BLAW Final

Bell, an accountant, enters into a contract to provide services to Consumer Staples Inc. Bell fails to meet a regulatory deadline for the work. Required to pay a fine, the company files a suit against Bell. Most likely, the court will order A. Bell to pay the amount of the fine as damages to the firm. B. Bell to meet the next deadline but not to pay damages. C. Consumer Staples to drop its suit and pay its fine. D. Consumer Staples to secure another professional to finish the work.

A. Bell to pay the amount of the fine as damages to the firm.

Jana and Kwan are partners in Lawyers LLP, a limited liability partnership. Jana supervises the firm's associate Milo, who negligently fails to appear in court on behalf of Norm, a client. Liability to Norm rests only with A. Jana and Milo. B. Jana. C. Milo. D. Jana and Kwan.

A. Jana and Milo.

Ty is an accountant whose clients include United Corporation. Working papers that Ty develops when preparing financial reports for United are owned by A. Ty. B. United. C. the Securities and Exchange Commission. D. no one—the papers should be destroyed immediately after use.

A. Ty.

All of a certain corporation's small number of shareholders agree that the firm can operate without directors, bylaws, shareholder meetings, stock certificates, and formal records of shareholders' decisions. This firm is most likely A. a close corporation. B. a corporation by estoppel. C. a de facto corporation. D. a de jure corporation.

A. a close corporation.

With the exception of malpractice, liability for torts committed by others in a firm cannot be imposed on the shareholders of A. a professional corporation. B. a benefit corporation. C. a close corporation. D. any corporation.

A. a professional corporation.

The number of directors that serve on a corporate board is determined by its A. articles of incorporation. B. bylaws. C. board of directors. D. quorum.

A. articles of incorporation.

Initiating and negotiating the sale and lease of corporate assets outside the regular course of business is a responsibility of the corporation's A. board of directors. B. high-level managers. C. chief executive officer. D. shareholders.

A. board of directors.

Dez is the chief financial officer of Elements Corporation, which is required to file certain financial statements with the Securities and Exchange Commission (SEC). Under the Sarbanes-Oxley Act of 2002, Dez must personally A. certify that the statements are accurate. B. delegate the responsibility for preparing the statements. C. deliver the statements to the appropriate SEC officer. D. prepare the statements.

A. certify that the statements are accurate.

Holly is an officer of Indelible Inc. The board removes Holly in violation of an employment contract. Indelible may be liable for breach of A. contract. B. the business judgment rule. C. the duty of loyalty. D. none of the choices.

A. contract.

Galen prepares a financial statement for Hobby Inc. before a public offering of its stock. The Securities and Exchange Commission orders a revision of the statement. During the subsequent delay of the offering, the stock price drops. Hobby files a suit against Galen for negligence. Galen's best defense is A. even if the accountant was negligent, this was not the proximate cause of the drop in the stock price. B. the firm suffered no injury. C. the accountant did not breach any duty of care that it owed to the firm. D. the accountant owed no duty of care to the firm.

A. even if the accountant was negligent, this was not the proximate cause of the drop in the stock price.

Del and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Del and Efron A. file a certificate of limited partnership. B. execute a partnership agreement. C. accept their first client. D. make their capital contributions.

A. file a certificate of limited partnership.

Components Assembly Corporation is a public company that is poised to issue securities that do not qualify for an exemption from registration. This means that the company must A. file a registration statement with the SEC. B. issue the securities through an online registration site. C. refrain from issuing the securities to unregistered investors. D. register the securities with a national securities exchange.

A. file a registration statement with the SEC.

A limited liability company that operates in more than one state may not receive consistent treatment. This is because, according to the principle that in most states determines the law that applies to a foreign limited liability company, one state's courts must A. interpret and apply another state's laws. B. strictly apply its own jurisprudence. C. arrive at a consensus between sometimes conflicting rules. D. equitably balance the different state laws.

A. interpret and apply another state's laws.

Cornell and Duke are partners in Equity Lending. They decide to admit Fran to the firm as a new partner. Fran's liability for partnership debts incurred before her admission is A. limited to her capital contribution to the firm. B. limited to her personal assets. C. nothing. D. unlimited.

A. limited to her capital contribution to the firm.

Data Analytics LLC is a limited liability company. Unless the firm's articles of organization specify otherwise, it will most likely be assumed that the firm is A. member-managed. B. manager-managed. C. an aggregate of member and non-member managers. D. run by an outside professional management group.

A. member-managed.

Development LP is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals, including Ethan. Ethan loses his limited liability if he A. participates in the firm's management. B. does not participate in the firm's management. C. invests in a project that the firm has declined. D. votes to sell or dissolve the firm.

A. participates in the firm's management.

Phone Apps LLC is forming as a limited liability company. To become a manager-managed firm, Phone Apps' members must A. refrain from participating in the firm's operations. B. designate a person or group of persons to manage the firm. C. elect to apply the principles of partnership law to their firm. D. expressly adopt the corporate form of business organization.

A. refrain from participating in the firm's operations.

Hoki, an accountant, accumulates working papers while performing an audit for Insurance Corporation. After the audit, these documents belong to A. the accountant, with the client having a right of access to the papers. B. the client, with the accountant having a right of access to the papers. C. the Public Company Accounting Oversight Board. D. no one—the papers should be destroyed immediately after use.

A. the accountant, with the client having a right of access to the papers.

Paving LLC is a foreign limited liability company in the state of Ohio. In dealing with Paving, Ohio will apply the law of the state where the firm A. was formed. B. is headquartered. C. does business. D. will receive consistent treatment.

A. was formed.

Cattle Ranch Inc. is a for-profit corporation that is owned by six shareholders who are members of the same family. Cattle Ranch is A. an S corporation. B. a close corporation. C. a benefit corporation. D. a public corporation and a private corporation.

B. a close corporation.

Rural Development Company and Suburban Real Estate Corporation form a joint stock company. This firm can be formed for, at the most, A. an implied duration of not more than six months. B. a perpetual existence. C. a single activity or transaction. D. an express duration of not more than one year.

B. a perpetual existence.

Medical and investment professionals network and pool funds to invest in Medical Online Consult Inc. This is A. venture capitalizing. B. crowdfunding. C. piercing the corporate veil. D. ultra vires.

B. crowdfunding.

To help small businesses raise capital, the Securities and Exchange Commission allows the companies to advertise investment opportunities to the public. This most likely encourages A. venture capitalizing. B. crowdfunding. C. piercing the corporate veil. D. private equity capitalizing.

B. crowdfunding.

Start-Up LLC is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be A. distributed according to members' proportionate ownership in the firm. B. divided equally among the members. C. forfeited to the state. D. reinvested in the business until the dispute is resolved.

B. divided equally among the members.

Like other limited liability companies, for federal jurisdictional purposes, Rodeo Productions LLC is most likely a citizen of A. all states in the United States. B. every state of which its members are citizens. C. any state in which it does business. D. no state—an LLC is not a "citizen."

B. every state of which its members are citizens.

Dairy Products, Inc., and Eden Farms Corporation form a joint venture to make and test-market Frosty Ice Cream. If this joint venture is like most joint ventures, it will continue A. for an implied duration of not more than six months. B. for a single project only. C. for an express duration of not more than one year. D. in perpetuity.

B. for a single project only.

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm will most likely A. borrow funds to be returned on a designated maturity date. B. give up a share of its ownership. C. pool funds to invest in a business venture. D. pay periodic dividends.

B. give up a share of its ownership.

Corporate bonds A. represent the true ownership of a corporation. B. have priority over holders of common stock as to payment of dividends. C. require a corporation to remain profitable until maturity. D. provide a proportionate interest in a corporation with regard to control.

B. have priority over holders of common stock as to payment of dividends.

Eli, an officer for Food Stores Inc., buys 10,000 shares of its stock. One week later, the company announces that it will merge with a competitor, Grocery Mart Corporation, and the price of Food Stores' stock increases. One month later, Eli sells his shares for a profit. Under Section 16(b) of the Securities Exchange Act of 1934, Eli would not be liable if, after buying the stock, he had waited A. less than fourteen days to sell it. B. more than six months to sell it. C. ninety days to sell it. D. two months to sell it.

B. more than six months to sell it.

Ben is an accountant whose clients include Capital Inc. Under the Ultramares rule, if Ben is negligent in his work for Capital, he could be liable to the client and A. any third party. B. no third party with whom the accountant is not in privity or "near privity." C. third parties who are foreseen users of the work. D. third parties who are reasonably foreseeable users of the work.

B. no third party with whom the accountant is not in privity or "near privity."

The first step in the incorporation of a business firm is to A. identify the appropriate market and adopt a business plan. B. select the state of incorporation. C. secure promises of financial support from potential investors. D. hold the first organizational meeting.

B. select the state of incorporation.

Sims, an accountant, prepares for Taco Corporation a financial statement that omits a material fact. The financial statement is included in Taco's registration statement, which Uri reads. Uri buys Taco stock. Under Section 11 of the Securities Act of 1933, for Sims to be liable for the omission, Uri must show that he A. relied on the omission. B. suffered a loss on the stock. C. knew about the omission before making the purchase. D. is a sophisticated investor.

B. suffered a loss on the stock.

The day-to-day operations of a corporation are overseen by A. the directors. B. the officers. C. the owners. D. the shareholders.

B. the officers.

Risk Insurance Inc. has a board of five directors. Risk's bylaws do not state any quorum requirements. As in most states, a quorum for Risk's board meetings is A. one director. B. three directors. C. four directors. D. all of the directors.

B. three directors.

Han is a shareholder of Insulation Inc. When the directors fail to undertake an action to redress a wrong suffered by the firm, Han files a suit on its behalf. Any damages recovered by the suit will go to the firm's A. shareholders, excluding Han. B. treasury. C. directors. D. shareholders, including Han.

B. treasury.

Del, an accountant, prepares for Econo Inc. a financial statement that omits a material fact. The statement is included in Econo's registration statement filed with the Securities and Exchange Commission. Fran, who relies the statement, and Gib, who does not, each buy Econo stock. Under Section 11 of the Securities Act of 1933, Del may be liable to A. no one. B. Fran only. C. Fran and Gib. D. Gib only.

C. Fran and Gib.

Fresh Fruit Company has assets of less than $10 million and fewer than fifty shareholders. Gourmand Pastries Inc. has assets of more than $50 million and more than five hundred shareholders. The Securities Exchange Act of 1934 applies to A. Fresh Fruit and Gourmand Pastries. B. Fresh Fruit only. C. Gourmand Pastries only. D. neither Fresh Fruit nor Gourmand Pastries.

C. Gourmand Pastries only.

Vaughn starts Wind Systems to make and sell turbines. Later, Vaughn contracts with Xi to invest additional capital in the firm in exchange for 25 percent of the profits. Vaughn and Xi are not partners in Wind Systems because A. they do not share the profits equally. B. their agreement does not provide for the sharing of losses. C. Vaughn started the firm before Xi agreed to invest additional capital. D. they do not have joint control over the business.

C. Vaughn started the firm before Xi agreed to invest additional capital.

As part of a stock offering for Design Media Corporation, the firm's accountant Eve intentionally misrepresents material facts in the prospectus. Fred buys the stock unaware of the misrepresentation and suffers a loss. Eve may be subject to A. none of the choices. B. job termination but no other sanctions, penalties, or liability. C. a fine, imprisonment, and damages. D. professional censure but no criminal sanctions or civil liability.

C. a fine, imprisonment, and damages.

Bayside Restaurant LLC is a limited liability company. Its sole member is Conrad. For federal income tax purposes, unless the firm indicates otherwise, it will automatically be taxed as A. a person. B. a corporation. C. a sole proprietorship. D. a partnership

C. a sole proprietorship

Orly's Adventure Travel and Paquito's Wild River Tours form a joint venture. Orly can participate in the venture's management to A. the extent that she assumes liability for the venture's debts. B. the extent of her investment in the venture. C. any extent. D. no extent.

C. any extent.

In some states, to form a limited liability company, a business must have A. a registered promoter. B. a designated founder. C. at least two members. D. a nonmember manager

C. at least two members

Auto Company's liabilities exceed its assets. The firm hires Bass, an accountant, to prepare a balance sheet. Through negligent omissions, the sheet shows a net worth. Credit Bank relies on the document to make a loan to Auto. When the firm defaults, the bank files a suit against Bass. Under the Restatement (Third) of Torts, Bass is most likely A. liable because the accountant owed a duty to the client. B. liable because the accountant owed a duty to any foreseeable user. C. liable if the accountant knew the bank would rely on the balance sheet. D. not liable because accountant and the bank were not in privity.

C. liable if the accountant knew the bank would rely on the balance sheet.

Rosa is a partner in Sugar & Spice, a partnership consisting of the owners of a bakery. Sugar & Spice incurs debt for new ovens. With respect to this debt, Rosa is A. not liable. B. only liable to the amount of her capital contribution. C. only liable in proportion to the number of partners in the firm. D. personally liable to the full extent.

C. only liable in proportion to the number of partners in the firm.

Cliff is an attorney whose clients include Data Inc. Unless Data has violated securities law, the contents of Cliff's file on the firm may be disclosed to a third party A. under no circumstances. B. only under a court order (with or without Data's consent). C. only with Data's consent. D. at Cliff's discretion.

C. only with Data's consent.

Debt Equity Inc., and its officers, directors, and employees, buy and sell securities based on financial research and analysis. Section 16(b) of the Securities Exchange Act of 1934 covers purchases and sales of securities involving A. corporate insiders, such as officers, directors, and employees. B. misappropriation of material, nonpublic information. C. short-swing profits. D. tippers and tippees.

C. short-swing profits.

Haji is an accountant charged with negligence by Infrastructure Service Inc., a client. Haji may successfully defend against the claim if he can show A. scienter was lacking. B. compliance with all International Financial Reporting Standards. C. the accountant was not negligent. D. any negligence on the accountant's part was only contributory.

C. the accountant was not negligent.

An S corporation avoids taxes at A. none of the choices. B. the market level. C. the corporate level. D. the shareholder level.

C. the corporate level.

Nora and Owen do business as Property & Profit, a real estate investment partnership. In acting on the firm's behalf, Nora takes advantage of an opportunity to make a secret profit. To her firm, Nora is liable for a breach of A. the duty of care. B. contract. C. the duty of loyalty. D. none of the choices.

C. the duty of loyalty.

Orbital Flights Inc. is required to register its securities under Section 12 of the Securities Exchange Act of 1934. This means that, with respect to Orbital, Section 16(b) of the act covers A. the declaration of dividends by Orbital's board of directors. B. the later re-registration of Orbital's securities. C. the short-swing activities of Orbital's insiders. D. the solicitation of proxies from Orbital's shareholders.

C. the short-swing activities of Orbital's insiders.

Bee is an accountant whose clients include Concessions Inc. If Bee is negligent in her work for Concessions, most courts would hold her liable to the client and A. any third party. B. no third party with whom the accountant is not in privity or "near privity." C. third parties who are foreseen users of the work. D. third parties who are reasonably foreseeable users of the work.

C. third parties who are foreseen users of the work.

Enya is an attorney whose clients include Finance Company. If Enya is negligent in her work for Finance, under the Restatement (Third) of Torts, she may be liable to the client and A. any third party. B. no third party. C. third parties who are foreseen users of the work. D. third parties who are reasonably foreseeable users of the work.

C. third parties who are foreseen users of the work.

Glen is a partner in Home Builders, a construction firm. Glen's assignment of his interest in the partnership to Investment Consultants results in A. nothing with respect to Home Builders. B. the automatic termination of Home Builders' legal existence. C. Glen's liability for all of Home Builders' debts. D. Glen's wrongful dissociation and liability for any damages.

D. Glen's wrongful dissociation and liability for any damages.

Because it may result in a piercing of the corporate veil, shareholders' continuous use of corporate property should most especially be avoided by a benefit corporation. A. a publicly held corporation. B. no corporation—corporate C. shareholders' liability is limited. D. a close corporation.

D. a close corporation.

A limited liability company that wants to distribute profits to its members could avoid "double taxation" by electing to be taxed as A. a person. B. a corporation. C. a sole proprietorship. D. a partnership.

D. a partnership

Most likely to appear in the articles of incorporation are the names of the company's initial A. officers and employees. B. shareholders and creditors. C. market and competitors. D. registered office and agent.

D. registered office and agent.

Grain Mills Corporation is required to register its securities under Section 12 of the Securities Exchange Act of 1934. Section 14(a) of the act regulates A. the declaration of dividends by the firm's board of directors. B. the later re-registration of the firm's securities. C. the short-swing activities of the firm's insiders. D. the solicitation of proxies from the firm's shareholders.

D. the solicitation of proxies from the firm's shareholders.