Business Degree Business Law 2 — Questions and Answers
Question 1: What is the main difference between a corporation and a sole proprietorship?
- Corporations are tax-exempt; sole proprietorships are not
- A corporation is a separate legal entity from its owners; a sole proprietorship is not (Correct answer)
- Sole proprietorships can have unlimited shareholders; corporations cannot
- Corporations cannot enter into contracts; sole proprietorships can
Correct answer: A corporation is a separate legal entity from its owners; a sole proprietorship is not
A corporation is a distinct legal entity separate from its owners, while a sole proprietorship and owner are legally the same entity with no separation.
Question 2: What is 'negligence' in business law?
- Intentional harm caused to another party
- Failure to exercise reasonable care, resulting in harm to another (Correct answer)
- A deliberate breach of a written contract
- An employee violating company policy
Correct answer: Failure to exercise reasonable care, resulting in harm to another
Negligence is the failure to take the level of care that a reasonably prudent person would exercise under the same circumstances, causing injury or loss.
Question 3: What does 'Chapter 11 bankruptcy' allow a US business to do?
- Liquidate all assets to pay creditors and close
- Reorganize debts and continue operating while repaying creditors under a court-approved plan (Correct answer)
- Transfer all liabilities to another company
- Declare all existing contracts void
Correct answer: Reorganize debts and continue operating while repaying creditors under a court-approved plan
Chapter 11 bankruptcy allows a business to restructure its debts under court supervision while continuing operations, unlike Chapter 7 which involves liquidation.
Question 4: What is 'tortious interference' in business law?
- A company failing to pay taxes on time
- Intentionally disrupting another party's business contracts or relationships (Correct answer)
- Unauthorized use of a competitor's trademark
- Violating consumer protection regulations
Correct answer: Intentionally disrupting another party's business contracts or relationships
Tortious interference occurs when a third party intentionally disrupts a contractual or business relationship between two other parties.
Question 5: What is the 'Uniform Commercial Code' (UCC) in the United States?
- A federal law regulating interstate banking transactions
- A standardized set of laws governing commercial transactions adopted by most US states (Correct answer)
- A federal regulation controlling advertising standards
- A set of rules for international trade agreements
Correct answer: A standardized set of laws governing commercial transactions adopted by most US states
The UCC is a comprehensive set of model laws that most US states have adopted to standardize and simplify commercial transactions.
Question 6: What is 'consideration' in contract law?
- The period of time given to review a contract
- Something of value exchanged between parties that makes a contract enforceable (Correct answer)
- The number of parties involved in a contract
- A clause allowing contract renegotiation
Correct answer: Something of value exchanged between parties that makes a contract enforceable
Consideration is the value (money, services, goods, or a promise to act or refrain from acting) that each party provides to make a contract legally binding.
Business Degree Business Law 2
What is the main difference between a corporation and a sole proprietorship?