Which of the following is TRUE about ?covenants not to compete? (or ?noncompete agreements?) in employment contracts?
1. Which of the following is TRUE about ?covenants not to compete? (or ?noncompete agreements?) in employment contracts?;a. Noncompete agreements are NOT enforceable in any U.S. state;b. To be enforceable, a noncompete agreement must be reasonable in its duration;c. The period of time (of restraint) can generally be any duration ? so long as the parties to the noncompete agreement are at least 18 years of age;d. Each U.S. state will enforce a noncompete agreement in exactly the same manner (e.g., pursuant to the Uniform Noncompete Act of 1999);2. Which of the following is MOST ACCURATE considering Wendeln v. The Beatrice Manor, Inc. (the case involving the nursing assistant who was terminated for reporting an incident to the Nebraska Department of Health and Human Services)?;a. There are NO exceptions to the at-will employment doctrine;b. The at-will employment doctrine is no longer applicable;c. There are only statutory exceptions to the at-will employment doctrine (i.e., public policy by itself is never sufficient to create an exception);d. There are statutory and public policy exceptions to the at-will employment doctrine;3. Which of the following is MOST ACCURATE considering Mims v. Starbucks Corp. (the case involving the promoted barista)?;a. Once an employee becomes a manager, she no longer desires overtime pay;b. In order for an employee to be considered a manager (and thus not entitled to overtime), she must spend more than 50% of her time performing management duties;c. When an employee spends less than 30% of her time performing management duties, management may still be considered her primary duty;d. When determining whether or not employees are managers (and thus not entitled to overtime), courts will only consider official job titles (i.e., courts will not consider the tasks actually performed by the employees);4. Which of the following is MOST ACCURATE considering Cash Distributing Co. v. Neely (the case involving discrimination based on age)?;a. Neely (the terminated man) had to present specific rebuttal evidence as to each nondiscriminatory reason given by Cash Distributing Co. (?Cash?) for Neely?s dismissal (e.g., Neely had to prove that he never delivered any stale beer);b. Neely rebutted Cash?s nondiscriminating reasons for termination by persuading the jury that, true or not, the reasons offered by Cash were not the real reasons for Neely?s dismissal;c. If it was proven that Neely had delivered any stale beer, Cash would have prevailed on summary judgment (i.e., there would have been no need for a trial);d. Neely would NOT have prevailed in this case if he had been 49 years old when Cash terminated him (i.e., Neely had to be at least 50 years old for protection);5. After recently learning that she has potential as ?an excellent dance instructor,? Audrey has decided to open up a dance studio. However, Audrey is uncertain as to whether she should (1) attempt to build her own ?Vokes Vibes? brand or (2) become a successful ?Arthur Murray Dance Studio? franchisee (assume that there are hundreds of such franchisees). Which is the BEST reason why Audrey should build her own ?Vokes Vibes? brand (and thus NOT pursue the franchisee route)?;a. Audrey is a rebel and insists on doing things her own way;b. To the extent possible, Audrey would like to use a proven business model;c. To the extent possible, Audrey would like to have established systems to help her find and teach customers and employees;d. To the extent possible, Audrey would like to invest in the strength of the ?Arthur Murray? brand;6. Stella formed and now operates her own for-profit consulting firm called ?McJustice.? No documents were filed with the SOS on behalf of McJustice. McJustice is most likely;a. An LLC;b. A Partnership;c. An S-Corporation;d. A Sole Proprietorship;7. Which of the following is MOST ACCURATE considering Warnick v. Warnick (the case where a son sued his mom and dad)?;a. According the UPA, a dissociated partner is NOT entitled to have his interest in the partnership purchased;b. If partners do not have a partnership agreement, no law will govern the operation of a partnership or the rights and duties of the partners;c. The case was dismissed because a son (or daughter) is not allowed to sue his parents or grandparents (unless a will or similar matter is in dispute);d. When a partner dissociates from a partnership, the partners (and former partner) may disagree about how the ?buyout price? should be determined;8. Which of the following is MOST ACCURATE considering Kerl v. Dennis Rasmussen, Inc. (the case involving an inmate-employee who shot his former girlfriend and her fianc?)?;a. Arby?s Inc. (the franchisor) was found liable because franchisors are always vicariously liable for torts committed by employees of the franchisee;b. A franchisor is probably NOT vicariously liable for damages if the franchisor did NOT control the day-to-day operations of the specific aspect of the franchisee?s business that is alleged to have caused the damages;c. A franchisor faces absolutely no risk of liability when it exercises day-to-day control over the hiring, firing, and supervision of franchisee employees;d. Franchisors can never be vicariously liable for damages that occur at a franchisee establishment;9. Which of the following is MOST ACCURATE considering In re Dissolution of Midnight Star Enterprises, L.P. (the case involving Kevin Costner and partnership valuations)?;a. When determining fair market value (to establish a buyout price), courts always prefer actual offers (i.e., from potential buyers) to hypothetical transaction standards (e.g., accountant valuation estimates);b. Courts refuse to resolve partnership valuation disputes until all of the partners agree on a particular valuation method;c. Limited partners are not entitled to have their interests purchased by the limited partnership (because such partners only have limited liability);d. Courts sometimes find that actual offers do not represent fair market value (e.g., because actual offers may include ?sentimental value?);10. Beavis, Mr. Head, and Mr. Anderson are partners in ?Burger World,? a fast food restaurant located in Highland. Highland is governed by the UPA. When they started Burger World, Beavis contributed 80% of the initial capital. Mr. Head contributed the other 20%. To date, they have never entered into any sort of partnership agreement. Which of the following is most likely TRUE?;a. If Mr. Head voluntarily departs Burger World, Burger World may be required to purchase his interest in the partnership;b. Because no partnership agreement has yet been signed, the UPA will NOT apply;c. Beavis is entitled to 80% of Burger World?s profits;d. Because Beavis contributed most of the initial capital, he has superior management rights when conducting Burger World?s business;11. Assume the facts stated in the prior question. Which of the following is TRUE?;a. Beavis, Mr. Head and Mr. Anderson could NOT be personally liable for damages if Stella wins a gross negligence lawsuit that she recently filed against Burger World;b. Mr. Head will report his share of Burger World?s income on his individual tax return;c. The Burger World entity will have its income taxed by the U.S. government;d. All of the above;12. David is admitted to an existing partnership. Several partnership debts and obligations have become due. With regards to ONLY those debts and obligations arising AFTER David joined the partnership, David is most likely;a. Is in no way liable for those debts or obligations;b. Personally liable for those debts and obligations (and, of course, his contribution to the partnership could also be used to satisfy the debts and obligations);c. Liable for those debts and obligations but only to the extent of his capital contribution to the partnership;d. Liable for up to $5,000 of debts and obligations pursuant to the UPA;13. Typical Inc. is a typical large publicly traded corporation that was incorporated in 1990. Which of the following individuals is most likely employed by Typical Inc. to manage its day-to-day affairs?;a. Typical Inc.?s Incorporator;b. Typical Inc.?s Outside Director;c. Typical Inc.?s Registered Agent;d. Typical Inc.?s President;14. Assume the facts stated in the prior question. Typical Inc.?s current directors were most likely elected by its;a. Incorporators;b. Shareholders;c. Registered Agents;d. Officers;15. Cool Ventures Inc. was incorporated in the state of Florida. In Florida, Cool Ventures Inc. is referred to as;a. A sole-state corporation;b. A domestic corporation;c. An alien corporation;d. A foreign corporation;16. Which of the following is MOST ACCURATE considering McFarland v. Virginia Retirement Services of Chesterfield, L.L.C. (the case where a lady sued certain individuals affiliated with an LLC after she was terminated)?;a. Members of an LLC can be personally liable if they personally participate in the specific tort alleged to have caused the injury (or direct the tort to be done);b. None of the individual owners could have been personally liable if the entity was formed as a Corporation (instead of an LLC);c. Members of an LLC are never be personally liable;d. Members of an LLC are always be personally liable;17. Which of the following is MOST ACCURATE considering Kuhn v. Tumminelli (the case where one member of a limousine service, Tumminelli, was alleged to have improperly used LLC funds for his personal benefit)?;a. Each member of any LLC is always entitled to take funds from the LLC whenever he/she desires;b. Because Tumminelli had no authority to receive and endorse the checks, the bank was liable for how Tumminelli used the funds;c. A bank is strictly liable when a member of an LLC obtains funds from the bank (e.g., by cashing a check) and then uses those funds for improper purposes;d. With regards to LLCs, operating agreements can serve important purposes (such as limiting the authority of certain members to do certain things);18. Which of the following is MOST ACCURATE considering In re Aqua Clear Technologies, Inc. (the case where a bankruptcy trustee was going after assets of the recently formed Discount Water Services, Inc., or ?DWS?)?;a. DWS was essentially a continuation of Aqua Clear Technologies, Inc. (?ACT?), the company that previously filed for bankruptcy (and thus the DWS assets should be used to satisfy the claims of ACT?s creditors);b. No ACT assets were used to start or run DWS;c. All assets transferred from ACT to DWS (i.e., prior to bankruptcy) were transferred in exchange for assets having an equivalent value;d. ACT and DWS had no common directors or officers;19. Which of the following actions will most likely to require shareholder approval;a. Issuing common stock that has previously been authorized;b. Hiring a new person to run the marketing department of a services company;c. Increasing the price of a frequently sold product;d. Increasing the number of authorized shares of stock;20. Which of the following is MOST ACCURATE considering Guth v. Loft, Inc. (the Pepsi case)?;a. Directors and officers are free to use a corporation?s assets for their personal uses (so long as such assets would otherwise be sitting idle);b. Fiduciary duties are sometimes breached when a director pursues an opportunity (i.e., in her individual capacity) without first offering that opportunity to the corporation she is serving;c. Unless they agree in writing, corporate officers and directors owe no fiduciary duties to the corporations they serve;d. Directors and officers are free to pursue whatever business and personal interests they desire ? so long as they do so after hours (i.e., after 6:30 PM);21. Which of the following is MOST ACCURATE considering SEC v. Texas Gulf Sulphur Co. (the insider trading case)?;a. Courts may consider what insiders actually did with information when determining whether such information is a ?material? under Rule 10b-5;b. Information relating to an initial test, or sample, is never sufficient to be considered a ?material? under Rule 10b-5;c. The SEC brought its action because Texas Gulf Sulphur Co. was raising more than $5,000,000 as part of the stock issuance in question;d. Texas Gulf Sulphur Co. was liable because the shares in question were not registered with the SEC and such shares did not fit within an exemption from registration;Background Information for the Next TWO Questions;The following companies plan to raise capital by issuing shares of stock as follows;Company: Make-it-Happen Inc. Mover Inc. World Shaker, Inc.;Shares being offered: 1,100,000 250,000 800,000;Price per share: $1.00 $1.50 $0.50;Total amount of offering: $1,100,000 $375,000 $400,000;22. Which company is LEAST likely to rely on Rule 504 (of Regulation D) for its exemption from registration under the Securities Act of 1933?;a. Mover Inc.;b. Make-it-Happen Inc.;c. World Shaker, Inc.;d. Each of the above companies may rely on Rule 504 for its exemption from registration;23. For this question only, assume that each company will rely on a Regulation D exemption from registration. Assume further that each company will issue shares of its stock to unaccredited investors as part of its offering. Which company will face an expressed disclosure requirement (i.e., which company MUST prepare an ?offering document? in connection with its offering)?;a. Mover Inc.;b. Make-it-Happen Inc.;c. World Shaker, Inc.;d. Each of the above companies must issue an offering document or private placement memorandum in connection with its offering;24. Carlos and Donny recently started a for-profit fitness center (i.e., gym/club). They are co-owners of the business. No documents were ever filed with the SOS on behalf of the business. Which of the following is TRUE;a. The business is a partnership;b. Carlos and Donny should consider obtaining insurance to reduce certain risks related to the business;c. Carlos and Donny Should consider using contracts to reduce certain risks related to the business;d. All of the above;25. Assume that Stephanie properly forms a corporation ?S Inc.? S Inc. then enters into a partnership with Cash Capital Inc. Stephanie?s liability exposure for the partnership?s activities is most likely;a. Limited to the amount of S Inc.?s investment in the partnership.;b. Limited to the amount of her investment in S Inc. (that is to say, S Inc.?s liability is unlimited with regards to the partnership?s activities but Stephanie?s liability is limited with regards to S Inc.?s activities).;c. Limited to the one-half of the amount of S Inc.?s investment in the partnership.;d. Unlimited.;26. Heidi?s sole proprietorship enters into a joint venture with Crazy Inc. (a Delaware corporation). Heidi?s personal liability for the joint venture?s activities is;a. Limited to the amount of her investment in the joint venture.;b. Limited to the amount of her investment in the joint venture and any profits.;c. Limited by state statute and varies from state to state.;d. Unlimited.;27. Nadine and Natalya form a consulting firm called ?N & N Partners.? For federal tax purposes, N & N Partners most likely;a. Is a separate tax-paying entity.;b. Needs to file an informational tax return with the IRS but is not a separate tax-paying entity.;c. Pays ? of the taxes if there are two partners.;d. Never files an informational tax return or pays any taxes.;28. Francesca and Steven, both U.S. citizens, want to market a new computer game. They wish to form a business entity that avoids U.S. income taxes at the entity level (they want the tax obligations to pass through to their individual returns). Which of the following entities could help Francesca and Steven achieve their goal;a. IT Inc. (a Delaware corporation that has successfully elected to be taxed as an S Corporation).;b. IT Partners (a Delaware partnership);c. IT LLC (a Delaware limited liability company);d. Each of the above entities could help Francesca and Steven achieve their goal of avoiding U.S. income taxes at the entity level.;29. Carolyn, an employee of Big Company, files a sexual harassment suit against Peter, her supervisor. Carolyn wins against Peter. Big Company, however, would also most likely be liable if it had harassment policies and complaint procedures in place;a. But Carolyn failed to follow such policies and procedures.;b. And Carolyn followed such polices and procures but Peter?s discrimination persisted.;c. But Peter failed to follow such policies and procedures;d. And Big Company often gives its employee of the month awards to its female employees.;30. Which of the following parties must typically be at least 18 years of age for a will be considered valid;a. Witnesses;b. Legatees;c. Testators;d. Each of the above must typically be at least 18 for a will to be valid;31. For a will to be valid, the witnesses to the will must typically;a. Read the will;b. Understand the intestacy laws;c. Be a beneficiary under the will;d. Verify that the testator (i) executed the will and (ii) had the requisite intent and capacity at the time of signing the will;32. Which type of trust is most likely to be created by a will and come to existence upon the death of the grantor;a. A testamentary trust;b. A revocable inter vivos trust;c. An irrevocable inter vivos trust;d. A constructive trust;33. During Chat, we discussed several ?background laws.? Assume Jeff dies without having a will. Which background laws will most likely apply to the distribution of Jeff?s property upon his death;a. Intestate laws;b. The UPA;c. The Uniform LLC Act;d. The Securities Exchange Act of 1934
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