LGS Exam 4 True/False

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 limited partner's investment in a limited partnership is not an investment contract, because the limited partner has no involvement in the day-to-day operations of the partnership.

False

A power of attorney is one of the most formal types of implied agency agreements.

False

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

False

A special power of attorney empowers the agent to act in any matters on the principal's behalf without limitation.

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 employer-independent contractor relationship exists when an employer hires an employee to perform some form of physical service.

False

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

False

An outsider's misappropriation of information in violation of his or her fiduciary duty violates Section 10(b) and Rule 10b-5 of the Securities Exchange Act of 1934. This rule is called the misappropriation theory.

False

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

False

Feign and divert is a situation in which an agent does something during the course of his or her employment to further his or her own interests rather than the principal's.

False

Implied agency is the most common form of agency.

False

Like the Securities Act of 1933, the Securities Exchange Act of 1934 primarily regulates the original issuance of securities.

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

Sometimes, a principal requests that an agent run errands or conduct other acts on his or her behalf while the agent or employee is on personal business. In this case, the agent is on a divisive-purpose mission.

False

State government approval is required to create a sole proprietorship.

False

The Securities Act of 1933 created the Securities and Exchange Commission (SEC) and empowered it to administer federal securities laws.

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

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 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'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 person who discloses material nonpublic information to another person is called an advisor.

True

A principal-agent relationship is formed when an employer hires an employee and gives that employee authority to act and enter into contracts on his or her behalf.

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 agent who enters into a contract on behalf of another party impliedly warrants that he or she has the authority to do so. This is called the agent's implied warranty of authority.

True

An agent with the power of attorney is called an attorney-in-fact, even though he or she does not have to be an attorney.

True

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

True

An investment contract is any contract whereby an investor invests money or other consideration in a common enterprise and expects to make a profit from the significant efforts of others.

True

Apparent agency, or agency by estoppel, arises when a principal creates the appearance of an agency that in actuality does not exist.

True

Bylaws govern the internal management structure of a corporation.

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

Examples of common securities include common stock, preferred stock, bonds, debentures, and warrants.

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

In an express agency, the agent has the authority to contract or otherwise act on the principal's behalf, as expressly stated in the agency agreement.

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

No more than thirty-five (35) nonaccredited investors may purchase securities pursuant to a private placement exemption.

True

Non-issuers, such as average investors, do not have to file a registration statement with the Securities and Exchange Commission (SEC) prior to reselling securities they have purchased.

True

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

True

Section 10(b) of the Securities Act of 1934 prohibits the use of manipulative and deceptive devices in contravention of the rules and regulations prescribed by the Securities and Exchange Commission (SEC).

True

Section 16(b) of the Securities Exchange Act of 1934 requires that any profits made by a statutory insider on transactions involving short-swing profits (trades involving equity securities occurring within six months of each other) belong to the corporation.

True

The Securities Act of 1933 exempts from registration securities transactions not made by an issuer, an underwriter, or a dealer.

True

The Securities Act of 1933 primarily regulates the issuance of securities by companies and other businesses.

True

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

True

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

True

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

True

The methods of terminating an agency relationship by acts of the parties are mutual agreement, lapse of time, achievement of agency purpose, and occurrence of a specified event.

True

The private placement exemption allows issuers of securities to raise capital from an unlimited number of accredited investors without having to register the offering with the Securities and Exchange Commission (SEC).

True

The purpose of the intrastate offering exemption is to permit local businesses to raise capital from local investors to be used in the local economy without the need to register with the Securities and Exchange Commission (SEC).

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

Under the doctrine of respondeat superior, an employer is liable for the tortious conduct of its employees or agents while they are acting within the scope of their authority.

True

Under the motivation test, if the agent's motivation in committing an intentional tort is to promote the principal's business, the principal is liable for any injury caused by the tort.

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

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

True