BUL3310 Exam4/Final Exam

May is one of three limited partners in a limited partnership. Each limited partner made a capital contribution of $50,000. Assume there is a judgment against the partnership for $300,000 and that both the partnership and the general partner are insolvent. What is the maximum amount that May will have to pay on the judgment? 0: May is a limited partner so has no liability for the debts of the partnership under any circumstances. $300,000: As a limited partner May has joint and several liability for the debts of the partnership so she could be personally liable for the full amount. $50,000: May's capital contribution can be applied to the debt, but she is not personally liable beyond that. $100,000: May will be liable for up to 1/3 of the judgment since there are three limited partners.

$50,000: May's capital contribution can be applied to the debt, but she is not personally liable beyond that.

Which of the following is NOT one of the recognized disadvantages of doing business as a corporation? Corporate profits are subject to double taxation. A corporation can be in existence for a maximum of 99 years. A corporation must qualify to do business in each state in which it engages in business activities. A corporation must comply with a great number of state and federal regulations.

A corporation can be in existence for a maximum of 99 years.

Which of the following is/are a recognized advantage of doing business as a corporation? (select all the correct answers) A corporation can have perpetual existence. A corporation does not have to report income for corporate revenue. Usury laws do not apply to corporations. Investors have extremely limited liability for the debts of the corporation.

A corporation can have perpetual existence. Usury laws do not apply to corporations. Investors have extremely limited liability for the debts of the corporation.

In a Limited Partnership, the General Partner's fiduciary duty is ______. A duty to minimize financial risks taken on by all Limited Partners in the partnership. A duty to ensure all Limited Partners has an equal voice in partnership affairs and decisions. A duty to ensure that the General Partner optimizes his or her investment in the partnership. A duty of good faith and fair dealing to all partners in the partnership.

A duty of good faith and fair dealing to all partners in the partnership.

All of the following are considered advantages to a Limited Liability Partnership, except: The limited liability partnership can function much like a general partnership, without the same risks of personal liability as a general partnership. Partnership proceeds may "pass through" the partnership for income tax purposes. A limited liability partner can avoid personal liability for partnership debts. A limited liability partner is always insulated from personal liability of he or she commits malpractice.

A limited liability partner is always insulated from personal liability of he or she commits malpractice.

A partnership will not terminate by operation of law if A partner becomes insolvent A partner dies The purpose of the partnership becomes illegal A partner files for bankruptcy

A partner becomes insolvent

Which of the following statements about promoters is true? A Promoter is an agent of the corporation even before the corporation comes into existence. 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

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 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.

A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger.

Which of the following is not required to create a partnership? A written agreement between the parties. An understanding to share profits and losses A common interest and intent to conduct business activities together. Two or more persons

A written agreement between the parties

Which of the following decisions would require a unanimous vote of the partners? Buying materials from a new supplier. Admitting a new partner into the partnership Hiring an accountant to prepare the partnership information return for federal taxes. Having the parking lot repaved and installing new lights.

Admitting a new partner into the partnership

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. Even if the creditor unintentionally provided misleading financial documents to the surety. Before the modification takes place. At the time the modification takes place.

After the modification takes place. Before the modification takes place. At the time 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. A general partnership is not a taxable entity under IRS rules. All partners can participate in management of the partnership. Income in a general partnership flows directly to the partners.

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) 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. The corporation files Articles of Partnership in the state where it has its principal place of business. The corporation has no retained earnings.

All the shareholders agree to be taxed as in a partnership.

Subchapter S corporation will avoid double taxation only if which of the following applies? (select all the correct answers) The corporations bylaws require all the revenue to be distributed to the shareholders at the end of each tax year. The corporation files Articles of Partnership in the state where it has its principal place of business. The corporation has no retained earnings. All the shareholders agree to be taxed as in a partnership.

All the shareholders agree to be taxed as in a partnership.

In a manager-managed LLC ___________. An individual or small group has the authority to control and make decisions for the LLC. No one member of the LLC has authority to make business decisions on behalf of the LLC. All members of the LLC participate equally in business decisions. The authority of the members of the LLC to make decisions is directly proportionate to the amount their capital contribution.

An individual or small group has the authority to control and make decisions for the LLC.

Corporate bond holders Are entitled to receive dividends when dividends are declared. Are entitled to be paid a specified rate of interest for a set period of time. Participate in the distribution of corporate assets when the corporation dissolves. Have an equity interest in the corporation.

Are entitled to be paid a specified rate of interest for a set period of time.

The purpose of a buy and sell agreement is to Set guide lines for selling the goodwill of the business. Create a trading partnership Arrange for the evaluation of the business and the method for financing the purchase of a withdrawing or deceased partner's interest. Determine the compensation for partners who manage the business.

Arrange for the evaluation of the business and the method for financing the purchase of a withdrawing or deceased partner's interest.

The formal document that represents the agreement of the parties to form a partnership is the ___________. Articles of partnership Partnership certificate Partnership charter Uniform Act of Partnership

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 By laws Articles of partnership

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

A security interest in personal property in favor of one who has performed services on the personal property is an ________. Artisan's lien. Mechanic's lien. Security Deposit. Color of title.

Artisan's lien

A Limited Partnership must have ____________. An equal ratio of limited partners to general partners. At least one general partner. 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(n) _______ is a legal proceeding accompanying an action in court by which a plaintiff may acquire a lien on a defendant's property as a security for the payment of any judgment that the plaintiff may recover. Discharge in bankruptcy. Sheriff's sale. Attachment. Meeting of creditors.

Attachment

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 Garnishment Attachment Attainder

Attachment

Under the "pass through" principle, a business entity Delegates duties of the business to a subcontractor Conducts high risk activities through a subsidiary. Avoids double taxation Assigns assets of the business to a receiver.

Avoids double taxation.

Bill is a limited partner in K&L Limited Partnership. Which of the following statements about his partnership interests is false? Bill made a capital contribution to K&L Bill has a right to make management decisions for K&L. Bill has a right to share in K&L profits. Bill must share in K&L losses up to his capital contribution.

Bill has a right to make management decisions for K&L

Which of the following statements about corporate bonds is true? (select all the correct answers) Bonds pay a stated rate of interest. Bond holders are not creditors, but debt-equity holders of corporations. Bond holders are creditors of the corporation Bond holders have the right to vote for directors

Bonds pay a stated rate of interest. Bond holders are creditors of the corporation

Persons who contract with the owner to furnish labor or material or construct a building are known as _________. Mortgagees. Contractors. Authorized agents. Subcontractors.

Contractors

Bob is a co-surety with Sue on a loan that was made to Sue's business. If the business defaults on the loan and Bob is required to pay the full amount, Bob has the right of ____________ against Sue. Indemnification Reimbursement Subrogation. Contribution

Contribution

What is the form of business organization that is subject to the most regulation at the state and federal level? Limited Partnership Corporation Partnership Professional Association

Corporation

Which of the following best describes the "double taxation" on corporate profits? Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends as personal income. The income an individual gets from dividends is taxed at twice the rate of the income he gets from wages. The profits of a corporation are taxed at twice the rate of the highest individual tax rate. The IRS is twice as likely to audit returns with dividend income as it is to audit returns with income from wages only.

Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends as personal income.

A bond holder is a _________of the corporation; and a shareholder is a ______of the corporation. Owner----------------Beneficiary Owner-----------------Creditor Creditor-------------Owner Beneficiary----------Owner

Creditor-------------Owner

A partner who does not participate in management and whose existence is not known by the public is a _____________ Dormant partner Secret partner Silent partner Phantom

Dormant partner

Frank is in the business of selling imported pottery. To induce a new wholesaler to sell him goods on credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the business. In fact, Ed had no partnership interest and Frank was a sole proprietor. Ed now has liability to the wholesaler based on Vicarious liability Estoppel Respondeat superior The complicity theory

Estoppel

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. 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.

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. Voids the contract. Fails to perform. Fulfills his or her contractual obligations.

Fails to perform

A business organized as proprietorship may have up to, but not more than, thirty-five owners. True False

False

A joint venture cannot sue or be sued. True False

False

An "improvement" to real property necessarily increases the market value of the real property. 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

In a merger, two or more existing corporations A and B combine so that a third corporation C results. 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

One of the disadvantages of a Limited Liability Partnership is double taxation. True False

False

The majority of states have not yet enacted Limited Liability Partnership enabling statutes. 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 Fiduciary Fidelity

Fidelity

Which of the following is not required for a foreign corporation to get a certificate of authority to do business? (select all the correct answers) File a copy of its bylaws with the secretary of state. Have a registered agent and registered office for service of process. File a copy of its Articles of Incorporation with the secretary of state. Apply for a certificate of authority in the foreign state.

File a copy of its bylaws with the secretary of state.

Sharing in net profits is not prima facie evidence that a partnership exists if the profits were paid by the partnership as/for: (select all the correct answers) For wages As an annuity to the spouse of a deceased partner As rent As dividends to the participants

For wages As an annuity to the spouse of a deceased partner As rent

Pearl sued Sam and was awarded a judgment against him for $50,000. Sam has a savings account with First Bank that can be seized in partial satisfaction of the judgment. The writ the court will use ordering First Bank to turn over to it the funds in Sam's account is a writ of____________. Garnishment Attainder Attachment Execution

Garnishment

________ is a proceeding by which a plaintiff seeks to reach the assets of the defendant that are in the hands of a third party. Execution. Foreclosure. Garnishment. Levy.

Garnishment

Which of the following usually provides an investor the least protection from personal liability for the debts of the business? LLC General Partnership Corporation Limited Partnership

General Partnership

In which of the following business forms are profits taxed at both the entity level and the owner level? General corporation LLC LLP Limited Partnership

General corporation

Which business entity has the following characteristics: liability of the owners is limited to their investments; ownership interest is easily transferrable and there are no legal limits to the number of owners; owners elect the managers of the business who operate under duties of loyalty and due care; the entity is organized under state law and may have perpetual existence; profits are subject to double taxation? General corporation Limited liability corporation General partnership Limited partnership

General corporation

ABC Corporation has a $150,000 open line of credit with Local Bank. Alice, the president of ABC, promised Local Bank that she will be liable if ABC defaults on any or all of the draws it takes against its line of credit. Under this agreement, Alice is a __________________. Co-surety Special guarantor General guarantor Co-principal

General guarantor

In a limited partnership, the _________partner has unlimited personal liability for the debts of the partnership; the ____________partner is liable only to the extent of his or her capital contribution. Limited-----------------general General----------------limited General----------------junior Senior------------------limited

General----------------limited

Any third party who promises a creditor to be liable for a principal's payment is either a surety or _________. Obligee. Principal Debtor Guarantor. Obligor.

Guarantor

The corporate merger that raises the greatest number of anti-trust issues is a _________merger; the corporate merger that raises the fewest number of anti-trust issues is a __________merger. Horizontal----------------Conglomerate Horizontal----------------Vertical Vertical -------------------Horizontal Vertical ---------------------Conglomerate

Horizontal----------------Conglomerate

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 Jay individually Each of the other partners individually The partnership as an entity

Jay individually Each of the other partners individually The partnership as an entity

Jim and Fred had been equal partners in J & F Industries for 20 years. Jim has died and Fred is now in the process of winding up the partnership. Which of the following statements about the winding up process is false? Jim's estate is entitled to an accounting Fred is entitled to compensation for winding up the business. Jim's estate is entitled to participate in the winding up process. If there are not enough assets in the partnership to pay off all the debts, Jim's estate will be liable for one half of the losses.

Jim's estate is entitled to participate in the winding up process.

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______ General partnership Proprietorship Limited partnership Joint venture

Joint venture

Which of the following abbreviations would NOT be used by a professional corporation as a required part of its name? Inc. PC S.C. LLC

LLC

In which of the following business organization do the losses as well as the profits pass through to the owners? (select all the correct answers) LLC Publicly traded corporations LP General corporation

LLC LP

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) Less than Equal to Substituted for Greater than

Less than Equal to Greater than

Partnership agreements often fund the purchase of a deceased partners' partnership interests with Levies on partnership interests Distributions of retained earnings Partner advances Life insurance policies

Life insurance policies

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? Limited Liability Company (LLC) General Corporation General partnership Limited Liability Partnership (LLP)

Limited Liability Company (LLC)

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 partnership General partnership Limited Liability Partnership Limited Liability Company

Limited Liability 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 Partnership Limited Partnership Limited liability corporation General corporation

Limited Partnership

All of the following could be recognized as advantages of doing business as a limited partnership, except: Limited partners can invest in a partnership while effectively protecting their personal assets. 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. A Limited Partnership is often a convenient and attractive option to investors.

Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities.

Which of the following statements about the limited partner in a limited partnership is false? There must be at least one limited partner. Limited partnerships that invest in real estate are typically good tax shelters for the limited partners. Limited partners must approve any changes to the partnership agreement. Limited partners may participate fully in the management of the partnership.

Limited partners may participate fully in the management of the partnership.

What is the equitable rule that 1 distributes assets of an insolvent partnership first to creditors of the partnership and 2 does not let partnership creditors reach the assets of individual partners until the partners' personal creditors are satisfied? Partnership partition Marshaling of assets Equitable distribution Comity of assets

Marshaling of assets

A partnership that fails to comply with a state's assumed name statute (select all the answers that are correct) May exposed the partners to criminal liability Will default to a Subchapter S corporation. Will be given a trade name by the attorney general Will not be able to use the courts of the state to sue its debtors

May exposed the partners to criminal liability Will not be able to use the courts of the state to sue its debtors

A lien for the value of material and labor expended in the construction of buildings and other improvements is a _________. Artisan's lien. Suretyship. Mechanic's lien. Right of redemption.

Mechanic's lien

Megan has joined Alliance Partners, making a 50,000 capital contribution. Alliance has been in business for 10 years and Megan is worried about her liability for pre-existing debts. Which statement best describes her liability for the debts Alliance had when she joined the partnership? Megan has no personal liability for the debts and her capital contribution cannot be used to satisfy old debts. Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them. Megan has unlimited personal liability and her entire capital contribution may be used to satisfy the debts. Megan has unlimited personal liability, but her capital contribution cannot be used because it is new money.

Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them.

Which of the following is a quality that an LLC shares with a corporation? An LLC and a corporation are treated identically for tax purposes. Members are only personally liable for debts to the extent of the money they put into the business. Members of an LLC usually have little to no control in major business decisions. Both an LLC and a corporation require complex and costly procedures and filings before they can legally do business.

Members are only personally liable for debts to the extent of the money they put into the business.

Peter, Paul and John, who were licensed pharmacists, formed a partnership to purchase and run a small drugstore chain. Each held a 13 interest in the partnership. When Paul died his wife Ellen began receiving annuity payments equal to 13 of the partnership's net profits. The payments were to last for 3 years. Ellen is also a licensed pharmacist and perfectly capable of performing all the duties that Peter, Paul and John performed. She claims that under partnership law both her right to receive a share of net profits and her expertise in the field are prima facie evidence that she is a partner in the firm. Is Ellen correct? Yes, sharing in net profits for whatever reason is prima facie evidence of a partnership. Yes, sharing in net profits and having the same business qualifications as the other partners together create prima facie evidence of a partnership. No, paying a surviving spouse an annuity out of net profits is not prima facie evidence of partnership. No, only management rights are prima facie evidence of a partnership

No, paying a surviving spouse an annuity out of net profits is not prima facie evidence of partnership.

Allfam is a closely held family corporation, many of whose shareholders are employees of the corporation. In an attempt to reduce its taxes, Allfam paid its shareholder-employees enormous salaries and deducted the salaries as a corporate expense. Is Allfam permitted to do this? Yes, this is a legitimate way for closely held corporations to reduce their taxes. No, the shareholder-employees will have do return the excess portion of their salaries to the corporation. No, the IRS will disallow the deductions for this year, but will allow the corporation to treat them as carry-forward losses for next year. No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends.

No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends.

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 would bring about the dissolution of the partnership? (select all the correct answers) One of the partners dies. The partnership files for bankruptcy. All of the partners agree to end the partnership The time the partnership is to last, as stated in the partnership agreement, has expired

One of the partners dies. All of the partners agree to end the partnership. The time the partnership is to last, as stated in the partnership agreement, has expired.

Which of the following statements about the operation of a member-managed LLC is false? Any member of the LLC may bind the LLC on a contract. Only the managing members have access to the books and records of the LLC Articles of organization must be filed with the state as part of the application process. The application must state that it is to be a member-managed LLC.

Only the managing members have access to the books and records of the LLC

Tom was the minority shareholder in a closely held corporation. Despite massive profits, no dividends were ever declared. The corporation did, however, pay extremely large salaries and bonuses to the officers of the corporation, who were also the majority shareholders. The majority shareholders of this corporation are guilty of _______________. Oppressive conduct Quo warranto acts Embezzlement Ultra vires acts

Oppressive conduct

Which of the following is the order in which partnership assets will be distributed upon termination of the partnership? Outside-creditors, partner-creditors, undistributed profits, capital contributions. Capital contributions, outside-creditors, partner-creditors, undistributed profits. Partner-creditors, outside-creditors, undistributed profits, capital contributions Outside-creditors, partner-creditors, capital contributions, undistributed profits.

Outside-creditors, partner-creditors, capital contributions, undistributed profits.

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 liability company Partnership Limited partnership Professional association

Partnership

All of the following could be accurate statements about a general partnership, except: Partnership liabilities in a general partnership are limited to the amount of capital contribution. The general partnership allows for quick, easy and immediate control. Partners can share partnership profits. 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. 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.

Profits are taxed at the corporate level as income and again at the shareholder level as dividends.

Which of the following statements about the taxation of corporations is false? Most states impose license fees or franchise taxes on corporations doing business in the state. Profits retained by the corporation are normally taxable to the shareholders under the corporate pass through rule. Salaries paid to employees are deductible expenses for the corporation. Premiums paid for employee health insurance plans are fully deductible.

Profits retained by the corporation are normally taxable to the shareholders under the corporate pass through rule.

The right of first refusal refers to the right of LLC members to Vote against admitting another member. Dissent from a business decision by a non-member manager. Purchase the interest of another member in the LLC before it is offered to an outside buyer Purchase an asset of the LLC before it is offered for sale to the public.

Purchase the interest of another member in the LLC before it is offered to an outside buyer

Suits by the state to determine if a corporate charter should be cancelled or forfeited are _______________ proceedings. Assessment Quo warranto Criminal Ultra vires

Quo warranto

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

Megan agreed to act as a surety on a personal loan First Bank made to Arthur. When Arthur defaulted on the loan, Megan paid off the loan obligation. Megan now has the right of ________against Arthur. Contribution Subrogation Indemnification" Reimbursement

Reimbursement

What happens when a court pierces the corporate veil? The court revokes the corporate charter. Shareholders become personally liable for the debts of the corporation. The court requires that the corporation be more substantially capitalized. The promoter becomes liable for the debts of the newly formed corporation

Shareholders become personally liable for the debts of the corporation.

Which of the following statements about the rights and duties of shareholders is false? Shareholders must approve changes to the corporate charter. Shareholders have virtually unrestricted access to corporate books and records Majority shareholders may have fiduciary duties to minority shareholders in closely held corporations. Shareholders are entitled to notice of the annual meeting and all special meetings.

Shareholders have virtually unrestricted access to corporate books and records

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 un-exercised warrants. Owners of common stock who had title to the shares 180 days before the last ex-dividend date. All current owners of common stock. Shareholders who own preferred stock

Shareholders who own preferred stock

A partner who does not participate in the management of the business is a _________partner; a partner who participates in decisions and advises management, but whose partnership interest is not known to third parties is a _________________partner. Silent-------------------Dormant Secret----------------------Dormant Silent----------------------Secret Dormant-------------------Silent

Silent----------------------Secret

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? Federal statutes US Code of Federal Regulations State statutes Local ordinances

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. General guarantor Special guarantor Co-surety Sub-surety

Sub-surety

Another name for a tax option corporation is a Professional corporation Joint venture Limited liability Company Subchapter S corporation

Subchapter S corporation

A ________ promises to be liable to the creditor only in the event that the surety refuses to perform and thereby defaults. Obligee. Subsurety. Co-surety. Debtor.

Subsurety

A document that an LLC must submit to the secretary of state's office prior to doing business is ______. A Security Interest Filing. The Articles of Organization. The Operating Agreement. A Partnership Agreement.

The Articles of Organization.

A director would incur personal liability if (select all the correct answers) 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 The corporation failed to withhold taxes from the wages of employees

Which of the following statements about cash dividends is false? Directors have personal liability for illegally declared dividends Shareholders who receive illegal cash dividends may be forced to return them to the corporation. The cash may come from any source, including the corporation's capital stock. Cash dividends become a debt of the corporation once they are declared.

The cash may come from any source, including the corporation's capital stock.

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 corporate opportunity doctrine The responsible corporate officer doctrine The business judgment doctrine The privileges and immunities doctrine.

The corporate opportunity doctrine

In a successful derivative suit, any money awarded in the judgment will go to The plaintiff shareholder and the corporation will share the money equally. The plaintiff shareholder The corporation There can be no award of money because only equitable remedies are available in derivative suits.

The corporation

Which of the following are not grounds for a state cancelling a corporation's charter? The corporation failed to maintain a registered agent in the state. The corporation has not performed any corporate functions for a long time. The corporation has not made a profit in 3 years. The corporation did not pay its franchise tax

The corporation has not made a profit in 3 years

Which of the following situations would justify piercing the corporate veil? The majority shareholder loans money to the corporation All the shares of a corporation are held by another corporation. The corporation was formed with the intent of defrauding another party or violating a statute. 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.

Which of the following is/are advantages of a general partnership? (select all the correct answers) Partners have limited liability for the debts of the partnership. General partneships do not owe any taxes. The costs to form a partnership are minimal. All partners have equal management rights.

The costs to form a partnership are minimal. All partners have equal management rights.

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.

Directors have which of the following fiduciary duties? (select all the correct answers) The duty to obey instructions The duty of loyalty The duty of due care The duty to maximize long-term profits

The duty of loyalty The duty of due care

Which of the following best describes the role of a general partner in a limited partnership? 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 defers to the business decisions of the limited partners of the limited partnership, unless those decisions seem economically unreasonable. 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 would a represent a breach of fiduciary duty by a general to the limited partners in a limited partnership? The general partner enters into contracts on behalf of the partnership without first consulting the limited partners. The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership. The general partner takes action to personally profit from the business of the partnership. The general partner takes action to minimize the risks and debts that are incurred by the partnership.

The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership.

In a Limited Partnership, a limited partners risk personal liability for partnership debts when __________. The limited partner expresses his or her opposition to a decision made by the general partner. The limited partner decides to contribute significant personal assets as capital to the partnership. The limited partner offers to sell his or her interest in the partnership. The limited partner becomes overly involved in partnership affairs.

The limited partner becomes overly involved in partnership affairs.

A member of an LLC risk personal liability for participating in all of the following activities, except: The member knowingly files a false tax return with the IRS. The member volunteers to assume personal responsibility for a loan payments made by the LLC. In the name of the LLC, the member secretly loans money to a close friend. The member consistently votes against decisions that are ultimately approved by the majority of other members of the LLC.

The member consistently votes against decisions that are ultimately approved by the majority of other members of the LLC.

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. States allow corporations to reserve a name for a limited time while the corporation is being formed. 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.

The name can never be changed once it is registered with the state.

Which of the following statements is true about a partnership name? (select all the correct answers) The name is an asset of the partnership that may be sold or assigned. The name must comply with the Federal patent provisions. The name must include the word "company" in it. The partnership must comply with the state's assume name provisions.

The name is an asset of the partnership that may be sold or assigned. The partnership must comply with the state's assume name provisions.

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: The partner's personal net worth. Prior court decisions. Specific language of the Partnership Agreement. Applicable state partnership statutes.

The partner's personal net worth.

Which of the following is not a right of a partner? The right to participate in the management of the business. The right to inspect the partnership books and records. The right to sue for an accounting if another partner has taken a secret profit. The right to draw yearly interest on his or her capital contribution

The right to draw yearly interest on his or her capital contribution

All of the following are rights held by an individual member of an LLC, except: Access to the LLC's books and records. 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. The right to request that the LLC be dissolved.

The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.

One method for determining a fair value of the stock of a shareholder who dissents from a proposed merger is the __________________. The 80% rule The weighted average method The ex post facto method. Promotion of justice rule

The weighted average method

Which of the following statements about LLC's is false? LLC's are a relatively new form of business organization. The LLC is not a taxable entity. There is an extensive body of law based on court decisions governing LLC's. 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.

Bob, Sue and Jim were classmates in medical school who formed a professional corporation to practice medicine. Which of the following statements about their professional corporation is false? Their practice will have to include some designation of its status, such as "S.C." or "P.C." in its name. Bob, Sue and Jim may have special legal protections against discrimination as shareholder-employees of the professional corporation. They will be protected from suits for medical malpractice. They will be eligible for a tax-advantaged pension plan.

They will be protected from suits for medical malpractice.

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 address circumstances in which the LLC would dissolve. To set forth rules concerning voting rights for members of the LLC. To make rules concerning the transfer of interests in the LLC

To indemnify members of the LLC from liability for any unlawful acts.

All of the following are functions of an LLC's Operating Agreement, except: To make rules concerning the transfer of interests in the LLC. To set forth rules concerning voting rights for members of the LLC. To address circumstances in which the LLC would dissolve. To indemnify members of the LLC from liability for any unlawful acts.

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. Creditors of the corporation or the state itself may block the purchase of treasury stock. It is stock that the corporation acquired by gift or by purchasing from shareholders.

Treasury stock can be resold only at par value.

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 can assign a general guarantor's promise to a new creditor for value. True False

True

A limited partner has liability to the full extent of his or her capital contribution. True False

True

A limited partner risks personal liability when he or she actively participates in the management of partnership affairs. True False

True

A limited partnership allows limited partners to be only liable for their capital contribution. True False

True

A surety who only guarantees collection is entitled to notice. 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

Co-sureties share joint and several liability to the creditor True False

True

Contractors have a longer period in which to file mechanic's liens that subcontractors or suppliers have. 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 False

True

In a manager-managed LLC, a single person or a select group has the authority to control and make decisions for the LLC. True False

True

Limited Partnership must have at least one general partner. True False

True

Limited partners may lose the full amount their capital contribution if the limited partnership incurs debts that exceed its assets. True False

True

Modification of the creditor-principal agreement generally discharges the surety. True False

True

One recognized advantage to a general partnership is that it allows partners to share in management and profits of the partnership. True False

True

Professional corporations are business entities organized under state law. True False

True

Restatement of Security treats contracts of suretyship as interchangeable with guarantor contracts. True False

True

State law determines whether or not a mortgage will have priority over a mechanic's lien. True False

True

Subrogation means the substitution of one person in place of another. True False

True

The Tax Code does not allow corporations to deduct as expenses excessive or unreasonable compensation to officers and employees. True False

True

The agreement to purchase stock in a future corporation is a pre-incorporation subscription. True False

True

The manager of a manager-managed Limited Liability Company may be a non-member. True False

True

Voluntary surrender of personal property subject to an artisan's lien generally terminates the lien. True False

True

Individual members of an LLC may do all of the following, except: Bind the LLC in legally enforceable contracts. Making capital contributions to the LLC. Using LLC funds to satisfy personal debts. Voting on business personnel issues.

Using LLC funds to satisfy personal debts.

A _________ is the voluntary relinquishment of the right to a mechanic's lien before a notice of lien is filed. Confessed judgment. Satisfaction and accord. Waiver. Collection proceeding.

Waiver

If a judgment for dollar damages is not paid, the judgment creditor may apply for a ______. Writ of first refusal. Writ of Execution. Default judgment. Writ of Habeas Corpus.

Writ of Execution.

Bob and Sue, who are both attorneys, agreed to share office space and other overhead expenses in order to save money. They did not agree to form a partnership. They do not share profits or losses and neither has a say in the management of the other's business. The sign outside their door, and on their common letterhead, reads: "Bob Smith and Sue Jones, Attorneys at Law." Using this stationary, Bob purchased office equipment from Smart Buy. Sue at no time used the equipment and did not enter into the contract with Smart Buy. Bob did not pay for the equipment and Smart Buy wants to hold Sue liable. Is Sue liable as a partner for this purchase? No, there was no sharing of profits or losses or management rights so there was no partnership. Yes, allowing her name to be used with Bob's in the same letterhead created an implied partnership Yes, allowing her name to be used with Bob's in the same letterhead created a partnership by estoppel Yes, allowing her name to be used with Bob's in the same letterhead created an express partnership.

Yes, allowing her name to be used with Bob's in the same letterhead created a partnership by estoppel

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. Alter ego Investment trust Oppressive conduct Ultra vires

alter ego

The theory under which courts pierce the corporate veil of corporations whose shareholders do not treat the corporation like a separate legal identity is the ________theory. Alter ego Quo warranto Promotion of justice Ultra vires

alter ego

State statutes that govern the sale of investment securities within the state are known as ___________laws. Asset protection Red herring Blue sky Investment trust

blue sky

The capital contribution of a partner may consist in all of the following except Real property Patent rights Business experience Cash

business experience

If a plaintiff shareholder cannot show that a director's decision was made in violation of his duties of loyalty or care, the court will allow the decision to stand under the __________rule. Business judgment Corporate governance Entire fairness Unocal

business judgment

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______________. State incorporation code Charter Articles of incorporation By laws

by laws

The court order directing that the share of profits due a partner be given to his or her creditor to satisfy a judgment is a _________________order. Accounting Collection Charging Marshaling

charging

John, a partner in KLM Partners, had a personal loan from First Bank for 35,000. First Bank got a judgment against John after he defaulted on the loan. First Bank can reach John's interest in KLM Partners and require that a receiver be appointed to take John's share of the partnership profits to satisfy the judgment. The court order that will do this is an ________________ Marshalling order Attachment order Charging order Accounting order

charging order

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. Conditional guaranty. Unconditional guaranty. Absolute guaranty.

conditional guaranty

The merger of two corporations who are neither competitors nor related as customer and supplier is a _______________merger. Horizontal Market extension Vertical Conglomerate

conglomerate

The merger that is the least likely to raise antitrust issues is a ___________merger. Conglomerate Horizontal Vertical Market extension

conglomerate

An extension of time of payment between a creditor and principal must be a valid agreement supported by ______ if it is to have an impact on the surety's liability. Real property. Personal property. Consideration Collateral

consideration

Minority shareholders have the best chance of electing directors in a corporation that uses the ______method of voting. Proxy Non-cumulative Cumulative Straight

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. Cumulative Divisible Non-cumulative Proxy

cumulative

A surety is liable to the creditor as soon as the principal ________. Files for bankruptcy Enters into the contract. Defaults. Makes an initial payment.

defaults

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. Group of answer choices Proxy Derivative Direct Peremptory

derivative

Any change in the identity of the partners, whether through death, withdrawal, or the adding of a new partner, results in the ________________of the old partnership. Disengagement Winding up Dissolution Termination

dissolution

Absent an agreement otherwise, the members of an LLC have a statutory right to (select all the correct answers) retain all profits dissolve the LLC inspect the books and records of the LLC approve a merger

dissolve the LLC inspect the books and records of the LLC approve a merger

A surety owes a _______ to the principal for any profits obtained after the surety performs. Percentage interest. Duty to account. Duty to discharge. Debt.

duty to account

The record date on which a dividend is payable is the ___________date. Activation Proxy Issuance Ex dividend

ex dividend

A cash dividend is a transfer of retained earnings to capital. true false

false

A commonly cited disadvantage of an LLC is that its members often risk personal liability if the business of the LLC fails. True False

false

A corporation can be in existence for a maximum of ninety-nine years. true false

false

A corporation incorporated in Delaware and doing business in New Jersey is not a foreign corporation in New Jersey. True False

false

A creditor in possession of collateral given to him or her by the principal may return it to the principal without the consent of the surety. 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 disadvantage of the Limited Liability Company is that profits are taxed both as income to the corporation and as dividends to the members. True False

false

A doctor who practices as part of a professional association cannot be sued for malpractice. True False

false

A lien for the value of materials and labor used in the construction or improvement of real property is an artisan's lien. True False

false

A limited partnership has to have at least two general partners and at least one limited partner True False

false

A partner's capital contribution may consist in business experience or service to the firm. True False

false

A promoter is an agent of the corporation. True False

false

A shareholder has 120 days after dissenting from a merger to change his or her mind and keep the stock. True False

false

A shareholder's desire to discover why a dividend was not paid is not a "proper purpose" for allowing the shareholder access to the corporation's records. 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 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

Any money recovered in a successful derivative suit belongs to the shareholder who initiated the suit. True False

false

Any profits which a surety makes when called upon to perform the principal's duties belong to the surety. True False

false

Article 2A of the Uniform Commercial Code governs the sale of securities. True False

false

Bonding companies are usually uncompensated sureties. True False

false

Both shareholders and directors may vote by proxy. True False

false

Courts will allow creditors to pierce the corporate veil of any corporation that has only one shareholder. True False

false

Debbie, the manager of a large furniture store, receives a bonus each year equal to 2% of the business' net profits. Under RUPA, this is conclusive evidence that Debbie has a partnership interest in the business. 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

If a personal creditor of Partner A wants to attach A's partnership interest in satisfaction of the debt, he would do so through a marshalling order. 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 closely held corporation, the shareholders will be personally liable for torts committed by employees of the corporation if committed while carrying out their employee duties. True False

false

In a consolidation, one corporation (A) assumes the assets and liabilities of another corporation (B), and corporation B ceases to exist. 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

Individual members of the LLC can never bind the LLC in a valid and enforceable contract. 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

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

Minority shareholders have the best chance of electing someone to the board of directors under the straight method of voting. 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

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

Pre-incorporation stock subscriptions are merely offers to purchase stock and are not normally binding on the purchaser. True False

false

Registered agents have liability on the pre-incorporation contracts of the corporation. True False

false

Shareholders are taxed on the value of the stock they receive in stock dividends 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 owner of a limited liability company LLC has unlimited personal liability for the debts of the LLC. 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

ABC Corporation, which is incorporated in Delaware, has its corporate offices and main manufacturing plant in Ohio. ABC is classified as a _______________corporation in Ohio. Foreign Domestic Native Alien

foreign

A __________ is a party whose promise is not limited to a single transaction or to a single creditor. Creditor. Obligee. General guarantor. Special guarantor.

general guarantor

In a limited partnership LP, what are the partners who have unlimited personal liability for the debts of the LP? Limited partners Silent partners Joint partners General 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? Limited liability partnership General partnership General corporation Limited partnership

general partnership

Which business entity is defined as "an association of two or more owners who carry on as co-owners a business for profit?" General partnership Subchapter S corporation Limited Liability Company Proprietorship

general partnership

The merger of two businesses in the same field that reduces the number of competitors is a _________________merger Vertical Horizontal Conglomerate Consolidation

horizontal

The merger that creates the greatest number of antitrust issues is a _____________merger. Market extension Horizontal Conglomerate Vertical

horizontal

Three major U. S. banks have launched a service to process online electronic payments, creating in the process a major competitor of PayPal's. If the banks were to buy out PayPal in the future, this would constitute a ______________________merger. Market product extension Conglomerate Horizontal Vertical

horizontal

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 __________. Special guarantee Suretyship General guarantee Indemnity

indemnity

Which business entity has the following characteristics: an informal association of two or more persons that is formed to accomplish a single business transaction? Limited partnership Professional association General partnership Joint venture

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? Trading group General partnership Limited partnership 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 corporate authority legal authority

legal capacity

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? Business identity Goodwill Competitive advantage Legal capacity

legal capacity

Which business entity has the following characteristics: one owner has unlimited personal liability for the debts of the business while other owners are liable only to the extent of their investments; owners lose their limited liability if they actively manage the business; the entity is organized under state law; both profits and loses pass through to the owners? Limited Liability Partnership Limited partnership Limited Liability Company General partnership

limited partnership

An LLC in which non-owners are hired to run the day to day activities of the firm is a ______LLC. Proprietary Member-managed Subchapter S Manager-managed

manager-managed

An LLC where a single person or select group has the power to manage is a ____________________LLC. Subchapter S Manager-managed Member-managed Proprietary

manager-managed

The merger of two corporations that results in the surviving corporation expanding its products or markets is a _____________merger. Vertical Conglomerate Horizontal Market extension

market extension

The board of ABC Corporation approved a new issue of Class B voting stock. The stock has no stated value. This stock is an example of __________________stock. No par Preferred Par value Watered

no par

Preferred stock that is entitled to receive only the stated preferred dividend and no other is _______________ preferred stock. Non-participating Non-cumulative Participating Cumulative

non-participating

A partnership whose primary purpose is to manufacture things or to provide services is a ____________partnership. Entrepreneurial Trading Non-trading Professional

non-trading

By statute, a limited partnership must have a minimum of ___________general partners. four two five one

one

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 Quo warranto acts Ultra vires acts Unfair trade practices. Oppressive conduct

oppressive conduct

Shares that are issued with a face value are Par value shares No par shares Non-certificated Treasury shares

par value shares

When partners enter into a partnership without stating how long the partnership will last, they have formed an ____________________. Partnership by the entireties Partnership for a term of years Partnership at will Implied partnership

partnership at will

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 Fidelity Artisan's

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. Payment schedule. Foreclosure sale.

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 Subscription Buy and sell Redemption

preemptive

When a corporation dissolves, holders of ___________ stock have priority in the distribution of corporation assets. Preferred Treasury Participating Common

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 _______. Proxy Warrant Assignment Delegation

proxy

Suits by the state to determine if a corporate charter should be cancelled or forfeited are _______________ proceedings. Assessment Quo warranto Ultra vires Criminal

quo warranto

A partner who participates in the management of the partnership, but whose existence is not known to the public is a _____________ partner. Secret Senior Dormant Silent

secret

A partner who does not participate in the management of the partnership is a ________partner. Dormant Secret Silent Junior

silent

A ________ is a party who limits his or her promise to a single transaction or to a single creditor. General guarantor. Creditor. Obligee. Special guarantor.

special guarantor

The document that is written evidence of an ownership interest in a corporation is a(n)______________. Charter Stock certificate Proxy statement Stock warrant

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 repurchase Stock dividend Stock subscription

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 _____________. Ex dividend split Stock dividend Stock split Stock repurchase

stock split

The certificate issued by a corporation that gives the owner the right to buy a stated number of shares at a stated price is a __________________. Bond Stock certificate Preliminary prospectus Stock warrant

stock warrant

The method of voting for directors in which each shareholder casts as many votes as he or she has shares is the _______________method. Straight Absolute Derivative Cumulative

straight

The ex-dividend date is The date on which a stock warrant expires. The date on which a dividend is payable. The date on which a convertible stock option expires. The date on which the corporation purchases treasury stock.

the date on which a dividend is payable

A partnership whose primary business purpose is the buying and selling of goods is a ________partnership Trading Professional Entrepreneurial Non-trading

trading

Stock that a corporation buys back from its shareholders is ____________. Recalled Participating Treasury Watered

treasury

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 must qualify to do business in each state where it conducts business activities. True False

true

A corporation must qualify to do business in each state where it conducts business activities. 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 director's duty of care is that of a normally prudent businessperson in the management of his or her own affairs. True False

true

A dormant partner is one who does not participate in the management of the business and whose identity is not known to third parties. True False

true

A limited partner normally has no liability beyond his or her contribution True False

true

A limited partnership must have at least one general partner and one limited partner. True False

true

A new partner is liable only to the extent of his or her capital contribution for the already existing debts of the partnership. 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 partnership maybe created by an express agreement between the parties or it may be implied from their conduct. True False

true

A person may become a partner without making a capital contribution true false

true

A principal who is discharged in bankruptcy is released from his duty to reimburse the surety. True False

true

A receiver is an officer of the court who takes possession of property involved in a lawsuit for the benefit of the ultimate owner. True False

true

A shareholder who has not fully paid the corporation for an original issue of stock may become liable to a creditor of the corporation for the unpaid balance. True False

true

A sole proprietorship is not a taxable entity; all profits or losses are reported and taxed as individual income. True False

true

A sub-surety liable to the creditor only when another surety fails to perform. True False

true

A surety's obligation is a generally promise to do what the principal agreed to do. True False

true

Absent a contrary provision in the partnership agreement, all partners have equal rights in the management of the business. True False

true

Absent an agreement otherwise, a Limited Liability Company's operating agreement can only be amended with the unanimous consent of the members. True False

true

An advantage to doing business as a corporation is that ownership interests can be transferred without impact on day-to-day business operations. True False

true

Because the LLC is a relatively new type of business entity, there are often fewer published court opinions addressing LLC issues. 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

California and New York allow only professional services firms to do business as Limited Liability Partnerships. True False

true

Corporations must include the terms "corporation" or "company" or "incorporated" or "limited" in their names. True False

true

Corporations normally have the power to make charitable contributions. True False

true

Courts have great discretion in deciding whether to order the dissolution of a corporation when the shareholders or directors are deadlocked. 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

Directors have personal liability if the corporation fails to withhold social security taxes from employee wages. True False

true

If net profits are retained in a Subchapter S corporation, income tax must be paid by shareholders on these earnings even though the earnings have not yet been received. True False

true

If the partnership agreement does not state how long the partnership is to last, a partnership- at- will is created. True False

true

If you purchased a used/older copy of the textbook, please be aware of the following update. Subchapter S corporations cannot have more than thirty-five shareholders, each of whom must sign the election to be taxed in a manner similar to a partnership. The above is incorrect, Subchapter S corporations are now allowed to have up to 100 shareholders (it cannot exceed 100 shareholders). (the answer to this question is true) True False

true

In a Limited Liability Company, the losses and profits pass through to the shareholders. True False

true

In a closely held corporation, shareholders owe each other substantially the same fiduciary duties that partners owe one another. True False

true

In most states corporations can have perpetual existence. True False

true

In most states corporations can have perpetual existence. true false

true

Investors favor using Limited Partnerships to invest in commercial real estate because they can use the depreciation of the property as a tax loss. 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

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

Officers of a corporation are responsible for carrying out the policies set by the board of directors. 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

One partner has the ability to veto the admission of a new partner into the business. True False

true

Partner A defrauded a client of the partnership. Partners B and C are jointly and severally liable with A to the client, even though they were unaware of the fraud. 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 sue to compel dividends if there are profits from which the dividend may legally be declared and the board's failure to do so is a gross abuse of its discretion. 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 courts have the power to order that real property be sold to satisfy a mechanic's lien. True False

true

State laws regulating the sale of securities within the state are called blue sky laws. 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 admission of a new partner automatically dissolves the partnership. True False

true

The business judgment rule protects directors who are loyal and careful from liability for business decisions that result in loss to the corporation. True False

true

The capital contribution of each partner is a liability to the partnership and must be returned to the partner when the partnership ends. True False

true

The limited liability partnership is often an attractive option for professional associations such as law firms, accountants and medical doctors. True False

true

The party who signs the application for a corporate charter is the incorporator. True False

true

The surviving corporation in a merger assumes the liabilities and obligations of the merged corporation. 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

To create a Limited Liability Corporation, articles of organization must be filed with the state's Secretary of State's office. True False

true

Unless agreed to otherwise, all partners have an equal vote in the management decisions of the partnerships. 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

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. Criminal Ultra vires Peremptory Preemptive

ultra vires

The merger of a corporation with one of its suppliers is a _____________merger. Horizontal Conglomerate Vertical Market extension

vertical

Alice bought 10,000 shares of ABC Corporation that had a par value of 10 a share. To pay for her shares, Alice gave ABC 45,000 in cash and a piece of real property that she said was worth 55,000. In fact, the land appraised for only 20,000. The stock that Alice bought from ABC Corporation is ______________ stock. Non-par Treasury Non-participating Watered

watered

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 __________________. Dissolution Marshaling of assets Winding up Termination

winding up