EXAM 4

A ________ partnership is a special form of partnership in which all partners are limited partners, and there are no general partners.

limited liability

Tammi purchases stock in Vivaldi Corporation. Vivaldi Corporation later encounters legal issues and faces significant legal claims. As a shareholder, Tammi's liability is:

limited to her investment in the stock.

The right to be paid before common stockholders if the corporation is dissolved and liquidated is called a ________.

liquidation preference

In the absence of an agreement to the contrary, all partners have equal rights in the conduct and management of the partnership business.

true

Licensing occurs when one business or party that owns trademarks, service marks, trade names, and other intellectual property (the licensor) contracts to permit another business or party (the licensee) to use its trademarks, service marks, trade names, and other intellectual property in the distribution of goods, services, software, and digital information. This is called a license.

true

Limited liability companies (LLCs) are treated as artificial persons who can sue or be sued, enter into and enforce contracts, hold title to and transfer property, and be found civilly and criminally liable for violation of law.

true

Preferred stock is an equity security that is given certain preferences and rights over common stock.

true

The agreement to form a partnership may be oral, written, or implied from the conduct of the parties.

true

Micah and Jonah want to start a corporation but want to be taxed as a partnership. They should form:

an S corporation.

Which of the following is not a common breach of the duty of loyalty owed by directors and officers of a corporation?

disclosed and authorized self-dealing

The ________ of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the business.

dissolution

In a(n) ________ franchise, the franchisor manufactures a product and licenses a retail dealer to distribute the product to the public.

distributorship

A ________ is the right to receive a fixed dividend at set periods during the year (e.g., quarterly).

dividend preference

A limited liability partnership (LLC) is a(n) ________ LLP in the state in which it is organized.

domestic

A corporation is a domestic corporation in the state in which it is incorporated; it is an alien corporation in all other states and jurisdictions.

false

A limited liability company (LLC) can be organized in more than one (1) state.

false

A limited liability company (LLC) may do business in states other than the state in which it is organized; to do so, however, the LLC must register as a domestic LLC in any state in which it wants to conduct business.

false

A sole proprietor has limited personal liability for the obligations of his or her sole proprietorship.

false

An attorney-in-fact is a person or corporation that is empowered to accept service of process on behalf of a corporation.

false

An intrapreneur is a person who forms and operates a business.

false

Corporation codes are federal statutes that regulate the formation, operation, and dissolution of corporations.

false

Managers of limited liability companies (LLCs) are personally liable for the debts, obligations, and liabilities of the LLC they manage.

false

Only managing partners have rights in the conduct and management of the partnership business.

false

Shareholders have unlimited liability for the contracts and debts of the corporations in which they own shares.

false

State government approval is required to create a sole proprietorship.

false

The Uniform Partnership Act (UPA) mandates that a partner has the right to share in the partnership's profits and losses in an amount proportionate to his or her capital contribution to the partnership.

false

The death, insanity, or bankruptcy of a shareholder, a director, or an officer of a corporation involuntarily terminates the existence of the corporation.

false

The owners of limited liability companies are usually called associates.

false

With regard to a sole proprietorship, the term d.b.a. means designated business authority.

false

A franchise is established when one party, the ________, licenses another party, the ________, to use the franchisor's trade name, trademarks, commercial symbols, patents, copyrights, and other property in the distribution and selling of goods and services.

franchisor; franchisee

A limited partnership has two (2) types of partners: ________ partners and ________ partners.

general; limited

A partnership and partners who are made to pay for tort liability may seek ________ from the partner who committed the wrongful act.

indemnification

The terms of a debt security are commonly contained in a contract between the corporation and the holder; this contract is known as a(n) ________ agreement.

indenture

The franchisor deals with the franchisee as a(n) ________.

independent contractor

A(n) ________ director is a member of the board of directors who is also an officer of the corporation.

inside

Authorized shares that have been sold by the corporation are called ________ shares.

issued

A limited partnership is also known as a ________.

special partnership

A partner is a co-owner with the other partners of the specific partnership property as a(n)

tenant in partnership

Upon the dissolution and the commencement of the winding up of a limited partnership, with which government office must the certificate of cancellation be filed?

the secretary of state of the state in which the limited partnership is organized

A certificate of interest is a document that evidences a member's ownership interest in a limited liability company (LLC).

true

A closely held corporation is one whose shares are owned by only a few shareholders, who are often family members, relatives, or friends.

true

A corporation is a domestic corporation in the state in which it is incorporated; it is a foreign corporation in all other states and jurisdictions.

true

A corporation's name must contain the words corporation, company, incorporated, or limited or an abbreviation of one of these words (i.e., Corp., Co., Inc., Ltd.).

true

A general partnership, or partnership, is a voluntary association of two (2) or more persons for carrying on a business as co-owners for profit.

true

A limited liability company (LLC) can amend its articles of organization at any time by filing articles of amendment with the secretary of state.

true

A limited liability company (LLC) is a domestic LLC in the state in which it is organized.

true

A limited liability company (LLC) is a separate legal entity distinct from its members.

true

A limited liability company (LLC) is an unincorporated business entity that combines the most favorable attributes of general partnerships, limited partnerships, and corporations.

true

A limited liability company (LLC) is liable for any loss or injury caused to anyone as a result of a wrongful act or omission by a member, a manager, an agent, or an employee of the LLC who commits the wrongful act while acting within the ordinary course of business of the LLC or with authority of the LLC.

true

A registered agent is a person or corporation that is empowered to accept service of process on behalf of a corporation.

true

A sole proprietorship is the simplest form of business organization.

true

A written partnership agreement is also referred to as articles of partnership.

true

An action for an accounting is a formal judicial proceeding in which the court is authorized to (1) review the partnership and the partners' transactions and (2) award each partner his or her share of the partnership assets.

true

An alien corporation is a corporation that is incorporated in another country.

true

Bylaws govern the internal management structure of a corporation.

true

Common breaches of the duty of loyalty owed by directors and officers of a corporation include (1) usurping a corporate opportunity (taking a corporate opportunity for oneself), (2) undisclosed and unauthorized competing with the corporation, (3) undisclosed and unauthorized self-dealing (e.g., selling property to the corporation), and (4) making a secret profit (e.g., taking a bribe).

true

Common stock is an equity security that represents the residual value of a corporation.

true

Convertible preferred stock permits stockholders to convert their shares into common stock.

true

Corporations are the most dominant form of business organization in the United States, generating over eighty-five percent (85%) of the country's gross business receipts.

true

General partners are personally liable for the debts and obligations of the partnership.

true

If a member or a manager of a limited liability company (LLC) negligently causes injury or death to another person, he or she is personally liable to the injured person or the heirs of the deceased person.

true

The articles of incorporation are also known as the corporate charter.

true

The board of directors makes policy decisions concerning the operation of a corporation.

true

The major forms of business organizations are sole proprietorship, general partnership, limited partnership, limited liability partnership, limited liability company, and corporation.

true

To form a limited liability company (LLC), articles of organization must be filed with the appropriate state office, usually the secretary of state's office.

true

Under the Internal Revenue Code and regulations adopted by the Internal Revenue Service (IRS) for federal income tax purposes, a limited liability company (LLC) is taxed as a partnership unless it elects to be taxed as a corporation.

true

Under the Uniform Partnership Act (UPA), partners are jointly and severally liable for torts and breaches of trust.

true

Unless otherwise agreed, the Uniform Limited Liability Company Act (ULLCA) mandates that a member has the right to an equal share in the limited liability company's (LLC's) profits.

true

Unless otherwise agreed, the Uniform Partnership Act (UPA) mandates that a partner has the right to an equal share in the partnership's profits and losses.

true

With regard to a sole proprietorship, the owner of the business is the business; in other words, there is no separate legal entity.

true

Revised Uniform Limited Partnership Act (RULPA) Section ________ permits limited partners to participate in the management of a limited partnership without losing their limited liability shield. The limited liability partnership agreement can permit certain or all limited partners a say in how the partnership's business should be run.

303

Which of the following is true of an LLC?

It does not have to file a form with the IRS to obtain flow-through taxation.

________ partners invest capital but do not participate in the management of the partnership, and are not personally liable for partnership debts beyond their capital contributions.

Limited

The ________ Act is a federal statute that establishes far-reaching rules to improve corporate governance, eliminate conflicts of interest, and instill confidence in investors of public companies.

Sarbanes-Oxley

Rena incorporates her business, Rena's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her jewelry in Virginia. In Virginia, her company will be considered:

a foreign corporation, and she will probably have to obtain a certificate of authority to do business there.

Which of the following is true of the franchisor and franchisee in a general franchise that is organized and operated properly?

a. The franchisor and franchisee are always considered as one legal entity. B. The franchisee is liable on its own contracts and is liable for its own torts. c. The franchisee is jointly liable for the franchisor's torts. d. The franchisor deals with the franchisee as a general partner.

In a(n) ________ franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor.

area

A limited liability partnership (LLP) is created formally by filing ________ of partnership with the secretary of state of the state in which the LLP is organized.

articles

A limited partnership agreement is also called the ________ of limited partnership.

articles

The number of shares provided for in a corporation's articles of incorporation is called ________ shares.

authorized

A ________ is a long-term debt security that is secured by some form of collateral (e.g., real estate, personal property).

bond

Upon the dissolution and the commencement of the winding up of a limited partnership, a certificate of ________ must be filed by the limited partnership.

cancellation

A ________ limited partnership is a document that two (2) or more persons must execute and sign that makes a limited partnership legal and binding.

certificate of

In a(n) ________, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory.

chain-style

A ________ permits stockholders to convert their shares into common stock.

conversion right

According to Uniform Partnership Act (UPA) Section 40(b), in what order are partnership debts satisfied?

creditors, creditor-partners, capital contributions, profits

A ________ provides that any missed dividend payments must be paid in the future to the preferred shareholders before the common shareholders can receive any dividends.

cumulative dividend right

A ________ is a long-term (often 30 years or more), unsecured debt instrument that is based on a corporation's general credit standing.

debenture

A franchisee needs to acquire a(n) ________ with the franchisor which will give the franchisee the right to use the franchisor's trademarks, service marks, trade names, and other intellectual property in the distribution of goods, services, software, and digital information.

license

A member of a member-managed limited liability company (LLC) and a manager of a manager-managed LLC owe a fiduciary duty of ________ to the LLC. This means that these parties must act honestly in their dealings with the LLC.

loyalty

In a ________-managed limited liability company (LLC), the members designate a manager or managers to manage the LLC and delegate their management rights to the manager or managers.

manager

In a ________-managed limited liability company (LLC), the members of the LLC have the right to manage the LLC.

member

A(n) ________ occurs when one corporation is absorbed into another corporation and ceases to exist.

merger

A ________ is a short-term debt security with a maturity of five (5) years or less.

note

A partnership with no fixed duration is called a

partnership at will

A partnership with a fixed duration is called a

partnership for a term

In a(n) ________ franchise, the franchisor provides a secret formula or the like to the franchisee; the franchisee then manufactures the product at its own location and distributes it to retail dealers.

processing plant

A ________ of shares is the required number of shares that must be represented in person or by proxy to hold a shareholders' meeting.

quorem

Tough TVs, a corporation, makes a profit in its first year of existence. The managers of the corporation decide to reinvest the profits. The reinvested profits are called:

retained earnings.

Unless a partnership is continued, the ________ of the partnership follows its dissolution.

winding up