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1. Which of the following elements is necessary to form a
legally binding contract?
a) Offer and acceptance
b) Consideration
c) Legal capacity
d) All of the above
Answer: d) All of the above
Rationale: In order for a contract to be legally binding, it
must include all three elements: offer and acceptance,
consideration, and legal capacity. These elements ensure
that both parties have willingly entered into the contract
with a mutual understanding of their rights and obligations.
2. Which type of business entity provides its owners with
limited liability protection?
a) Sole proprietorship
b) Partnership
c) Corporation
d) Limited liability company
Answer: c) Corporation
Rationale: A corporation is a separate legal entity from its
owners, which means the owners (shareholders) have
limited liability for the debts and obligations of the
corporation. This provides a layer of protection for theÂ
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