectiva hopes to drive its competitors from the market. This is
predatory pricing
The doctrine of sovereign immunity can immunize a foreign nation from the jurisdiction of U.S. courts.?
HVAC Parts Company charges different buyers different prices for identical goods. HVAC’s prices are subject to evaluation under
the Clayton Act.
A trade association practice or agreement that restrains trade is analyzed under the rule of reason.
Restrictions on imports may not include quotas.?
Business Universal Corporation, a U.S. firm, establishes a wholly owned subsidiary firm in Brazil. In this situation, Business Universal retains complete control and authority over?
all of the operation
Bodycare Corporation makes and sells ChemMed, the most prescribed name-brand blood pressure-lowering medication. Deja Vu Drugs, Inc., has the potential to make a generic version of the same drug.


Refer to Fact Pattern 22-1. Bodycare pays Deja Vu not to sell its product. This is

price fixing agreement
Trail Bike Corporation is a public company whose shares are traded in the public securities markets. Under the Securities Act of 1933, Trail Bike is required to
disclose financial and other information about its securities.
The Clayton Act prohibits price discrimination.
International Media, Inc., a U.S. firm, expands into global markets through a joint venture. In the venture, International Media shares responsibilities and?
both the profits and liabilities.
Frictionless Lubricant Corporation and Grease Inc. are the principal suppliers of their product in their market. They agree that Frictionless will sell exclusively to retailers and Grease will sell exclusively to wholesalers. Under antitrust law, this market division is most likely
a per se violation.
Solder Welding Corporation is a public company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Act of 2002, Solder Welding is subject to the direct corporate governance requirements of
the federal government
Exemptions from federal securities law are not exemptions from state laws.?
Resale price maintenance agreements are per se violations of the Sherman Act.
Fiesta Food Company, Gourmet Cheeses, Inc., and Healthy Eats, Inc. agree to exchange information and share advertising. This trade association agreement is
subject to analysis under the rule of reason.
Corporate “outsiders” may not be held liable for insider trading under Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5
When a contract contains a forum selection clause, a lawsuit arising from a dispute under the contract will be heard by a court in the specified forum.?
The Securities and Exchange Commission does not regulate the content of proxy statements.?
Securities can be sold after the effective date of the registration statement without restrictions.
Under the principle of comity, all foreign governments are subject to all U.S. laws.?

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