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COMLAW101 > TOPIC 12: Business Structures > Flashcards

TOPIC 12: Business Structures Flashcards

1
Q 
A structure based on an artificial legal personality is called a:
  corporation. 
  partnership. 
  unlimited liability company. 
  agency. 
  franchise.
A

Corporation

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2
Q

Select the most accurate statement in respect of limited liability companies:
Limited liability is enjoyed by all shareholders unless a personal guarantee has been given in respect of any loan or credit extended to the company.
Directors and shareholders are always personally liable for the debts of the company.
Limited liability is always enjoyed by all shareholders.

A

Limited liability is enjoyed by all shareholders unless a personal guarantee has been given in respect of any loan or credit extended to the company.

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3
Q

Which of the following are features of “incorporation”?
Perpetual succession (despite the departure of members/shareholders).
Limited liability.
Separation of ownership and control.
All of the above are features of incorporation.
Separate legal entity.

A

All of the above are features of incorporation

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4
Q

In respect of liability in a partnership, select the correct statement:
Partners have unlimited liability for the obligations and debts of the partnership. but only in respect of assets of the partnership business itself, as creditors cannot claim the personal assets of any partner.
Partners enjoy limited liability in respect of the obligations and debts of the partnership.
Partners have unlimited liability for the obligations and debts of the partnership. in respect of both assets of the partnership business itself, and the personal assets of any partner.

A

Partners have unlimited liability for the obligations and debts of the partnership. in respect of both assets of the partnership business itself, and the personal assets of any partner.

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5
Q

Limited liability companies:
are not separate legal entities from those who own them.
All of the other statements are true.
have artificial legal personality and are registered under the Companies Act 1993.
have corporate owners who are personally liable for any criminal offences committed by the company.

A

have artificial legal personality and are registered under the Companies Act 1993.

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6
Q 
Companies in New Zealand are governed by:
  the Companies Act 1993. 
  the Corporations Code 2008. 
  the Companies Act 1955. 
  the Companies Act 2005 (Eng.).
A

the Companies Act 1993.

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7
Q

Why is there a need for agency law in trade and commerce?
Because persons in business are usually unable to attend to everything personally and, without the ability to appoint an agent, business activity would be limited to what an individual could personally transact.
Because concepts of agency are important in partnership law. partners being both agents of the firm and of the other partners in respect of partnership business.
All of the above reasons apply.
Because corporations are artificial persons and can only act through human agents.

A

All of the above reasons apply

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8
Q

In the case of “Salomon v Salomon & Co Ltd” (1897) the House of Lords found that:
Mr Salomon and his company (Salomon & Co Ltd) were in fact in a joint venture in the nature of partnership and that, accordingly, Mr Salomon owed fiduciary obligations to himself.
Mr Salomon and his company (Salomon & Co Ltd) were one and the same legal person, and were not distinct legal entities.
Mr Salomon was acting illegally as bootmaking was not a legitimate business activity in the late 19th century.
a company is a distinct legal person, separate from those who own its shares and from those who control and operate it.

A

a company is a distinct legal person, separate from those who own its shares and from those who control and operate it.

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9
Q

A “limited liability company”:
All of the above are accurate statements in respect of a limited liability company.
is a separate legal entity from those who own/operate it.
is formed under the Companies Act 1993.
is built around the concept of an artificial legal person.

A

All of the above are accurate statements in respect of a limited liability company.

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10
Q 
A business named "Fantasy Florists Ltd" would be:
  a firm. 
  a partnership. 
  a sole trader. 
  a corporation.
A

A corporation

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11
Q

In relationship to “partnership”, select the correct statement:

  • A partnership can exist without the members being aware that they are in fact in a partnership relationship
  • They are often referred to by the term “firm”
  • All of the above are true statements in relation to the concept of “partnership”
  • Unlike companies, they are unincorporated
A

All of the above are true statements in relation to the concept of “partnership”

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12
Q

Which of the following are features of “incorporation”?

  • All of the above are features of incorporation
  • Limited liability
  • Perpetual succession (despite the departure of members/shareholders)
  • Separate legal entity
  • Separation of ownership and control
A

All of the above are features of “incorporation”

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13
Q

In the law of agency, whether or not the principal is bound by the acts of the agent depends on whether the agent had “authority”. In relation to this aspect of the law, which type/s of AUTHORITY will result in a principal being bound by the acts of his agent?

  • The principal will only be bound where the agent had ACTUAL AUTHORITY
  • The principal will only be bound where the agent had APPARENT AUTHORITY
  • The principal will only be bound where the agent had OSTENSIBLE AUTHORITY
  • The principal will be bound where the agent had either ACTUAL AUTHORITY or APPARENT AUTHORITY
A

The principal will be bound where the agent had either ACTUAL AUTHORITY or APPARENT AUTHORITY

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14
Q 
A business named "Sarah F. Antasy, trading as Fantasy Florists" would be:
  a agency. 
  a company. 
  a sole proprietorship. 
  a partnership.
A

A sole proprietorship

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15
Q

Mr Smith is a sole trader. He operates a painting and decorating business under the name “Smith’s Painters & Decorators”. Select the correct statement in respect of Mr Smith’s business:

  • Mr Smith may not employ anyone else in the business as he must operate it as a sole entity
  • Mr Smith owns and controls the business
  • All of the above are true statements in respect of Mr Smith’s business
  • Mr Smith would have been required to set up the business formally under the Sole Proprietorship Act 1993
A

Mr Smith owns and controls the business

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16
Q

A “sole proprietorship” is a business conducted by

  • A company
  • A partnership
  • A natural person
  • A corporate person
A

A natural person

17
Q

Select the BEST definition of “an agent” from the list below:

  • An agent is a person who sells commodities for a third person
  • An agent is a person who sells property for a third person
  • An agent is a person engaged for the purpose of bringing another into contractual relations with third persons
  • An agent is a person engaged by a third party for any purpose
A

An agent is a person engaged for the purpose of bringing another into contractual relations with third persons

18
Q

Which of the following are features of a business conducted as a “sole proprietorship”

  • Incorporation required to set up business AND unlimited liability
  • No formal requirements to set up the business AND unlimited liability
  • Incorporation required to set up business AND limited liability
  • No formal requirements to set up the business AND limited liability
A

No formal requirements to set up the business AND unlimited liability

19
Q

Corporations:

  • All of the other statements are true statements in respect of corporations
  • Include incorporated societies
  • Are built around the concept of an artificial legal person
  • Include limited liability companies
A

All of the other statements are true statements in respect of corporations

20
Q

An important reason for the existence of the concept of “agency” in modern times is that:

  • Agents would otherwise be unemployed
  • The concept of agency is necessary for the existence and operation of corporations, as corporations can only act through human agents
  • All of the other statements
  • It is impossible to transact any business without an agent
A

The concept of agency is necessary for the existence and operation of corporations, as corporations can only act through human agents

21
Q

Directors of a company:

  • Owe duties of good faith and loyalty to the company
  • Owe no duties at all to the company and can do whatever they like, even pursuing their own personal interests
  • Can engage in reckless trading, even if creditors of the company are harmed
A

Owe duties of good faith and loyalty to the company

COMLAW101 (10 decks)

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