Chapter 15

Question 1

a business that has no separate legal existence from its single owner

Answer 1

sole proprietorship

Question 2

formed by two or more persons who engage in a profit-seeking activity and share the profit and loss of such activity while enjoying a right to participate in management and co-ownership of assets

Answer 2

partnership

Question 3

A partnership that does not provide limited liability to any of its members is often referred to as a

Answer 3

general partnership

Question 4

all partners share liability, but any one partner can be required to pay the full amount of the debt

Answer 4

Joint liability

Question 5

established when the partners do not specify a term of duration for the partnership

Answer 5

at-will partnership

Question 6

partnerships with one or more general partners and one or more limited partners

Answer 6

Limited partnerships

Question 7

unlimited personal liability for the liabilities of the partnership, including debts incurred by the partnership or torts committed by the partnership’s activities

Answer 7

general partner

Question 8

has liability that is limited to its investment in the partnership

Answer 8

limited partner

Question 9

both general partners and limited partners in the limited liability limited partnership receive limited liability protection

Answer 9

Limited liability limited partnership

Question 10

a partnership formed under state law, which provides for limited liability of all of its partners but is not considered a form of a limited partnership

Answer 10

limited liability partnership

Question 11

a separate legal entity that provides limited liability to its owners, who are called stockholders

Answer 11

corporation

Question 12

Owners of a corporation are referred to as

Answer 12

stockholders

Question 13

a corporation that was formed under state law

Answer 13

S corporation

Question 14

a separate legal entity that provides limited liability protection to its owners like a corporation while avoiding double taxation

Answer 14

limited liability company (LLC)

Question 15

a term used to describe a contract that allows one business organization to enjoy benefits such as advertising, access to products, and use of trademarks and trade owned by another

Answer 15

franchise

Question 16

a business entity that does not intend to make a profit, as it spends its revenues and other sources of income on its designated programs

Answer 16

nonprofit

Question 17

a corporation form required by state law for certain professionals such as doctors, lawyers, and accountants

Answer 17

Professional service corporation

Question 18

one who provides services for another, generally on a continuing basis, under the direction of the hiring person, and subject to the control of the hiring person

Answer 18

employee

Question 19

does not work under the direct control or supervision of the hiring person but is instead hired to perform a task or complete a project

Answer 19

independent contractor

Question 20

a court may impose liability on an individual who did not commit the act that caused injury but who has a special relationship with the person who did commit the act that caused injury

Answer 20

Vicarious liability

Question 21

held masters strictly liable for the actions of their servants

Answer 21

respondeat superior

Question 22

the one on whose behalf an agent acts

Answer 22

principal

Question 23

the one who agrees to act on behalf of a principal and subject to the control of the principal

Answer 23

agent

Question 24

one in which the agent is not compensated by the principal

Answer 24

Gratuitous agency relationship

Question 25

an agent who has the authority to provide all the business services a principal would need for a given purpose or at a given location

Answer 25

general agent

Question 26

an agent who is authorized by the principal to perform a specific undertaking

Answer 26

special agent

Question 27

an agent of an agent authorized by the principal to perform acts as part of the agency agreement

Answer 27

subagent

Question 28

an agency that is formed either through a written agreement or an oral agreement

Answer 28

express agency

Question 29

arises from facts and circumstances that result in the parties believing an agency has been formed

Answer 29

implied agency

Question 30

formed a by a principal who creates the agency by ratifying, meaning agreeing to be legally bound by, a party who was not an agent but acted on their behalf

Answer 30

agency by ratification

Question 31

occurs when a principal acts in a manner that leads a third party to reasonably believe an agency relationship exists

Answer 31

agency by estoppel

Question 32

the principal actually gives authority to the agent before the agent acts on their behalf

Answer 32

actual authority

Question 33

authority that was given in written or verbal form

Answer 33

express authority

Question 34

holds that if an agent will be entering into contracts on behalf of the principal, which must be in writing under the Statute of Frauds, the agent’s authority as granted by the principal must be in writing

Answer 34

equal dignity rule

Question 35

not expressly given but arises from (1) express authority or (2) custom as is necessary to carry out the agency relationship

Answer 35

Implied authority

Question 36

occurs when a principal grants authority after the agent has acted on her behalf without authority

Answer 36

Authority by ratification

Question 37

arise when an emergency situation arises and an agent must act without actual authority

Answer 37

Emergency agency powers

Question 38

exists when a principal leads a third party to reasonably believe an agent possesses authority to perform an action or actions on behalf of the principal

Answer 38

Apparent authority

Question 39

one whom the agent does not make known to a third party in a manner that results in the third party believing they are contracting with the agent

Answer 39

undisclosed principal

Question 40

one whom the agent does not disclose the identity of to a third party but does inform the third party the agent is acting on behalf of a principal

Answer 40

partially disclosed principal

Question 41

one whom an agent discloses the existence and identity of to a third party

Answer 41

fully disclosed principal

Question 42

a duty that requires one party act in the best interest of another party

Answer 42

fiduciary duty

Question 43

the act of seeking reimbursement arising from a legal liability is referred to as

Answer 43

indemnification