BADM 300 UIUC EXAM 1 QUESTIONS
AND ANSWERS
Functions of the law - Correct Answers -keeping the peace
shaping moral standards
promoting social justice
maintain status quo
facilitate orderly change
facilitate planning
basis for compromise
maximize individ. freedom
english common law (roots) - Correct Answers -law, equity, merchant courts
developed by judges issuing opinions + establishing precedent
Sources of Federal Law - Correct Answers -constitution
treaties
statutes (legislative)
executive orders (executive)
regulations (executive)
judicial decisions: federal and administrative courts)
sources of state law - Correct Answers -constitution
statutes
regulations/admin orders
judicial decisions
municipal ordinances
state v federal law - Correct Answers -federal > state
constitution > statue > regulation
precedent - Correct Answers -court must follow the case law established by any higher
court *in that court's jurisdiction*
stare decisis - Correct Answers -stand by the decision (precedent)
sole proprietorship - Correct Answers -form of business in which owner is actually the
business, not a separate legal entity
,most common form of organization
sp advantages - Correct Answers -easy + inexpensive
full ownership control
right to all profits
easily transferred or sold
sp disadvantages - Correct Answers -unlimited liability (personal capital/assets)
legally responsible for contracts/torts
taxes paid on personal income tax (form 1040, schedule C)
tort - Correct Answers -a wrongful act/infringement of a right
general partnerships - Correct Answers -association of two or more persons to carry on
as co owners of a business for profit
Uniform Partnership Act (UPA) - Correct Answers -model act that codifies partnership
law
Revised Uniform Partnership Act (RUPA) - Correct Answers -issued by the national
conference of commissioners on uniform state laws, but not adopted by many states
(limited partnerships)
gp taxation - Correct Answers -flow through taxation
income and losses flow onto and have to be reported on individual partners' personal
income tax returns
gp management right - Correct Answers -each partner has the right to participate in
management of partnership with equal vote (unless otherwise agreed upon)
general partnership rights - Correct Answers -share profits equally
right to compensation (not entitled to receive salary unless agreed upon)
right to indemnification (reimbursement for business expenses)
right to return of loans
right to return of capital
right to information
duty of loyalty - Correct Answers -a duty not to act adversely to the interests of the
partnership
duty of care - Correct Answers -obligation to use same level of care and skill that a
reasonable person in same position would use (breach is negligence)
duty to inform - Correct Answers -a partner owes to inform his or her copartners of all
the information he or she possesses that is relevant to the affairs of the partnership
, duty of obedience - Correct Answers -requires partners to adhere to provisions of the
partnership agreement and decisions of partnership
general partnership liability - Correct Answers -unlimited liability for the debts of
partnership
joint and several liability - Correct Answers -tort liability of partners together and
individually
a plaintiff can sue one or more partners separately
gp liability of incoming/outgoing partners - Correct Answers -a new partner is only liable
for existing debts to extent of capital contribution
personally liable for debts incurred after becoming partner
if gp is dissolved, each partner is personally liable for debts of partnership
limited partners - Correct Answers -invest capital but do not participate in management
and are not personally liable beyond capital contributions
must file certificate of limited partnerships with SoS
limited liability partnerships - Correct Answers -same as gp but general partners are not
personally liable
franchises pros - Correct Answers -faster growth, new markets, more money
types of franchises - Correct Answers -distributorship
processing plant
chain-style franchise
area franchise
distributorship - Correct Answers -franchisor manufactures product, franchisees sell
product
limited liability limited partnerships - Correct Answers -same as LP but general partners
are not personally liable
Corporations - Correct Answers -85% of business in US
owners are shareholders
separate legal entity (person) in eyes of law
free transferability of shares - Correct Answers -for corps: free by sale, assignment,
pledge or gift
AND ANSWERS
Functions of the law - Correct Answers -keeping the peace
shaping moral standards
promoting social justice
maintain status quo
facilitate orderly change
facilitate planning
basis for compromise
maximize individ. freedom
english common law (roots) - Correct Answers -law, equity, merchant courts
developed by judges issuing opinions + establishing precedent
Sources of Federal Law - Correct Answers -constitution
treaties
statutes (legislative)
executive orders (executive)
regulations (executive)
judicial decisions: federal and administrative courts)
sources of state law - Correct Answers -constitution
statutes
regulations/admin orders
judicial decisions
municipal ordinances
state v federal law - Correct Answers -federal > state
constitution > statue > regulation
precedent - Correct Answers -court must follow the case law established by any higher
court *in that court's jurisdiction*
stare decisis - Correct Answers -stand by the decision (precedent)
sole proprietorship - Correct Answers -form of business in which owner is actually the
business, not a separate legal entity
,most common form of organization
sp advantages - Correct Answers -easy + inexpensive
full ownership control
right to all profits
easily transferred or sold
sp disadvantages - Correct Answers -unlimited liability (personal capital/assets)
legally responsible for contracts/torts
taxes paid on personal income tax (form 1040, schedule C)
tort - Correct Answers -a wrongful act/infringement of a right
general partnerships - Correct Answers -association of two or more persons to carry on
as co owners of a business for profit
Uniform Partnership Act (UPA) - Correct Answers -model act that codifies partnership
law
Revised Uniform Partnership Act (RUPA) - Correct Answers -issued by the national
conference of commissioners on uniform state laws, but not adopted by many states
(limited partnerships)
gp taxation - Correct Answers -flow through taxation
income and losses flow onto and have to be reported on individual partners' personal
income tax returns
gp management right - Correct Answers -each partner has the right to participate in
management of partnership with equal vote (unless otherwise agreed upon)
general partnership rights - Correct Answers -share profits equally
right to compensation (not entitled to receive salary unless agreed upon)
right to indemnification (reimbursement for business expenses)
right to return of loans
right to return of capital
right to information
duty of loyalty - Correct Answers -a duty not to act adversely to the interests of the
partnership
duty of care - Correct Answers -obligation to use same level of care and skill that a
reasonable person in same position would use (breach is negligence)
duty to inform - Correct Answers -a partner owes to inform his or her copartners of all
the information he or she possesses that is relevant to the affairs of the partnership
, duty of obedience - Correct Answers -requires partners to adhere to provisions of the
partnership agreement and decisions of partnership
general partnership liability - Correct Answers -unlimited liability for the debts of
partnership
joint and several liability - Correct Answers -tort liability of partners together and
individually
a plaintiff can sue one or more partners separately
gp liability of incoming/outgoing partners - Correct Answers -a new partner is only liable
for existing debts to extent of capital contribution
personally liable for debts incurred after becoming partner
if gp is dissolved, each partner is personally liable for debts of partnership
limited partners - Correct Answers -invest capital but do not participate in management
and are not personally liable beyond capital contributions
must file certificate of limited partnerships with SoS
limited liability partnerships - Correct Answers -same as gp but general partners are not
personally liable
franchises pros - Correct Answers -faster growth, new markets, more money
types of franchises - Correct Answers -distributorship
processing plant
chain-style franchise
area franchise
distributorship - Correct Answers -franchisor manufactures product, franchisees sell
product
limited liability limited partnerships - Correct Answers -same as LP but general partners
are not personally liable
Corporations - Correct Answers -85% of business in US
owners are shareholders
separate legal entity (person) in eyes of law
free transferability of shares - Correct Answers -for corps: free by sale, assignment,
pledge or gift
