Business Law Chapter 42

The partners who manage the limited partnership and are personally liable for the firm debts are __________ partners.

A. general

A limited liability company's operating agreement:

A. is equivalent to the bylaws of a corporation.

Management of an LLC is vested in its:

A. members

The owners of a limited liability company are known as:

A. members.

A limited liability company may be classified as a partnership for tax purposes if:

A. such an election is made by "checking the box" for partnership tax treatment on the appropriate Internal Revenue Service form.

The spread of limited liability corporation statutes resulted from:

B. an Internal Revenue Service ruling.

A limited liability company:

B. has no restriction on the number of owners.

A limited liability company:

B. member may actively participate in control of the business without losing limited liability status.

Which form of business entity was created primarily to shield innocent owners, particularly those in professions, from malpractice liability generated from other owners in the firm?

B. the limited liability partnership

Each limited partner in a limited partnership is entitled to which of the following?

C. Both a. and b.

Which of the following statements regarding limited partnerships is true?

C. Limited partners can lose their liability limitation if they participate in the control of the business.

A limited liability partnership must include which of the following terms in its name?

C. either a. or b.

The dissolution and winding up of a limited partnership is governed by the same principles applicable to a __________.

C. general partnership.

When no limited partnership certificate is filed, what is the result?

D. Both general and limited partners are fully liable

Members of a limited liability company share profits:

D. according to the terms of the operating agreement.

It is expected that in the future, the limited liability company will in many instances replace which of the following forms of business ownership?

D. all of the above

Most limited liability company statutes provide that a LLC will dissolve:

D. all of the above.

Under the Revised Uniform Limited Partnership Act, a limited partner probably will not lose the protection of limited liability when the limited partner:

D. all of the above.

Under the Revised Uniform Limited Partnership Act, a limited partner may contribute:

D. cash, property, and services.

A limited partnership can be formed by one (1) or more __________ partners and one (1) or more __________ partners.

D. general; limited

A limited liability company is identical to a Subchapter S corporation.

False

A limited liability company pays federal income tax.

False

A limited liability partnership protects partners from liability for the wrongful acts of those whom they directly supervise and control.

False

A limited partner can never lose money.

False

A limited partner may never sue the business.

False

All owners of a limited liability company are known as officers.

False

Both general partnerships and limited partnerships are created only through the process of executing a certificate.

False

Even limited partners are completely liable for debts of the business.

False

If a limited partnership certificate is never filed, all partners are treated as limited partners.

False

In a limited partnership, general partners are not responsible for the debts of the firm.

False

It is impossible to form a business in a manner that allows for single taxation and limited liability.

False

Limited liability companies may be formed without filing formal articles of organization with the secretary of state.

False

The dissolution of a limited partnership is governed by unique rules quite different from those applicable to the dissolution of a general partnership.

False

The names of limited partners and investors must be included on the certificate of limited partnership.

False

The operating agreement of an LLC must be in writing to be valid.

False

While most states have adopted limited liability company statutes, few states have created statutes allowing the formation of limited liability partnerships.

False

A general partner within a limited partnership may be a corporation.

True

A limited liability company may be managed directly by the owners.

True

A limited liability company may hold property in its own name.

True

A limited partner may receive a share of the profits.

True

An LLC is a legal entity with the authority to conduct business in its own name.

True

Courts tend to resolve ambiguities in limited partnership agreements against the general partners.

True

Every limited partnership must have at least one general partner.

True

It is possible for a limited partner to be subject to the debts of the firm if the limited partner participates in the control of the business.

True

Limited liability is not a feature of general partnership law.

True

Limited liability partnership statues are designed to permit the conversion of existing general partnerships into limited liability partnerships.

True

Limited partners may contribute cash or property as their capital contributions.

True

Managers of an LLC have the same fiduciary duties to the entity as corporate officers have to a corporation.

True

The limited liability company combines the tax advantage of the partnership with the limited liability feature of the corporate form of business organization.

True

Under the Revised Uniform Limited Partnership Act, limited partners may engage in certain "safe harbor" activities without losing their protection from liability. These activities include being a contractor for, or an agent or employee of, the limited partnership or of a general partner.

True