LGS 200 Final Exam Study Guide 2023 Business Judgement Rule - Correct Answer The business judgment rule is a presumption that in making a business decision, the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the company.Entrepreneurs - Correct Answer -Owner is actually the business.-Business is not a separate legal entity.-Most common form of business organization in the United States.-It's important for entrepreneurs to choose the right type of business organization, for example, sole proprietorship, general partnership, limited partnership, limited liability partnership, limited liability company, or corporation.Sole Proprietorship - Correct Answer -Owner is actually the business.-Business is not a separate legal entity.-Most common form of business organization in the United States.Advantages of Sole Proprietorship - Correct Answer -Ease and low cost of formation.-Proprietor can make all management decisions.-E.g. hiring and firing employees.-No other approvals required.-Proprietor owns entire business.-Has the right to receive all profits.-Easily transferred or sold.Disadvantages of Sole Proprietorship - Correct Answer -Access to capital is limited to: personal funds plus and any loans owner can obtain -Proprietor legally responsible for business's contracts.-Proprietor responsible for torts committed in course of employment. 1 / 2
Personal Liability of Sole Proprietorship - Correct Answer -Proprietor bears the risk of loss of the business.-Will lose entire capital contribution if the business fails.-Proprietor has unlimited personal liability.-Creditors may recover claims against the business from proprietor's personal assets.-Does not pay taxes at business level.General Partnership - Correct Answer -Voluntary association of two or more people as co-owners of business.-Rights and duties between partners and with third parties defined by partnership agreement and by law.-Partners personally liable for debts and obligations of the partnership.-Partnership does not pay federal income taxes General Partnership Name - Correct Answer -Can operate under name of any one or all of partners, or -May use fictitious name.-Must file fictitious business name certificate.-Publish notice.-Cannot be similar to name used by another business.Requirements for a General Partnership under UPA - Correct Answer Four Requirements: -Voluntary association of two or more persons -Includes natural persons, partnerships, corporations -Carrying on a business -As co-owners -All partners must agree to participation -For profit Partnership Agreement - Correct Answer -May be written, oral, or implied from conduct.
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