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BUS 221 EXAM 4 REVIEW
Terms in this set (101)
A familiar example of an agent is a corporate officer:
A n agency relationship cannot be created by an oral agreement:
Employers cannot avoid any tax liabilities by hiring independent contractors instead of employees:
Under the law of agency, notice to the agent is notice to the principal:
A Principal petitions for bankruptcy and is declared bankrupt by the bankruptcy court. Usually, this event automatically terminates the agency relationship between the Principal and its Agent(s):
A principal is not normally liable for the crime of an agent committed within the scope of the agency or employment:
Sybil agrees with Tyrone and other professional athletes to sign contracts with promoters and others on the athletes' behalf. Sybil is:
Reynaldo is a delivery driver for Southeast Asian Noodle Company. Reynaldo follows detailed instructions of the company in carrying out his work. Reynaldo is:
Investment Holdings Corporation hires Jeri, a business appraiser, to locate investment possibilities for Investment Holdings. Jeri learns of a salsa and hot sauce manufacturing company available for a reasonable price, but neglects to tell Investment Holdings. Most likely, Jeri:
Breached an agent's fiduciary duties to the principal.
Mirena serves in a representative capacity for Netanya. Orla is injured through Mirena's negligence. Under the doctrine of Respondeat Superior, Netanya may be liable to Orla if Mirena's conduct occurred:
In the course and scope of Mirena's employment.
The doctrine of Employment of Will means that the employer may terminate an employee at any time for any legal reason:
If an employer's employment manual says that employees will only be fired for cause, this is an employment-at-will:
The U.S. Fair Labor Standards Act regulates:
1. Minimum hourly wages for non-exempt employees
2. Child Labor
3. Pay rates for time worked over 40 hours per week, for non-exempt employees.
Workers Compensation covers your medical expenses if you are injured on the job or in the course of employment:
An employer usually has the right to monitor employees' communications on employer-provided devices and systems for email, phone,voicemail, computer data, and electronic communications:
In a general partnership, the partners, by voting, share the control over the partnership business:
A franchisee ordinarily pays a fee for a franchise license (the privilege of being granted a franchise):
Under Title VII of the Civil Rights Act, most private firms are prohibited from discriminating in employment matters on the basis of race, sex, color, religion and national origin:
A sole proprietorship offers more flexibility than does a partnership or a corporation:
In a limited partnership, every partner has full responsibility for the partnership and for all its debts:
Anyone who does business must create a separate business organization:
When a partner disassociates (leaves the partnership) in violation of the terms of the partnership agreement, the disassociation is wrongful:
Both case law and statutory law protect franchisees when a franchisor wrongfully (unfairly or arbitrarily) terminates the franchise:
Title VII of the Civil Rights Act of 1964 does not apply to State and Local government agencies:
Teresa buys a franchise from Urgent Medical Clinics, LLC. If their agreement is like most franchise agreements, it will specify that Urgent Medical can terminate the franchise:
For cause only
Chet is a partner in Diligent Accounting Service. Chet can inspect Diligent's books and records:
In their entirety
Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for:
Any partnership obligation
Rosalee is a general partner in Silver Dragon, a partnership consisting of the owners of a Chinese and American restaurant. Silver Dragon incurs debt for new dining tables and chairs. With respect to this debt, Rosalee is:
Personally liable to the full extent
What are the main characteristics, advantages, and disadvantages of a sole proprietorship?
A sole proprietorship is the simplest form of business organization. In a sole proprietorship, the owner and the business are the same. Anyone who creates a business without designating a specific form for its organization is doing business as a sole proprietorship. An advantage of the sole proprietorship is its greater flexibility over other forms of business organization. The owner makes all of the decisions and can operate the enterprise without any formalities.
A significant disadvantage of this form of organization, however, is that unlike most other forms of business organization, there are no limits on the liability of the owner for the debts and obligations of the firm. Another disadvantage of the sole proprietorship form of doing business is: The ability of a sole proprietor to raise capital while maintaining control, and retaining the same form, is limited chiefly to borrowing funds. Bringing in partners would convert the business to a partnership. Issuing stock would require incorporating or establishing another form of business. Selling the business would sacrifice all control. The only way to obtain additional business capital without accumulating it through business profit is by borrowing funds.
Under federal (and most states') income tax law, to what extent is a partnership entity taxed? To what extent are the partners taxed? Explain.
For federal income tax purposes, the profits or losses of the partnership are passed through to the individual partners.
The partnership does not pay taxes at the entity level. The individual partner tmust report his or her share of the profit or loss on his or her own personal income tax return (Form 1040) and personally pays any resulting income tax under his/her 1040.
Not all directors have a right to access a corporation's books and records, facilities, and premises.
A court will pierce the corporate veil of a corporation when the corporate privilege is abused for personal benefit.
The state can dissolve a corporation for failing to pay taxes.
The executive officers represent the ultimate authority in every corporation.
Mary is an employee of XYZ Corporation. She is supervised by--and reports to--Peter, the Chief Financial Officer of the corporation. She is convicted of conspiring to violate a federal price-fixing law. In such a case, Peter could also potentially be personally prosecuted for Mary's crime because he was the officer supervising her.
Courts can never "pierce the corporate veil" of a limited liability company to expose shareholders to personal liability.
Unless a limited liability company indicates otherwise, the Internal Revenue Service automatically taxes it as a partnership.
Eve is a director of Fab Style Corporation. Without informing Fab, Eve goes into business with Gro Trend, Inc., in competition with Fab. Eve is most likely liable for breach of
the duty of loyalty.
Hudson and Ilsa want to market a new line of kayaks and related gear under the brand name Journeys as a corporation—Journeys Inc. To avoid income taxes at the corporate level, they should form
an S corporation.
Gina is a director on the board of Home Furnishings Inc. As a director, she may not
put her personal interests before the welfare of the firm.
Mr. Smith is a director and officer of ABC Pizza Corporation. Mr. Smith selects an ad campaign that consumers find offensive—a marketing decision that results in a dramatic decrease in profits for the firm and its shareholders. The shareholders accuse Mr. Smith of breaching his fiduciary duty to the corporation by failing to exercise due care. What is Donatello's best defense against this accusation?
The Business Judgment Rule
Jeri and Knute are members of Lighthouse Tours LLC, a limited liability company. With respect to Lighthouse Tours's liabilities, as members, Jeri and Knute are shielded from
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.
Lightning Corporation and Mind, Inc., two game creators, wish to combine their capabilities to make and market Nano, a special limited-edition game. The appropriate legal entity for this project is most likely
a joint venture.
XYZ Corporation is a new business. It needs more capital to run its operations. How can a Corporation raise additional capital? Select all that apply.
-issue shares of preferred stock or more shares of common stock
-obtain loans from banks or commercial lenders, typically by borrowing against or pledging some of its assets.
-obtain venture capital financing or private equity capital
-issue corporate bonds
An agency is a ___ relationship
What is a fiduciary?
A person who undertakes to act on behalf of—and primarily for the benefit of—another. A fiduciary relationship involves trust and confidence.
Agency relationships are common between employers and employees. They may also exist between employers and independent contractors.
All employees who deal with third parties are usually deemed to be agents.
Employers are exposed to many other state/federal requirements and common law liabilities for employees but not for independent contractors:
To decide whether a worker is an employee or an independent contractor, courts often consider several questions. The chief one is:
How much control does the employer exercise over the details of the work
In Coker (tow driver punched customer), the court found:
-Relationship between towing company and driver is: employer/employee.
-Relationship between AAA and towing company is: Principal/Agent. See factors used in court's analysis.
-Therefore, AAA not liable for driver's assault on the customer.
uThe IRS has its own factors. Many other state/federal regulators use their own (similar) criteria/factors to determine employee status vs. independent contractor.
Copyrighted work created by employee is owned by the employer. ("Work for hire.")
Copyrighted work created by an independent contractor is normally owned by the contractor unless the parties agree in writing that it is a "work for hire" and the work falls into nine specific categories
Generally, agency relationships:
-Require no consideration (unlike a contract).
-Require principal to have contractual capacity (agent does not).
-Can be created for any legal purpose.
An agent is liable for her own crimes. The principal is not liable, even if the crime was committed within the scope of employment, unless:
-Principal participated in the crime.
-Principals may be liable for agent violation of regulations in some jurisdictions.
It is the principal's duty to inform third parties who know of the agency's existence that it has been terminated:
Termination by Operation of Law- These events automatically terminate an agency:
-Death or insanity of principal or agent.
Liability for Independent Contractor's Torts:
Generally, an employer is not liable for acts of independent contractors because employer has little or no right to control.
Who might/could be an Agent in a Principal-Agent relationship? Check all that apply.
a. an employee sales person acting for her employer.
b. an independent contractor acting for a company.
c. an employee janitor who is expressly not authorized to represent her employer.
d. an individual who, without consideration, expressly agrees to act on behalf of another individual.
e. someone who is authorized by contract to represent another party in negotiations, transactions and contracts.
Agent's 5 Duties to the Principal (based on utmost good faith):
An Agent's duty of Loyalty to the Principal includes keeping acquired information __________.
When an Agent makes an authorized contract with a third party, who is liable when the Principal is fully disclosed?
When an Agent makes an authorized contract with a third party, who is liable when the Principal is partially disclosed?
Principal and, in most states, the Agent.
When an Agent makes an authorized contract with a third party, who is liable when the Principal is undisclosed?
Both the principle and agent
For employer-employees, what does the common law doctrine of Respondeat Superior mean?
It means that the Employer is responsible for a tort committed by its employee if the act was committed within the course and scope of employment. Latin translated: "Let the Master answer (be responsible) for the servant".
Can an employer fire an employee for "whistleblowing"?
No. Retaliation against a whistleblower would be against public policy and against many specific statutes. An employee's right to report an employer's violation of laws is protected. The employer cannot take any "adverse employment action" against the whistelblower.
The Family and Medical Leave Act (FMLA) allows employees to take time off work for family or medical reasons:
The Fourth Amendment of the U.S. Constitution prohibits private employers from conducting drug tests of employees and applications.
False. The Fourth Amendment (which prohibits unreasonable searches and seizures) only applies to the Government. It does not apply to private employers. Most Government employees are protected from drug-testing because of the Fourth Amendment.
A court might treat an Employee Manual as an implied employment contract
True. In that case, this might be an exception to the Employment At Will doctrine.
The doctrine of Employment At Will governs Government employers.
False. It applies only to private employers.
What is Employment at Will?
Either party may terminate the employment at any time for any reason, unless a contract provides to the contrary.
Title VII prohibits discrimination in employment on the basis of:
Title VII of the Civil Rights Act of 1964 prohibits religious discrimination in employment. In addition, it requires that employers must reasonably accommodate an employee's sincerely held religious practices:
____ is a federal agency that, among other things, monitors employers' compliance with Title VII.
The Equal Employment Opportunity
In discrimination cases brought under Title VII, intentional discrimination is called "disparate treatment" discrimination. Unintentional discrimination is called "disparate impact" discrimination:
What is constructive discharge?
When employee leaves job voluntarily, but
she claims she was "forced out" because of intolerable working conditions caused or allowed by the employer
Plaintiffs can use constructive discharge to establish any type of discrimination claim under Title VII and is most commonly asserted in cases involving sexual harassment:
What are the two kinds of sexual harassment?
-Quid Pro Quo ("this for that")
-Hostile Work Environment
What are the Remedies for employment discrimination under Title VII?
The Age Discrimination in Employment Act prohibits employment discrimination against persons 40 years old or older:
The Americans with Disabilities Act prohibits employment discrimination against persons with disabilities:
The Americans with Disability Act (ADA) requires employers to offer "reasonable accommodation" to employees or applicants with a disability who are otherwise qualified for the job they hold or seek:
Uniformed Services Employment and Reemployment Rights Act (USERRA) protects civilian job rights and benefits for members of the military, former military personnel, and reservists. It also provides additional protections for veterans who are disabled:
In an employment discrimination case, the three basic types of defenses available to an employer include:
-Bona Fide Occupational
All of the above
A local plant requires a high school diploma for its night cleaning crew employees, resulting in an all-white cleaning crew.
Is this disparate-treatment or disparate-impact discrimination?
If a franchisor exercises considerable control over the details and procedures of the franchisee's business operations, the franchisor may be liable, under the doctrine of respondeat superior, for torts committed by franchisee or the franchisee's employees:
An LLC (Limited Liability Company) is formed in Florida. It also does business in another state. A court in the other state will most likely apply the LLC laws of the other state (rather than the LLC laws of Florida):
True. This inconsistent application of LLC laws by the states is a chief disadvantage of LLCs.
Like a corporation, a Limited Liability Company is a separate legal entity from its owners:
The members of a Limited Liability Company (LLC) have unlimited personal liability for any loss or injury caused by the wrongful acts or omissions of the firm:
False. Their liability is limited to the amount they have invested in the LLC. This is the chief advantage of LLCs.
In a corporation, the shareholders must approve mergers and similar corporate reorganizations:
Can a corporation be held criminally liable for crimes committed by its agents or employees?
In many cases, yes
Who has overall authority and responsibility to govern a corporation?
The board of directors
What are the two main kinds of securities that a corporation can issue to raise capital?
Stocks and Bonds
Who is the primary regulator of publicly held corporations?
The U.S. Securities and Exchange Commission
Who elects the directors?
Who appoints the chief officers?
The officers hire/fire most other employees:
What is an example of a conflict of interest?
Going into business with a competitor would be a conflict of interest.
The Board of Directors of a corporation makes a strategic decision that is unsuccessful. What is their best defense?
The business judgement rule
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