exam 4 bul 3310
The document that is written evidence of an ownership interest in a corporation is a(n)______________. Charter Stock warrant Proxy statement Stock certificate
stock certificate
Instead of giving shareholders a cash dividend, ABC Corporation gave each shareholder 2 shares of a new stock issue for each share of stock the shareholder already owned. This is an example of a _____________. Stock split Stock subscription Stock repurchase Stock dividend
stock dividend
Mike owned 10,000 shares in Texas Equipment that had a par value of 10. As part of a financial reorganization, Texas Equipment now records Mike as having 20,000 shares with a par value of 5. This is an example of a _____________. Stock dividend Ex dividend split Stock repurchase Stock split
stock split
The method of voting for directors in which each shareholder casts as many votes as he or she has shares is the _______________method. Absolute Cumulative Straight Derivative
straight
The method of voting for directors in which each shareholder casts as many votes as he or she has shares is the _______________method. Straight Derivative Cumulative Absolute
straight
A ________ promises to be liable to the creditor only in the event that the surety refuses to perform and thereby defaults. Co-surety. Debtor. Subsurety. Obligee.
sub surety
Persons who contract with the owner to furnish labor or material or construct a building are known as _________. Mortgagees. Contractors. Authorized agents. Subcontractors.
subcontractors
A ________ provides security for a creditor without involving an interest in the property, where the security for the creditor is provided by a third person's promise to be responsible for the debtor's obligation. Suretyship. Foreclosure sale. Artisan's lien. Mechanic's lien
suretyship
Partners hold title to partnership property as Joint tenants Tenants in common Tenants in partnership Tenants by the entireties
tenants in partnership
What is the name of the doctrine that makes it a breach of a director's duty of loyalty to take for himself a business prospect that should have been offered to the corporation? The responsible corporate officer doctrine The privileges and immunities doctrine. The corporate opportunity doctrine The business judgment doctrine
the corporate opportunity doctrine
Directors have which of the following fiduciary duties? (select all the correct answers) The duty to maximize long-term profits The duty of loyalty The duty to obey instructions The duty of due care
the duty of loyalty, The duty of due care
A partnership that buys and sells commodities is a _______________partnership; a partnership that produces goods or sells services is a _____________partnership. Trading-----------------------common law Code--------------------------common law Trading-----------------------non-trading Code--------------------------statutory
trading-non trading
Stock that a corporation buys back from its shareholders is ____________. Treasury Watered Participating Recalled
treasury
A Subchapter S corporation is taxed in the same way a partnership is taxed. True false
true
A buy and sell agreement normally specifies the terms under which a withdrawing or deceased partner's interest will be bought out. True false
true
A corporation is a person for purposes of the due process clauses of the 5th and 14th Amendments. True False
true
A corporation must qualify to do business in each state where it conducts business activities. True False
true
A corporation officer may be personally liable to the injured third party if he or she aided the corporation in violating a copyright or infringing on a patent. True False
true
A creditor who succeeds in holding a shareholder liable for the debts of an existing corporation is said to have "pierced the corporate veil." True False
true
A limited partnership allows limited partners to be only liable for their capital contribution. True False
true
A limited partnership must have at least one general partner and one limited partner. True False
true
A partner in a trading partnership has the implied power to make warranties on goods sold by the partnership. True False
true
A principal who is discharged in bankruptcy is released from his duty to reimburse the surety. True False
true
A surety who only guarantees collection is entitled to notice. True False
true
A surety's obligation is a generally promise to do what the principal agreed to do. True False
true
Boards of directors normally have the power to purchase insurance to indemnify directors who are sued personally for corporation-related actions. True False
true
Both contractors and subcontractors are entitled to a mechanic's lien against the owner for nonpayment of their accounts. True False
true
Corporations must include the terms "corporation" or "company" or "incorporated" or "limited" in their names. True False
true
Courts will not allow a merger of corporations if the only purpose is to get rid of minority shareholders. True False
true
If the formalities of creating a limited partnership are not met, a partnership will be treated by courts as a general partnership. True False
true
If the principal does not default, the surety never becomes liable to the creditor. True
true
In a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another. True False
true
Legal capacity is the ability of an organization to sue and to own property. True False
true
Members of professional associations and professional corporations are eligible under the Tax Code to participate in pension and profit-sharing plans. True False
true
Modification of the creditor-principal agreement generally discharges the surety. True False
true
Most states consider a shareholder attempt to oust management to be a proper purpose for allowing the shareholders access to corporation books and papers. True False
true
Once a corporation has been dissolved and the remaining assets of the corporation have been distributed to the shareholders, a creditor of the corporation may be able to sue the former shareholders on the corporate debt. True False
true
Partners are agents of the partnership and of the other partners individually. True False
true
Partners have unlimited personal liability for the debts incurred by the partnership. True False
true
Partnership books must be kept in the firm's place of business and be accessible to all partners True False
true
Partnerships typically buy life insurance policies on each partner in order to fund the required purchase of the partner's interest in the partnership when the partner dies. True False
true
Shareholders have a right to vote on major changes to the corporation, such as mergers and dissolutions. True False
true
Shareholders may dissent from both stock-for-stock mergers and cash-for-stock mergers. True False
true
Shareholders may vote on matters in which they have a personal interest. True False
true
Shareholders of a corporation may also be employees of that corporation. True False
true
Some states use the alter ego theory to require corporations to assume liability for contracts negotiated on their behalf by the promoters. True False
true
State law determines whether or not a mortgage will have priority over a mechanic's lien. True False
true
States have statutes of limitations limiting the time after the dissolution of a corporation when creditors of the corporation may sue former shareholders on corporate debts. True False
true
Subchapter S corporations may have a maximum of 100 shareholders. True False
true
The bankruptcy of a partner will cause the dissolution of the partnership by operation of law. True False
true
The party who signs the application for a corporate charter is the incorporator. True False
true
The surviving partner is entitled to compensation for winding up the affairs of the partnership. True False
true
The two types of guaranty agreements are general and special. True False
true
Under RUPA, a partnership may take title to real property as a tenancy in partnership. True False
true
Unless agreed to otherwise, all partners have an equal vote in the management decisions of the partnerships. True False
true
Usury laws do not apply to corporations when they borrow money. True False
true
When holders of mechanic's liens are equal in priority, and there are not sufficient funds to satisfy all their claims, they will share the funds that are available on a pro-rata basis. True False
true
Acts of a corporation that goes beyond the powers granted to it by the state or in its charter are _____________acts. Preemptive Criminal Ultra vires Peremptory
ultra vires
Acts of a corporation that goes beyond the powers granted to it by the state or in its charter are _____________acts. Preemptive Peremptory Criminal Ultra vires
ultra vires
The merger of a corporation with one of its suppliers is a _____________merger. Market extension Horizontal Vertical Conglomerate
vertical
When a partnership ceases to exist, the process of reducing the firm's assets to cash, paying off the creditors, returning the capital contributions of the partners, and distributing profits is called __________________. Winding up Dissolution Termination Marshaling of assets
winding up
A Limited Partnership must have ____________. An equal ratio of limited partners to general partners. At least one limited partner who participates in management decisions. Equal capital contributions from both limited and general partners. At least one general partner.
?
A partnership whose primary purpose is to manufacture things or to provide services is a ____________partnership. Entrepreneurial Professional Non-trading Trading
?
All of the following are considered advantages to a Limited Liability Partnership, except: A limited liability partner is always insulated from personal liability of he or she commits malpractice. Partnership proceeds may "pass through" the partnership for income tax purposes. The limited liability partnership can function much like a general partnership, without the same risks of personal liability as a general partnership. A limited liability partner can avoid personal liability for partnership debts.
?
The maximum number of shareholders a Subchapter S corporation may have is 1000 35 100 25
?
Which of the following is/are advantages of a general partnership? (select all the correct answers) General partneships do not owe any taxes. The costs to form a partnership are minimal. Partners have limited liability for the debts of the partnership. All partners have equal management rights.
?
Which of the following statements about promoters is true? A promoter is allowed to sell property he owns to the corporation if the sale is approved by the board of directors after full disclosure. A promoter cannot be held liable on pre-incorporation contracts with third parties. A promoter is allowed to accept a commission from a third party whose property he sells to the corporation.
A promoter is allowed to sell property he owns to the corporation if the sale is approved by the board of directors after full disclosure.
The "weighted average method" refers to a way of voting for directors that protects the rights of minority shareholders. A way of distributing dividends in closely held corporations A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger. A way of resolving antitrust issues when competitor corporations merge.
A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger.
Stock that a corporation buys back from its shareholders is treasury. Most state corporation statutes require that the money to repurchase shares come from A special stock subscription Accumulated profits or surplus A new issue of debt instruments A new issue of preferred shares
Accumulated profits or surplus
John was a limited partner in Commercial Properties Limited. When the general partner became ill, John took over all the management duties of Commercial Properties. Ace Office Equipment, a supplier of Commercial Properties, is suing Commercial Properties over several months of unpaid bills. Under modern laws governing the operation of limited partnerships, which of the following statements best describes John's personal liability for Commercial's debt to Ace Office Equipment? Ace can hold John personally liable for Commercial's debt because he assumed management of Commercial. Ace can hold John personally liable for Commercial's debt because he is a limited partner in the business. Under no circumstances can John be liable beyond his capital contribution. Ace can hold John personally liable for Commercial's debt only if Ace knew that John had taken over the management duties.
Ace can hold John personally liable for Commercial's debt only if Ace knew that John had taken over the management duties.
A surety will remain liable when the creditor-principal agreement is modified if the surety consents to the modification ___________________________(select all the correct answers) After the modification takes place. At the time the modification takes place. Before the modification takes place.
After the modification takes place. At the time the modification takes place. Before the modification takes place.
Which of the following is considered a disadvantage of doing business as a general partnership? All partners are/may be held liable for partnership debts. All partners can participate in management of the partnership. Income in a general partnership flows directly to the partners. A general partnership is not a taxable entity under IRS rules.
All partners are/may be held liable for partnership debts.
Subchapter S corporation will avoid double taxation only if which of the following applies? (select all the correct answers) The corporation has no retained earnings. The corporation files Articles of Partnership in the state where it has its principal place of business. All the shareholders agree to be taxed as in a partnership. The corporations bylaws require all the revenue to be distributed to the shareholders at the end of each tax year.
All the shareholders agree to be taxed as in a partnership.
In a manager-managed LLC ___________. No one member of the LLC has authority to make business decisions on behalf of the LLC. The authority of the members of the LLC to make decisions is directly proportionate to the amount their capital contribution. All members of the LLC participate equally in business decisions. An individual or small group has the authority to control and make decisions for the LLC.
An individual or small group has the authority to control and make decisions for the LLC.
In a _______, a creditor must have made reasonable but unsuccessful attempts to collect from the principal before the guarantor can be held liable. Satisfaction guaranty. Unconditional guaranty. Absolute guaranty. Conditional guaranty.
Conditional guaranty.
The merger that is the least likely to raise antitrust issues is a ___________merger. Conglomerate Market extension Horizontal Vertical
Conglomerate
The combination of two corporations that results in the dissolution of both corporations and the emergence of a new corporation is a(n) _____________. Purchase of assets Consolidation Merger Bulk transfer
Consolidation
A bond holder is a _________of the corporation; and a shareholder is a ______of the corporation. Owner----------------Beneficiary Creditor-------------Owner Beneficiary----------Owner Owner-----------------Creditor
Creditor-------------Owner
A surety is liable to the creditor as soon as the principal ________. Defaults. Files for bankruptcy Enters into the contract. Makes an initial payment.
Defaults.
Which of the following is recognized as a disadvantage to doing business as an LLC? Individual members of the LLC can never bind the LLC in a valid and enforceable contract. Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions. Compared to other business entities, the LLC is taxed more heavily by the IRS. An LLC requires the participation of several owners, which can sometimes complicate day-to-day business decisions.
Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions.
A surety has no obligation to the creditor unless the principal _______. Assigns the contract. Fulfills his or her contractual obligations. Voids the contract. Fails to perform.
Fails to perform.
A corporation incorporated in Delaware and doing business in New Jersey is not a foreign corporation in New Jersey. True False
False
Bonding companies are usually uncompensated sureties. True False
False
State law requires that state chartered banks post bonds to protect the banks from losses caused by embezzlement by bank employees. The bonds posted by banks are __________bonds. Bank Performance Fidelity Fiduciary
Fiduciary
A "certificate of limited partnership" is a document that is Issued by the limited partners jointly to the general partner. Filed with the state Secretary of State by the limited partnership as part of its application process. Issued by the IRS to acknowledge a limited partnership's tax status. Issued by the general partner to the limited partners.
Filed with the state Secretary of State by the limited partnership as part of its application process.
A __________ is a party whose promise is not limited to a single transaction or to a single creditor. Obligee. General guarantor. Creditor. Special guarantor.
General guarantor
The dividend that a corporation pays on its common stock may be __________ the dividend that it pays on its preferred stock. (select all the correct answers) Greater than Equal to substituted for Less than
Greater than Equal to Less than
A person who becomes a partner by estoppel Has no partnership rights, only liability to creditors who believed he was a partner. Has the right to share in the profits earned by the partnership Has the right to share in the day to day management of the partnership Has the right to veto any decision where unanimous consent is required
Has no partnership rights, only liability to creditors who believed he was a partner.
Which of the following issues do not require a unanimous vote of the partners? Confession of a judgment against the partnership Admission of a new partner Hiring an office manager for 40 hours a week. Disposal of the good will of the business
Hiring an office manager for 40 hours a week.
If a partnership agreement does not say how losses will be shared, they will be shared Equally among those partners who have not made loans to the partnership In whatever way the profits are shared. Equally among the partners Proportionately according to the capital contribution of each partner.
In whatever way the profits are shared.
Edgar Esquire has an insurance contract with Lawyers Insurance Company which provides that Lawyers Insurance will pay any malpractice judgment against Edgar up to $3 million. The insurance contract between Edgar and Lawyers Insurance Company is one of __________. Indemnity Special guarantee General guarantee Suretyship
Indemnity
Which business entity has the following characteristics: the entity is organized under state law; the owners must declare to the state whether the organization will be managed by the owners or by persons hired by the owners; owners have limited liability for the debts of the entity; both profits and losses pass through to the owners? General Corporation Limited Liability Company (LLC) Limited Liability Partnership (LLP) General partnership
LLC
States give corporations many rights, among them the right to sue and the right to own property in the corporation's name. What do such legal rights collectively constitute for a corporation? Legal capacity Goodwill Business identity Competitive advantage
Legal capacity
Which business entity has the following characteristics: owners are normally professionals engaged in selling their services; owners have both limited liability for the debts of the entity and limited liability for the contracts and torts of the other owner-professionals; the entity is organized under state law; profits are taxed only at the owner level? Limited Liability Company General partnership Limited Liability Partnership Limited partnership
Limited Liability Partnership
All of the following could be recognized as advantages of doing business as a limited partnership, except: A Limited Partnership is often a convenient and attractive option to investors. Limited partners can invest in a partnership while effectively protecting their personal assets. Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities. A limited partnership allows limit partners to be liable only to the extent of their capital contribution.
Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities.
An LLC in which non-owners are hired to run the day to day activities of the firm is a ______LLC. Subchapter S Proprietary Member-managed Manager-managed
Manager-managed
All of the following are considered advantages of doing business as an LLC, except: The LLC can provide its members voting rights that are proportionate to the members' capital contributions. The LLC insulates its members from personal liabilities for the debts of the business. The LLC can function much like a general partnership, while avoiding many of the risks of a general partnership. Members of the LLC may lawfully avoid filing personal tax returns with the IRS.
Members of the LLC may lawfully avoid filing personal tax returns with the IRS.
Jim and Sid are partners in Widget Manufacturing. Jim read a letter from one of Widget's buyers asking for adequate assurances that Widget would be able to meet an upcoming contractual obligation. The demand was proper and, under Article 2, the buyer could treat the contract as breached if Widget did not respond to the demand within 3 months. Jim forgot to tell Sid about the demand and did not respond to it himself. Widget is now being sued by Buyer for 4,000 in damages for breach of contract. Sid contends that the partnership is not liable because only one partner was aware of the demand. Is Sid correct? No, Sid did not receive the notice because of his own negligence in attending to partnership correspondence. No, the partnership is liable because notice to one partner is legally notice to all the partners and the partnership. No, the partnership is liable under the doctrine of respondeat superior Yes, as an equal owner of the business Sid was entitled to equal notice.
No, the partnership is liable because notice to one partner is legally notice to all the partners and the partnership.
Which of the following is the order in which partnership assets will be distributed upon termination of the partnership? Partner-creditors, outside-creditors, undistributed profits, capital contributions Outside-creditors, partner-creditors, undistributed profits, capital contributions. Outside-creditors, partner-creditors, capital contributions, undistributed profits. Capital contributions, outside-creditors, partner-creditors, undistributed profits.
Outside-creditors, partner-creditors, capital contributions, undistributed profits.
When ABC Corporation was formed, the directors authorized an issue of 1,250,000 shares at $1,000 a share. These shares are classified as _______________stock. No par value Par value Treasury Watered
Par value
All of the following could be accurate statements about a general partnership, except: The general partnership allows for quick, easy and immediate control. Partners can share partnership profits. Partnership liabilities in a general partnership are limited to the amount of capital contribution. Partners can share in management of the partnership.
Partnership liabilities in a general partnership are limited to the amount of capital contribution.
Corporations are said to have a burden of "double tax" because Corporations are taxed at both the state and federal level. Profits are taxed at the corporate level as income and again at the shareholder level as dividends. Corporations must file federal tax returns twice a year because their taxing period runs for only 6 months. Corporations compute their federal tax liability by multiplying their state tax liability by 2.
Profits are taxed at the corporate level as income and again at the shareholder level as dividends.
Which of the following statements is correct about shareholders' voting rights? (select all the correct answers) A shareholder's vote will be counted only if the shareholder is personally, physically present at the meeting when the vote is take. Shareholders are entitled to notice when a special meeting is called. A shareholder's vote is negated if they object to the actions of the board. A quorum of shareholders must be present to conduct business.
Shareholders are entitled to notice when a special meeting is called. A quorum of shareholders must be present to conduct business.
What happens when a court pierces the corporate veil? The promoter becomes liable for the debts of the newly formed corporation The court requires that the corporation be more substantially capitalized. Shareholders become personally liable for the debts of the corporation. The court revokes the corporate charter.
Shareholders become personally liable for the debts of the corporation.
ABC Corporation has been dissolved. After paying all its creditors, ABC will make a cash distribution to its shareholders. Of the following, which shareholders will have priority in the distribution? Shareholders who own preferred stock All current owners of common stock. Shareholders who own un-exercised warrants. Owners of common stock who had title to the shares 180 days before the last ex-dividend date.
Shareholders who own preferred stock
Allison is going to create a lawn service business. Allison would like to limit her liability by creating a subchapter "S" corporation. She does not know if the state she lives in allows for a single shareholder corporation. Where should Allison look to find the answer to her question? US Code of Federal Regulations Federal statutes Local ordinances State statutes
State statutes
Jo and Anna, who are mother and daughter, are co-owners of Joanna's Frocks. When the bank loaned money to the business, Jo and Anna agreed to be sureties on the loan. Under the loan agreement, Anna will be liable only if Jo defaults on her obligation as a surety. Anna is a __________on the loan. Sub-surety Special guarantor Co-surety General guarantor
Sub-surety
A director would incur personal liability if (select all the correct answers) The corporation failed to withhold taxes from the wages of employees The shares of the corporation lost more than 20 of their market value. The corporation goes bankrupt The board declared an illegal dividend
The corporation failed to withhold taxes from the wages of employees The board declared an illegal dividend
Which of the following are not grounds for a state cancelling a corporation's charter? The corporation has not performed any corporate functions for a long time. The corporation failed to maintain a registered agent in the state. The corporation did not pay its franchise tax The corporation has not made a profit in 3 years.
The corporation has not made a profit in 3 years.
Which of the following would not be grounds for dissolving a corporation? The shareholders are deadlocked in electing a board of directors. The corporation has not made a profit or declared dividends in two years. Oppressive conduct by a controlling shareholder. A quo warranto proceeding
The corporation has not made a profit or declared dividends in two years.
Which of the following situations would justify piercing the corporate veil? All the shares of a corporation are held by one person The corporation was formed with the intent of defrauding another party or violating a statute. All the shares of a corporation are held by another corporation. The majority shareholder loans money to the corporation
The corporation was formed with the intent of defrauding another party or violating a statute.
Which of the following is not normally included in the Partnership Agreement? The name of the partnership. The daily work schedule for each partner. The capital contribution of each partner. A buy and sell agreement
The daily work schedule for each partner.
Which of the following best describes the role of a general partner in a limited partnership? The general partner defers to the business decisions of the limited partners of the limited partnership, unless those decisions seem economically unreasonable. The general partner may participate in the business decisions of the limited partnership, but he or she will never be held personally liable for the debts of the business. The general partner manages the partnership and remains responsible for partnership liabilities. The general partner usually has an insignificant role in the overall business decisions of the limited partnership.
The general partner manages the partnership and remains responsible for partnership liabilities.
Which of the following is false about the name of a corporation? The name can never be changed once it is registered with the state. The name cannot be deceptively similar to any other corporation incorporated in that state. The name must include words like "company" or "corporation" to indicate that the entity has limited liability. States allow corporations to reserve a name for a limited time while the corporation is being formed.
The name can never be changed once it is registered with the state.
Which of the following statements about proprietorships is true? The owner of a proprietorship is personally liable for all the debts of the proprietorship. A business can have up to thirty-five owners and still be a proprietorship. A proprietorship cannot generate more than 10 million in proceeds per tax year.
The owner of a proprietorship is personally liable for all the debts of the proprietorship.
When considering whether a partner has breached his or her fiduciary duties to the partnership, courts are likely to consider all of the following, except: Prior court decisions. Applicable state partnership statutes. Specific language of the Partnership Agreement. The partner's personal net worth.
The partner's personal net worth.
Jay, who is a partner in an accounting firm, is being sued for malpractice by a client. If the jury finds for the client, which of the following parties will have liability on the judgment? (select all the correct answers) Each of the employees of the partnership individually The partnership as an entity Each of the other partners individually Jay individually
The partnership as an entity Each of the other partners individually Jay individually
In a suretyship, security for the creditor is provided by A pledge by the debtor of personal property. The promise of a third party to perform if the debtor does not perform. Granting the creditor an interest in the debtor's real property A statutory lien on the debtor's personal property.
The promise of a third party to perform if the debtor does not perform.
All of the following are rights held by an individual member of an LLC, except: The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC. Access to the LLC's books and records. The right to request that the LLC be dissolved. The right to vote against an amendment to the LLC's operating agreement.
The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.
A corporation ceases to exist as a legal entity when The shareholders vote unanimously to dissolve the corporation The directors of the corporation notify corporation creditors of the dissolution. The state issues a certificate of dissolution. The directors vote unanimously to dissolve the corporation
The state issues a certificate of dissolution.
Which of the following statements about LLC's is false? There is an extensive body of law based on court decisions governing LLC's. LLC's are a relatively new form of business organization. The LLC is not a taxable entity. Shareholders have no personal liability for the debts of the LLC.
There is an extensive body of law based on court decisions governing LLC's.
All of the following are functions of an LLC's Operating Agreement, except: To indemnify members of the LLC from liability for any unlawful acts. To make rules concerning the transfer of interests in the LLC. To address circumstances in which the LLC would dissolve. To set forth rules concerning voting rights for members of the LLC.
To indemnify members of the LLC from liability for any unlawful acts.
Which of the following statements about treasury stock is false? Treasury stock can be resold only at par value. Most states require that corporations purchase treasury shares only with accumulated profits or surpluses. It is stock that the corporation acquired by gift or by purchasing from shareholders. Creditors of the corporation or the state itself may block the purchase of treasury stock.
Treasury stock can be resold only at par value.Directors must be compensated for their services. True False
Premiums paid by corporations for the health insurance it provides employees are tax-deductible expenses. True False
True
Unless agreed to otherwise, partners are not entitled to compensation for work done to further the interests of the partnership. True False
True
A partnership that fails to comply with a state's assumed name statute (select all the answers that are correct) Will not be able to use the courts of the state to sue its debtors Will be given a trade name by the attorney general May exposed the partners to criminal liability Will default to a Subchapter S corporation.
Will not be able to use the courts of the state to sue its debtors May exposed the partners to criminal liability
If a judgment for dollar damages is not paid, the judgment creditor may apply for a ______. Writ of Execution. Writ of Habeas Corpus. Default judgment. Writ of first refusal.
Writ of Execution.
Smith's Inc. is a closely held corporation in which Joe Smith is the President and owns 80% of the corporation's stock. The corporation was undercapitalized when it was formed, and for the past seven years Joe has regularly taken funds from the corporate account to pay his own personal expenses and debts. Should Smith's Inc. not have sufficient funds to pay a creditor, the creditor may hold Joe personally liable for the corporation's debt under the _____________theory. Oppressive conduct Ultra vires Investment trust Alter ego
alter ego
Which of the following statements about the rights and duties of doctors who practice medicine in a professional corporation is true? Because they are also owners of the corporation, doctors have no protection from discrimination based on age. are eligible to participate in tax advantaged pension plans. Doctors have no personal liability for medical malpractice suits. The professional corporation can have no more than 10 owner-employee doctors.
are eligible to participate in tax advantaged pension plans.
The formal document that represents the agreement of the parties to form a partnership is the ___________. Articles of partnership Partnership charter Uniform Act of Partnership Partnership certificate
articles of partnership
The written agreement between two or more persons that creates a partnership and sets for the rights and duties of each partner is the_____________. charter Articles of incorporation Articles of partnership By laws
articles of partnership
Mel, who owns a car repair shop, replaced the clutch in Ellen's car. Until Ellen pays for the repairs, Mel has a ______lien on the car. Guarantor's Judicial Mechanic's Artisan's
artisan's
Jason has filed suit against Luke claiming $50,000 in damages. While the claim is being litigated, Jason can ask the court for a writ to seize property belonging to Luke which could be used to satisfy a judgment. The seizure prevents Luke from selling or otherwise disposing of the property during the proceedings. The writ Jason will ask for is a writ of________________. Execution Attainder Attachment Garnishment
attachment
Under the "pass through" principle, a business entity Assigns assets of the business to a receiver. Conducts high risk activities through a subsidiary. Delegates duties of the business to a subcontractor Avoids double taxation
avoids double taxation
The capital contribution of a partner may consist in all of the following except Real property Patent rights Business experience Cash
business experience
The rules that govern the corporation, including the number of directors it will have, the method of electing directors, the time and place of shareholder meetings, etc., are found in the corporation's______________. By laws State incorporation code Charter Articles of incorporation
by laws
The document that the state issues evidencing that a corporation has been duly formed is the corporation's __________. By laws Charter Certificate of authority to do business. Articles of incorporation
charter
The merger of two corporations who are neither competitors nor related as customer and supplier is a _______________merger. Horizontal Conglomerate Vertical Market extension
conglomerate
Preferred stock whose unpaid dividends accrue and are paid when earnings are available is __________________ preferred stock. Participating Convertible Cumulative Non-participating
cumulative
The kind of voting that calculates the total number of votes a shareholder may cast by multiplying the number of shares he owns by the number of directors to be elected is _________ voting. Non-cumulative Proxy Cumulative Divisible
cumulative
The method of voting that gives minority shareholders the best chance of electing someone to the board of directors is ______________ voting. Supermajority Proxy Consolidated Cumulative
cumulative
The suit that a shareholder would bring against the officers of a corporation to enjoin ultra vires acts or acts that impair corporate assets is a __________suit. Peremptory Derivative Proxy Direct
derivative
A partner who participates in the management of the partnership, but whose existence is not known to the public is a _____________ partner. Silent Secret Dormant Senior
dormant
The record date on which a dividend is payable is the ___________date. Activation Proxy Issuance Ex dividend
ex-dividend
A business organized as a proprietorship may have up to, but not more than, thirty-five owners. True False
false
A cash dividend is a transfer of retained earnings to capital. True False
false
A creditor must exhaust his or her judicial remedies against the principal before seeking to recover from the surety. True False
false
A limited partnership has to have at least two general partners and at least one limited partner True False
false
A promoter is an agent of the corporation. True false
false
A shareholder's right to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption. True False
false
Absent an agreement otherwise, each partner is entitled to compensation for his or her services in managing the business. True False
false
An "improvement" to real property necessarily increases the market value of the real property. True False
false
An LLC must have at least two members that participate in management in order to lawfully do business. True False
false
An artisan's lien is always assignable. True False
false
An incoming partner has unlimited personal liability for the already existing debts of the partnership. True False
false
Article 2A of the Uniform Commercial Code governs the sale of securities. True False
false
Compared to other business entities, a general partnership requires filing complex documentation with the secretary of state's office before it is authorized to do business. True False
false
Contracts of suretyship are legally indistinguishable from contracts of indemnity. True False
false
Courts will allow creditors to pierce the corporate veil of any corporation that has only one shareholder. True False
false
Directors have no personal liability for illegally declared dividends. True False
false
Directors may vote on matters in which they have a personal interest. True False
false
Directors must be compensated for their services. True False
false
If a partner assigns his or her interest in a partnership to a creditor, the assignee steps into the shoes of the partner and becomes entitled to participate in the management of the business. True False
false
In a Limited Liability Company, the unanimous consent of the members is required to hire a new employee. True False
false
In a limited partnership, a general partner's fiduciary duty is breached when limited partners are not permitted to participate in management. True False
false
In a limited partnership, each limited partner has an equal right to participate in the management of the business. True False
false
In a partnership for a term of years, each partner has both the power and the right to withdraw from the partnership at any time. True False
false
Lack of capacity and discharge in bankruptcy are two common defenses that are available to a surety that may be asserted against a creditor. True False
false
Limited Liability Companies are one of the oldest forms of business organization True False
false
Limited Liability Companies are one of the oldest forms of business organization True false
false
Limited Partnerships offer a convenient way for professional and family-owned enterprises to do business. True False
false
Limited partnerships must have one general partner for every seven limited partners. True False
false
Marshaling of assets is the tax doctrine that allows income to be taxed only at the owner level and not at the organization level. True False
false
Misconduct of the principal that induces a party to become a surety allows that surety to avoid the contract. True False
false
One of the disadvantages of a Limited Liability Partnership is double taxation. True False
false
Participating preferred stock allows holders to trade their preferred shares for common shares when the trading price reaches a specified target. True False
false
Partners may use partnership property for both partnership and personal reasons. True False
false
Partnerships are required to use the term "Company" in their names. True False
false
Receivers have liability on the pre-incorporation contracts of the corporation. True False
false
State laws regulating the sale of securities within the state are called red herring laws. True False
false
Stock warrants are not transferable and cannot be sold on any stock exchange. True False
false
The Statute of Limitations does not apply to surety contracts. True False
false
The articles of incorporation are drawn up at the first organizational meeting of the corporation. True False
false
The general contractor is eligible for a mechanic's lien on the real property, but the subcontractors on the project are not. True False
false
The person appointed by a corporation to receive service of process is the receiver. True False
false
Under most state corporation statutes, shareholders are entitled to be paid dividends whenever an earned surplus exists. True False
false
When a ________ is purchased, a bonding company promises to pay an employer any loss, not to exceed a stated amount, caused by the covered employees' embezzlement. Fidelity bond. Performance bond. Nonperformance bond. Security agreement.
fidelity bond
In a limited partnership LP, what are the partners who have unlimited personal liability for the debts of the LP? Silent partners Limited partners General partners Joint partners
general partners
Which business entity has the following characteristics: owners have unlimited personal liability for the debts of the business, and joint and several liability for the contracts and torts of the other owners; there are few formalities in creating the entity; profits are taxed only at the owner level? General corporation Limited partnership General partnership Limited liability partnership
general partnership
Any third party who promises a creditor to be liable for a principal's payment is either a surety or _________. Principal Debtor Obligor. Guarantor. Obligee.
guarantor
Which of the following statements about a joint venture is true? It can be the defendant in a lawsuit without subjecting the individuals who form the joint venture to liability. Individuals form it to conduct a single, or very limited, business activity. It can be the plaintiff in a lawsuit without involving the individuals who form the joint venture.
individuals form it to conduct a single, or very limited, business activity.
Nelson and Jack are both avid sailors. When a sailing acquaintance put his older, but still highly desirable, boat up for sale, Nelson and Jack agreed to pool their resources to buy and fix up the boat, then sell it and split the profits. This is an example of an______ Limited partnership General partnership Joint venture Proprietorship
joint venture
Which of the following is an informal association of two or more persons who agree to engage as co-owners in a single business transaction? General partnership Limited partnership Trading group Joint venture
joint venture
If a business has the power to own property, enter into contracts, and sue others in court, it is said to have Legal capacity legal standing legal authority
legal capacity
In which of the following business organizations does an owner risk losing his or her limited liability by actively and publicly managing the business? Limited Liability Partnership Limited liability corporation Limited Partnership General corporation
limited partnership
In which of the following business organizations does an owner risk losing his or her limited liability by actively and publicly managing the business? Limited liability corporation General corporation Limited Partnership Limited Liability Partnership
limited partnership
The merger of two corporations that results in the surviving corporation expanding its products or markets is a _____________merger. Vertical Horizontal Market extension Conglomerate
market extension
A lien for the value of material and labor expended in the construction of buildings and other improvements is a _________. Artisan's lien. Right of redemption. Mechanic's lien. Suretyship.
mechanics lien
Dominant shareholders in closely held corporations who exploit their control of the corporation to benefit themselves at the expense of minority shareholders are guilty of Oppressive conduct Quo warranto acts Unfair trade practices. Ultra
oppressive conduct
The business entity that consists in an association of two or more persons to carry on as co-owners a business for profit is an__________. Limited partnership Partnership Limited liability company
partnership
When partners enter into a partnership without stating how long the partnership will last, they have formed an ____________________. Partnership for a term of years Partnership by the entireties Implied partnership Partnership at will
partnership at will
What is the provision of the tax rule that makes income taxable only for the individuals who receive it, and not for the business entity that produces it? Pass through Income averaging Dividend retention Double taxation
pass through
Perfect Painters submitted a bid to paint the dorm rooms at State University during the summer. State Law requires that all bidders for state contracts post a bond protecting the state against loss if the bidder fails to perform within the contract time. The kind of bond Perfect Painters will post is a _______________bond. Performance Mechanic's Artisan's Fidelity
performance
A _______ provides protection against losses that may result from the failure of a contracting party to perform the contract as agreed. Performance bond. Finance agreement. Foreclosure sale. Payment schedule.
performance bond
The prerogative of existing shareholders to buy new issues of stock in the same proportion as their current holdings is their ___________ right. Preemptive Redemption Buy and sell
preemptive
When a corporation dissolves, holders of ___________ stock have priority in the distribution of corporation assets. Preferred Participating Treasury
preferred
A shareholder who cannot attend a shareholder meeting may give another person the right to vote her shares in that election. This temporary grant of authority is an _______. Delegation Warrant Assignment Proxy
proxy
Suits by the state to determine if a corporate charter should be cancelled or forfeited are _______________ proceedings. Ultra vires Quo warranto Assessment Criminal
quo warrants
The person who is designated to receive notices and service of process for a corporation is its Registered agent Special agent General agent Factor
registered agent