Exam 4 BUL 3310 (FSU) Gwen Adkins
Final Test Questions With 100%
Accurate Solutions 2025-2026
Updated.
Evolution of the Entity - Answer Choice Depends On: Risk, taxes, and how the business will
operate.
Each Entity Type Has: Pros, cons, and legal effects on owners.
Not Permanent: Owners can change the entity as the business grows.
- Entities are not set in stone. Principals may change the entity as business evolves.
Principals - Answer Who? People in a business who get profits based on ownership
percentage.
Choosing a Business Entity - 5 Key Factors:
Formation - How it's created (legal steps).
Liability - Who is responsible for debts/losses.
Capitalization - How it gets funded.
Taxation of Income - How profits are taxed.
Management & Operation - Who runs it & how.
Sole Proprietorship - Answer One-person business - Owner = business.
Easy to start - Small fee, simple filing, no annual reports.
Unlimited liability - Owner's personal assets are at risk.
Full control - One person makes all decisions.
Partnerships: General Limited - Answer Two or more owners share profits & losses.
General partners - Personal liability for debts.
Limited partners - Liability limited to their investment.
Limited Liability partnership - Answer Two or more owners share profits & losses.
,Favorable tax treatment - Potentially better tax benefits than other entities.
Corporation - Answer One or more owners invest money for stock ownership.
Limited liability - Owners are not personally liable for business debts
Capitalization (Sole proprietorships) - Answer Personal resources - Owner's personal assets
or credit.
Private loans - Borrowing from individuals.
Business/commercial loans - Loans from banks or lenders.
Line of credit - Flexible borrowing limit from a financial institution.
Taxation: personal (Sole proprietorships) - Answer No corporate tax - Business income is not
taxed separately.
Report on personal return - Owner includes business income and expenses on their own tax
return.
Termination (Sole proprietorships) - Answer By owner's choice - Principal can end the
business.
By law - Ends if the owner dies or files for personal bankruptcy.
Sole proprietorships (2) - Answer 1 person/sole management - One owner, full control.
Easy formation - Minimal fee, might need a fictitious name.
Unlimited liability - Personal assets are at risk.
Capitalization sources - Personal assets, private loans, commercial loans, lines of credit,
unsecured credit.
Taxes - Personal income tax + self-employment tax.
What is a franchise and why isn't it on the list of commonentities? - Answer A method rather
than an entity
Franchise - Answer a method of conducting business via a contract relationship rather than a
business entity
,Franchise Agreements - Answer Relationship between franchisee and franchisor.
1. Term - Time limit of the agreement.
2. Fees - Franchise fees, payment terms, and buying requirements.
3. Territory rights - Exclusive geographic area for the franchisee.
4. Franchisor commitments - Training, support, and advertising.
5. Franchisee commitments - Follow operating protocols.
6. Royalties/fees - Payments the franchisee must make.
7. Termination policies - Rules for ending the agreement.
Franchise Regulation - Answer U.S. Federal Trade Commission (FTC) - Regulates franchises at
the federal level.
States - Franchise regulations vary by state.
Florida - No specific franchise act, but has requirements for various types (see Florida Statutes
in passim).
Lewis V. Moore - Answer " A sole proprietorship and its owner are one in the same "
Case Background: Lemuel Lewis had a contract with Lynn Moore, who operated a sole
proprietorship, entitling him to 10% of her cash withdrawals.
Business Change: Moore dissolved her sole proprietorship and formed an LLC with another
person.
Legal Dispute: Lewis claimed he was still entitled to 10% of Moore's withdrawals from the LLC
based on their original agreement.
Court's Ruling: The court ruled against Lewis, stating that since Moore was not the majority
owner of the LLC, the agreement no longer applied.
Significance: Reinforces that in a sole proprietorship, the owner and business are the same, but
forming an LLC creates a separate legal entity with different legal obligations.
, Case Background: Robert Biller filed a lawsuit for injuries sustained at Snug Harbor Jazz Bistro,
originally operated as a sole proprietorship by George Brumat.
Owner's Death: In July 2007, Brumat passed away, and his assets, including the jazz bistro, were
bequeathed to his niece, Luana Brumat.
Formation of LLC: Following Brumat's death, Luana Brumat and others formed Snug Harbor Jazz
Bistro of Louisiana, L.L.C., to continue the business operations.
Sole Proprietorship Termination: A sole proprietorship terminates upon the owner's death, as
the business and owner are legally indistinguishable.
Successor Liability: In this case, the newly formed LLC was not deemed a successor liable for the
obligations of the original sole proprietorship. The court ruled that the LLC was a separate
entity, and thus, Biller could not hold it responsible for incidents that occurred under the sole
proprietorship.
This case underscores the legal principle that a sole proprietorship ceases to exist upon the
owner's death, and any subsequent business entity formed does not automatically inherit
liability for the predecessor's obligations.
Corporation (2) - Answer Fictitious legal entity - Exists separately from its principals.
Creation - Formed through state law filing, governed by state statutes, often based on the
Revised Model Business Corporation Act (RMBCA).
Corporation as an entity - Recognized as an independent legal entity.
Classifications of corporations - Answer Privately held (96%) vs. Publicly held - Ownership
distinction.
Domestic - Operates in the state of incorporation.
Foreign - Operates in a state other than where it's incorporated.
Alien - Formed outside the U.S., transacts business in the U.S.
For Profit - Aimed at making money.
Nonprofit and Benefit Corporations - Serve public interest, no profit motive.
Public Corporations - Formed by the government to serve public interest (e.g., transit).
Final Test Questions With 100%
Accurate Solutions 2025-2026
Updated.
Evolution of the Entity - Answer Choice Depends On: Risk, taxes, and how the business will
operate.
Each Entity Type Has: Pros, cons, and legal effects on owners.
Not Permanent: Owners can change the entity as the business grows.
- Entities are not set in stone. Principals may change the entity as business evolves.
Principals - Answer Who? People in a business who get profits based on ownership
percentage.
Choosing a Business Entity - 5 Key Factors:
Formation - How it's created (legal steps).
Liability - Who is responsible for debts/losses.
Capitalization - How it gets funded.
Taxation of Income - How profits are taxed.
Management & Operation - Who runs it & how.
Sole Proprietorship - Answer One-person business - Owner = business.
Easy to start - Small fee, simple filing, no annual reports.
Unlimited liability - Owner's personal assets are at risk.
Full control - One person makes all decisions.
Partnerships: General Limited - Answer Two or more owners share profits & losses.
General partners - Personal liability for debts.
Limited partners - Liability limited to their investment.
Limited Liability partnership - Answer Two or more owners share profits & losses.
,Favorable tax treatment - Potentially better tax benefits than other entities.
Corporation - Answer One or more owners invest money for stock ownership.
Limited liability - Owners are not personally liable for business debts
Capitalization (Sole proprietorships) - Answer Personal resources - Owner's personal assets
or credit.
Private loans - Borrowing from individuals.
Business/commercial loans - Loans from banks or lenders.
Line of credit - Flexible borrowing limit from a financial institution.
Taxation: personal (Sole proprietorships) - Answer No corporate tax - Business income is not
taxed separately.
Report on personal return - Owner includes business income and expenses on their own tax
return.
Termination (Sole proprietorships) - Answer By owner's choice - Principal can end the
business.
By law - Ends if the owner dies or files for personal bankruptcy.
Sole proprietorships (2) - Answer 1 person/sole management - One owner, full control.
Easy formation - Minimal fee, might need a fictitious name.
Unlimited liability - Personal assets are at risk.
Capitalization sources - Personal assets, private loans, commercial loans, lines of credit,
unsecured credit.
Taxes - Personal income tax + self-employment tax.
What is a franchise and why isn't it on the list of commonentities? - Answer A method rather
than an entity
Franchise - Answer a method of conducting business via a contract relationship rather than a
business entity
,Franchise Agreements - Answer Relationship between franchisee and franchisor.
1. Term - Time limit of the agreement.
2. Fees - Franchise fees, payment terms, and buying requirements.
3. Territory rights - Exclusive geographic area for the franchisee.
4. Franchisor commitments - Training, support, and advertising.
5. Franchisee commitments - Follow operating protocols.
6. Royalties/fees - Payments the franchisee must make.
7. Termination policies - Rules for ending the agreement.
Franchise Regulation - Answer U.S. Federal Trade Commission (FTC) - Regulates franchises at
the federal level.
States - Franchise regulations vary by state.
Florida - No specific franchise act, but has requirements for various types (see Florida Statutes
in passim).
Lewis V. Moore - Answer " A sole proprietorship and its owner are one in the same "
Case Background: Lemuel Lewis had a contract with Lynn Moore, who operated a sole
proprietorship, entitling him to 10% of her cash withdrawals.
Business Change: Moore dissolved her sole proprietorship and formed an LLC with another
person.
Legal Dispute: Lewis claimed he was still entitled to 10% of Moore's withdrawals from the LLC
based on their original agreement.
Court's Ruling: The court ruled against Lewis, stating that since Moore was not the majority
owner of the LLC, the agreement no longer applied.
Significance: Reinforces that in a sole proprietorship, the owner and business are the same, but
forming an LLC creates a separate legal entity with different legal obligations.
, Case Background: Robert Biller filed a lawsuit for injuries sustained at Snug Harbor Jazz Bistro,
originally operated as a sole proprietorship by George Brumat.
Owner's Death: In July 2007, Brumat passed away, and his assets, including the jazz bistro, were
bequeathed to his niece, Luana Brumat.
Formation of LLC: Following Brumat's death, Luana Brumat and others formed Snug Harbor Jazz
Bistro of Louisiana, L.L.C., to continue the business operations.
Sole Proprietorship Termination: A sole proprietorship terminates upon the owner's death, as
the business and owner are legally indistinguishable.
Successor Liability: In this case, the newly formed LLC was not deemed a successor liable for the
obligations of the original sole proprietorship. The court ruled that the LLC was a separate
entity, and thus, Biller could not hold it responsible for incidents that occurred under the sole
proprietorship.
This case underscores the legal principle that a sole proprietorship ceases to exist upon the
owner's death, and any subsequent business entity formed does not automatically inherit
liability for the predecessor's obligations.
Corporation (2) - Answer Fictitious legal entity - Exists separately from its principals.
Creation - Formed through state law filing, governed by state statutes, often based on the
Revised Model Business Corporation Act (RMBCA).
Corporation as an entity - Recognized as an independent legal entity.
Classifications of corporations - Answer Privately held (96%) vs. Publicly held - Ownership
distinction.
Domestic - Operates in the state of incorporation.
Foreign - Operates in a state other than where it's incorporated.
Alien - Formed outside the U.S., transacts business in the U.S.
For Profit - Aimed at making money.
Nonprofit and Benefit Corporations - Serve public interest, no profit motive.
Public Corporations - Formed by the government to serve public interest (e.g., transit).
