Question

6) DirtyBike Manufacturer manufactures dirt bikes in Cleveland, Ohio. DirtyBike gives an exclusive license to Paul's Dirt Bikes in Oklahoma City, Oklahoma to sell the bikes. This is an example of:

A) a franchise

B) a distributorship

C) a chain style business

D) manufacturing arrangement

E) exclusive manufacturing arrangement

10) Cameron a partner in a pool and sauna business, enters into a written agreement with a supplier for chemicals for their pool business without the other partners' signatures on the agreement. Does Cameron have the authority to do so?

A) Yes, implied authority permits partners to enter into agreements necessary to carry on partnership business.

B) Yes, actual authority permits partners to enter into agreements regardless of the subject matter.

C) No, all partners to the pool and spa business must be signatories to a written agreement.

D) Yes, implied authority permits partners to enter into agreements regardless of the subject matter and for any amount of money.

E) No, unless the partnership agreement specifically authorizes only Cameron to order pool supplies.

11) Dixon CPA, an accounting partnership, makes an offer to Nessa to become one of their partners. Dixon recently took out a loan for $2 million. Nessa is concerned that, if she became a partner, she could be held personally liable for the existing loan. Which of the following statements best describes the liability Nessa could face if she becomes partner?

A) Nessa can be held personally liable, up to the amount of her percentage of voting rights.

B) Nessa can be held personally liable, and the capital she adds to the partnership can be used to pay off the loan.

C) Nessa cannot be held personally liable, but the capital she adds to the partnership can be used to pay off the loan and her salary can be used to pay off the loan.

D) Nessa cannot be held personally liable, and the capital she adds to the partnership cannot be used to pay off the loan.

E) Nessa cannot be held personally liable, but the capital she adds to the partnership can be used to pay off the loan.

Answer 1

6. (A) a franchise

A franchise is a type of license that a party (franchisee) acquires to allow them to have access to a business's (franchisor) proprietary knowledge, processes, and trademarks in order to allow the party to sell a product or provide a service under the business's name.

10. (A) Yes, implied authority permits partners to enter into agreements necessary to carry on partnership business.

Each partner in a business has the implied authority to act in the name of the company. Such acts are binding on the other partners, so long as they fall within the ordinary course of the company's normal business. Such acts of implied authority may include: Buying or selling goods on behalf of the company.

11. (B) Nessa can be held personally liable, and the capital she adds to the partnership can be used to pay off the loan

Assuming Dixon CPA is an unlimited partnership firm, all members are liable jointly with all the other partners and also severally, for all acts of the firm done while one is a partner. We can be held personally responsible for another partner’s negligence or carelessness. This means that if our partnership firm is insufficient to meet its financial obligations, they may have to use their personal assets to pay off debtors, even though we personally may not be at fault.