BUS251: Chapters 21-30
The best choice of business entity is driven primarily by the following factors: ________.
risk; tax; operational objectives
All of the following are methods that a sole proprietorship can raise money except: - sell ownership in the business - private loans - commercial loans - line of credit
sell ownership in the business
Every C corporation is considered a legal, taxable entity that is _______ for income tax purposes.
separate from the owners
A well-established and deep-seated principal of American law is that a corporation is a(n) ______.
separate person; separate entity
Most courts have used four factors to consider whether to pierce a corporation's protective veil, and if two are present is court is more likely to hold _______ personally liable for corporate debts.
shareholders
_______ are the owners of the corporation and while they do not directly manage the corporation, shareholders are granted certain rights to protect their ownership interests.
shareholders
Under Rupa's default rules, partner's right to manage the business implies that each partner has the ability to _______.
sign contracts on behalf of the partnership
_______ have no oversight committees (such as a board of directors), do not require any agreements among principals, and may be converted to another form of entity.
sole proprietorships
Most _______ are relatively small in terms of assets and revenues, and are not restricted in terms of the number of _______ and can operate in as many locations as the principal desires.
sole proprietorships; employees
Carlos is a member of an LLC along with three others. After one year, despite their best efforts, the business closes and the bank that extended them a loan sues for repayment. The bank may:
sue the LLC but may not sue Carlos
A franchise agreement generally covers the following: _______.
term of the agreement; territory rights; franchise fees
A franchise agreement that covers _______ rights usually provides the franchisee with an exclusive geographic area.
territory
Voting rights of LLC principals are governed by:
the operating agreement
Which of the following is not true regarding venture capital firms?
they are generally long-term investors
_______ is funding provided by a group of professional investors for use in a developing business, usually in a particular industry such as health care.
venture capital
To avoid the property provision, before the partnership is started, a partner must decide: _______ or _______.
whether the property is owned individually; whether the property is a capital contribution
Josh is a sole proprietor of an ice cream ship. Regina, a customer, slips and falls on some melted mint chocolate chip ice cream on the floor and breaks her leg. Regina files suit and wins a judgement of $50,000. Josh does not have any insurance and the total value of the assets of ice cream ship is $10,000. Which statement below is correct?
Josh will have to use his own personal assets to pay the remainder off the judgement
Mike owns Swibel Trucking, a successful trucking business, as a sole proprietorship. After many successful years in business, one night he decides he wants to change his business to a partnership so that he can share the burden and devote more time to pursue his hobby of duck watching full time. What steps must he take to change the type of business entity to a partnership?
None as a sole proprietor can convert to another business form at the proprietor's will.
The _______ does not allow any manager or member to avoid personal liability based on her willful misconduct or bad faith.
RULLC
Note that ________ imposes personal liability when members consent to an improper _______ of money made when the LLC is insolvent.
RULLCA; distribution
In the absence of a partnership agreement, the _______ is likely to govern a general partnership.
RUPA
Under the _______ partners do not have rights to _______ partnership property.
RUPA; specific
After the ULLCA was created, some states have started to adopt an act that modifies it called:
Revised Uniform Limited Liability Company Act
Some states have adopted the _______ model statute to regulate LLCs.
Revised Uniform Limited Liability Company Act (RULLCA)
Which entity wrote the Revised Model Business Corporation Act (RMBCA)?
The American Law Institute
Cyndy, Shelby, Kennedy and Kristin formed Double Dawn Paddle Board Yoga LLC as a manager-managed LLC naming Kennedy as the managing member. A local yogurt entrepreneur approaches Shelby offering to be the exclusive provider of pink yogurt for their company to give out after their yoga secessions. Loving pink yogurt, Shelby signs a 10 year contract whereby only their pink yogurt will be provided for their company. When Cyndy, Kennedy and Kristin find out what Shelby has done, they are furious and do not want to be bound by the 10 year contract Shelby signed as they all prefer blue yogurt. What most likely will be the outcome of this scenario?
The contract will not bind the LLC since Shelby did not have the authority to enter into a contract that binds the LLC.
Which of the following is true about sole proprietorship?
The owner reports income and expenses on the owner's own tax return
Corey wishes to start up a railroad reconstruction business called, "Oh Susanna Railroads" with his good friends Mike and Fred. In order to pursue this the business will need to secure a substantial amount of money which is far beyond their own personal assets or creditworthiness. He recently approached you asking if an LLC would be the best option for their business given that the owners of an LLC have limited liability. Which statement below would be the most accurate answer to Corey's inquiry?
While an LLC does have limited liability, given the fact that Corey specifically stated he will need to raise a lot of money, an LLC has limited capitalization methods and may be difficult to raise the required amount needed.
Suppose Joseph and James are shareholders of JJ, Inc and obtain a credit card from BIGBOX Credit Co. James and Joseph use the credit card in good faith to make purchases to operate the business. For several years, JJ Inc conducts business and pays its debts regularly. However, their business industry enters a 'great recession' and many are forced into default. Suppose that BIGBOX sues James and Joseph personally. Will the corporate veil protect them?
Yes, the corporate veil will protect them because they acted in good faith and paid their bills for three years.
Which of the following statements about a franchise is correct?
a franchise faces mandatory disclosures/
To form a corporation, principals file _______ with a state authority that sets out the corporation's name, purpose, number of shares issued, and address of the corporation's headquarters.
articles of incorporation
An LLC is formed by filing the _______ (also called the certificate of organization) with the designated public official in that state, such as the secretary of state or the state's corporation bureau.
articles of organization
A general partnership is legally defined as: ________. (1) (2) who are co-owners and co-managers of the business and (3) who share in the profits of their ongoing business.
association of two or more people; co-owners and co-managers; share profits equally
Two of the major advantages of a pass-through entity are that investors can _______ and _______.
assume the tax deductions and losses; earnings can be distributed without double taxation
The _______ sets the strategy and policies of the corporation and is independent from the shareholders and _______.
board of directors; officers
Large corporations may use more sophisticated forms of debt such as issuing _______ or _______.
bonds; debentures
To claim protection under the _______ rule, a director must have had no financial self-interest (or _______) in the disputed transactions or decision. (Choose two correct answers)
business judgement, self-dealing; duty of loyalty, self-dealing
A(n) _______ agreement allows remaining partners to purchase the partnership interest of a(n) _______ partner.
buy-sell; withdrawing
A corporation's _______ typically specify the date, time, and place for the annual shareholders meetings, as well as the number of officers and directors of the corporation.
bylaws
Under RUPA's default rules, each partner has an equal right to _______ the business.
co-manage
A(n) _______ loan is usually collateralized by an asset of equivalent value typically consisting of the proprietor's personal assets to get a lower interest rate.
commercial
Sole proprietors may raise money through _______ loans which is a more formal process from a lender such as a bank.
commercial
A(n) buy-sell agreement helps ensure the _______ of the partnership business and can avoid legal disputes if a valuation methodology is provided.
continuity
In examining the _______ doctrine, courts consider whether the officer, director, or controlling shareholder learned of the opportunity because of his role in the corporation.
corporate opportunity
Compared to other entities, a(n) _______ has perhaps the most formal filing and reporting requirements.
corporation
LLCs are mainly capitalized via _______ or through the sale of _______ ownership in the LLC itself.
debt; equity
LLPs are capitalized in the same way as a partnership, through _______ or _______.
debt; equity
Limited partnerships are generally funded either through _______ (e.g., by borrowing money from the principals or a commercial lender) or by selling _______ (e.g., by selling a percentage of ownership rights in the partnership and any profits of the business).
debt; equity
Because LLPs are pass-through entities, _______ are _______ and may sometimes help to reduce taxes on other sources of revenue on the individual's tax return.
deductible; losses
The operating agreement must determine if the LLC is a member-managed LLC or a manager-managed LLC so that third parties can:
determine who has the authority to make day to day decisions that bind the LLC
Partners must exercise due care in handling the affairs of the partnership and treat business affairs with _______.
diligence
The Federal Trade Commission regulations focus on mandatory _______ regarding the financial condition of the franchise, success rates, and other important
disclosures
A(n) LLC _______ occurs when an individual member decides to exercise the right to withdraw from the partnership.
dissociation
Frank wants to leave his partnership and wants to stop being a principal. What is this process called?
dissociation
Linda, Nancy and Pam stated an LLC two years again. Nancy wishes to now leave the LLC. This process is called:
dissociation
The process when an individual member of an LLC exercises the right to withdraw from the partnership is called ___________.
dissociation
When a partner no longer wishes to be a principal in the partnership, she may choose to leave the partnership. This is called ______.
dissociation
Upon a dissociation, the remaining LLC members may decide either to continue the LLC, or to trigger a(n)_______.
dissolution
Which of the following is not a part of the winding up process?
dissolution of the partnership
In the state of its incorporation, a corporation is referred to as a(n) ________.
domestic corporation
________ occurs when corporations pay taxes on their earnings, and shareholders pay taxes on any corporate earnings distributed to them in the form of dividends.
double taxation
Courts hold that a director breaches her _______ when she has failed to fulfill her role in oversight.
duty of care
A partner is entitled to a(n) _______ under the default rules.
equal share of profits
A(n) _______ limited partnership is simply a limited partnership that is used for estate planning for families of considerable wealth.
family
The fundamental purpose of a _______ limited partnership is to enable wealthy members of one generation to _______ as a gift to heirs.
family; distribute assets
In some states, if Joan Gates does business as "Gates Consulting" she would file for a certificate of _________ with a local or state office.
fictitious name
A __________ is a business entity that has a proven track record of success and sells the right to operate the business and use the business's trade secrets, trademarks, products, and so on.
franchise
A business entity that has proven track record which sells to another the right to operate the business and use the business's trade secrets, trademarks and products is a:
franchise
A(n) _______ should be thought of as a method of conducting business that centers on a contractual relationship rather than as a business entity.
franchise
Federal statutes define a(n) _______ as an arrangement of a continuing commercial relationship for the right to operate a business with a particular trade name or sell the seller's branded goods.
franchise
A franchisor sells the right to operate the business and use the business's trade secrets a(n):
franchisee
A franchise involves the two parties: the _________ who is a business entity that has a proven track record of success, who sells to a(n) _______ the right to operate the business and use the business's trade secrets, trademarks, and products.
franchisor; franchisee
LLP statutes provide ______ partnerships with the right to convert their entity and gain the protective shield ordinarily afforded only to limited partners or corporate shareholders.
general
Two or more individuals can form a(n) _______ partnership if they have demonstrated an intent to carry on as _______ of a business for profit.
general; co-owners
A limited partnership has at least one _______ partner (managing principal) and at least one _______ partner (investing principal).
general; limited
In a limited partnership, _______ partners manage the business but _______ partners may not participate in daily management of the business.
general; limited
To form a limited partnership, the _______ partner files a certificate of _______ partnership with the state government authority (usually the secretary of state's office).
general; limited
The _______ standard requires that partners exercise appropriate discretion in dealing with other partners and third parties concerning the partnership's business.
good faith
Equal share of profits in a partnership agreement allows partners to receive a _______ salary for the work they will perform on behalf of the partnership.
guaranteed
Each general partner in a limited partnership _______.
has personal liability; is liable for all of the partnership's debts and liabilities
A partnership may be dissolved when the partnership: _______.
has reached its agreed-upon term; by unanimous consent of the partners
In the case of De Lage Landen Financial Services v. Picasso Aesthetic and Cosmetic Dental Spa, Rubin, the sole principal of a professional corporation, lost the veil of corporate protection because:
he gave a personal guarantee
Partnership property is any property that is: _______.
held in the name of partnership; used for partnership business; purchased with partnership funds (also if it is acquired in the name of a partner with their title listed as "partner")
One important factor courts consider in piercing the corporate veil is _______.
inadequate capitalization
What is an advantage of a Subchapter S corporation that a standard corporation does not have?
it does not face double taxation
Which statement below is correct about a sole proprietorship?
it has low start-up costs and minimal filing.
Under RUPA, all partners face ______ liability for contract and tort-related obligations.
joint-and-several
When choosing a business entity, principals should consider the following factors: _______.
liability; taxation; ease of formation (also capitalization; taxation of income; and management & operation)
Perhaps the most important feature of an LLC is the _______ of its members.
limited liability
Frances wants to start a new small business and is seeking advice as to which type of entity would best suit his needs. His businesses has a high potential for liability and therefore he wants to protect his personal assets, but he does not want to spend a lot of time, effort or money in starting the business up or continuing the management of it. Additionally, he is looking for an entity that would give him the best tax advantages. Which type of business organization would suggest?
limited liability company
_______ partnerships are formed when a general partnership files a statement of qualification with the appropriate public official, but the conversion of the partnership must be approved by _______ of the ownership.
limited liability; a majority
A(n) limited partner's liability is _______.
limited to the amount contributed to the partnership
A(n) _______ partnership is an entity that exists by virtue of a state statute and has at least one general partner and one _______ partner.
limited; limited
A corporation formed to maintain a charitable operation is called a:
nonprofit corporation
The RULLCA sets forth seventeen _______ statutory provisions related to liability of the entity and its members that are not subject to change by the operating agreement.
nonwaivable
Partnership and agency law governs the relationship between the partnership and outside third parties and cannot be altered by a(n) _______ agreement.
partnership
A partnership where the partners have not agreed to remain partners until the expiration of a definite term or event is known as:
partnership at will
Property used for the partnership business may become subject to either: _______ or _______.
partnership ownership; partnerships claim to its use
Limited partnerships are _______ entities just like general partnerships.
pass-through
The ability to flow through to the investors the tax deductions and losses that are typically generated by an emerging company or a company with significant up-front debt is an advantage of a:
pass-through entity
If a corporation is a start-up or has limited assets, creditors will almost always require that the shareholders give a(n) _______.
personal guarantee
When dealing with an LLC, landlords often require a(n) _______ from the members whereby the members pledge assets to ensure payment of the business venture's obligations.
personal guarantee
LLC members are insulated from _______ for any business debt or liability (contract or tort) if the venture fails.
personal liability
Under RUPA's default rule, both ______ and _______ must be split equally among all partners.
profits; losses
When an individual begins to carry out a business venture's activities before actually filing the articles of incorporation, the individual is known as a(n) _______.
promoter
If a _______ makes a contract on behalf of a not-yet-formed corporation, she may have some degree of _______ to perform under the contract.
prompter, personal liability
A partnership agreement may limit a(n) _______ to a specified dollar amount.
reimbursement
To date, how many states in the US have adopted all or substantial portions of the Revised Uniform Partnership Act?
About 80 percent, 40 states
Gwendolyn Melvin wishes to start a children's sports store called, "Just Let 'Em Play!" as a sole proprietor. What form must she file so that she can use another name than her own?
DBA Certificate
Many corporations choose to incorporate in Delaware. Which of the following is NOT an advantage to incorporating in Delaware?
Delaware's tax structure provides significant tax benefits to out-of-state corporations incorporating in the state of Delaware
An operating agreement generally includes the following aspects of the LLC: _______.
Governing structure; dissolution; voting rights
Under both _______ and ______, each partner has the right to be informed of the partnership's business.
UPA; RUPA
Under RUPA, a partner's bankruptcy is a(n) _______ by law.
dissociation
A responsibility to act in the best interests of a partnership by the partners is called a(n):
fiduciary duty
A sole proprietor is liable:
for all the debts of the business
In a member-managed LLC, the management structure of the entity is similar to that of a(n) _______, with all the members having the authority to bind the business.
general partnership
Which of the following types of firms are allowed to use the LLP business structure?
law firms; accounting firms; family businesses
The owners of a limited liability company are called which of the following?
members
With regard to taxation, LLPs are treated as:
pass-through entities
Corporations also sell equity, also called ________, to capitalize their operations.
securities
The _______ are the owners of a corporation.
shareholders
A corporation comes into existence when:
the state accepts the articles of incorporation and issues the charter
Reid Sterling owns a sole proprietorship called Dunkle Distributing. Dunkle Distributing is a:
trade name
If Joan Gates wishes to "do business as" Gates Consulting, she would create a(n) _______ or DBA with a local or state office. (Choose all correct answers)
trade name; fictitious name
True or false: A corporation's bylaws are not filed with the state but are kept in the corporate records.
true
If the term in an LLC operating agreement expires but but the members want the LLC to continue, they must have a _______ vote to fix an additional term.
unanimous
If a partnership does not want to abide by the default rules promulgated by the RUPA and/or the UPA, the partners
Can override the default rules by a partnership agreement
Christin and Paola operate a business in which both have contributed $50,000 to the business's capitalization. Christin makes all business decisions, and Paola made Christin sign a partnership agreement saying that Paola is liable only for partnership debts up to $50,000.
Christin is a general partner, and Paola is a limited power
Which of the following does not require a duty of care or good faith to other principals?
a sole proprietorship
The RULLCA does not allow any manager or member to avoid personal liability based on her _______ or _______.
bad faith; willful misconduct
A venture capital firm is a group of professional investors using private equity to:
develop a business
Because it is not a taxable entity, an LLP:
files an information tax return
Sole proprietorships are limited in their options for raising money. These options include which of the following?
financing using the proprietorship's personal resources; financing the business through debt
Corporate formalities include all of the following except:
find investors
In partner-to-partner transactions, each partner owes each other _______.
full disclosure
A(n) _______ partnership is legally defined as: (1) an association of two or more people (2) who are co-owners and co-managers of the business and (3) who share in the profits of their ongoing business.
general
A close cousin to a commercial loan is a commercial ______ which allows a proprietor to draw against a predetermined credit limit.
line of credit
Similar to the board of directors in a corporation, an LLC may have:
managing members
In 1997, the IRS made LLCs
more attractive by eliminating strict operating requirements for qualifying as a partnership for tax purposes
Jed wants to pass his sole proprietorship on to his son Luke in his will. Can her do this?
no.
_______ carry out the directors' set course of direction through management of the day-to-day operations of the business.
officers
For tax purposes, LLPs are treated as _______.
pass-through entities
When choosing a business entity, principals should carefully consider the extent of _______ for debts and contracts.
personal liability
The origins of LLPs were rooted in protection of:
professional service partnerships
The United States Postal System is an example of what type of corporation?
public
Corporations are classified into one or more categories that reflect their overall _______.
purpose; capitalization; structure (also location)
Most states recognize at least ______ forms of business entities.
six
A partner violates his duty of loyalty if he personally takes advantage of a business opportunity that _______.
would have benefited the partnership
CJ and Danny have incorporated and obtained a $100,000 loan in their corporate name. The loan is payable with interest over five years. After paying on the loan regularly for two years, the business falters due to the economy, and CJ and Danny default on the loan. Their business has no assets. Which of the following statements best describes CJ and Danny's liability in this case?
CJ and Danny have no personal liability for the debt unless they pledged personal assets as collateral or signed a personal guarantee
The _______ is the federal regulatory authority that oversees the regulation of franchisors.
Federal Trade Commission (FTC)
Generally, in a(n) _____ all partners have liability protection for debts and liabilities of the partnership.
LLP
Fred, Mike, Reid and Connor create Double Done LLC, a family recreation center. Their operating agreement specifically states that Mike will make the day to day decisions and that Fred, Reid and Connor will have little input except for major decisions. This type of LLC is:
Manager-managed LLC
Mariel owns a toy store, which is a sole proprietorship. She wants to retire. What is the best way for Mariel to transfer the ownership of her business?
Mariel can sell the assets of the business to another party.
Limited partnerships may not sell ownership rights through the ______.
NYSE; NASDAQ
Stanton and Francesca have started a general partnership. Stanton has contributed 95 percent of the start-up capital and has the business experience and contracts, while Francesca's primary contribution is the labor necessary to operate the business. Management decisions are jointly made. At the end of the year, the business has shown a $100,000 profit. Stanton and Francesca have no formal written partnership agreement.
The RUPA mandates that each get $50,000
Which of the following require(s) a formal filing to be recognized as a valid business entity?
a limited partnership
With regard to taxation of partnerships,
a partnership must must file an information return
Which of the following gives a person the right to vote at an annual meeting?
a share of stock
A disagreement among partners is resolved through ______, and a _______ is usually required to win.
a vote; majority vote
A franchise conducts business:
according to an established contract
In a manager-managed LLC, non-managing members generally do not have the authority to: _______.
act on behalf of the business venture
Situations that require a unanimous vote under the RUPA include: _______.
admission of a. new partner; acts outside the ordinary course of business; amending the partnership agreement)
A partnership is considered fully terminated:
after winding up
A corporation formed outside the United States that transacts business in the United States is known as a(n) _______.
alien corporation
Today, _______ recognize LLCs and provide both procedural (formation) and internal default rules (in the event the parties are unable to agree otherwise) for the operation of LLCs.
all states
All of the following statements are true about double taxation except:
an LLC cannot face double-taxation
Under RUPA's default rules, each partner is entitled to receive _______ of the partnership's profits regardless of the partner's degree of involvement in the success of the business.
an equal share
A sole proprietorship is terminated either by _______ or by _______ in the case of the death or personal bankruptcy of the proprietor.
an express act of the principals; operation of law
Under the RUPA partners are not liable if they make a business decision that results in harm due to _______.
an ordinary mistake of judgement
A proprietors ownership interest in a sole proprietorship _______ to her heirs through a gift or an estate.
cannot pass
The _______ lists how much value each partner has contributed to their _______ capital accounts.
capital contribution; individual
Partners may wish to structure profits and losses to reflect: _______ or _______.
capital contributions; amount of work
LLC managers owe fiduciary duties of ______ and _______ to the other LLC members.
care; loyalty
Another name for articles of organization is:
certificate of organization
One of the first considerations for principals forming a corporation is _______.
choosing the state in which to incorporate
A sole proprietorship is generally not subject to _______ income taxation, and no tax return is filed on behalf of the business.
corporate
In a minority of the states, the articles of incorporation are called the:
corporate charter
Even after commencement of business operations, officers and directors have a responsibility to comply with _______.
corporate formalities
Corporations often borrow money from either: _______ or _______ to fund day-to-day operations.
corporate lenders; private investors
Generally, the ___ shields shareholders, directors, and officers of a corporation from personal liability in case the corporation runs up large debts.
corporate veil
Unlike a(n) _______, an LLC does not issue shares.
corporation
A(n) personal guarantee allows a _______ to obtain a judgment against the personal assets of one or more shareholders in the event of a default by the corporation. (Choose two correct answers)
creditor
The RULLC attempts to clarify the following two matters: _______ and the _______
deadlocks; rights of departing LLC members
An LCC is a flexible type of business entity that offers its owners many advantages:
easy formation; flexible operation; limited legal liability of the owners (also pass-through taxation)
Unless the partnership agreement specifies otherwise, all partners have which of the following?
equal management rights
Dissolution of an LLC is a process triggered by a(n) _______ or by a(n) _______ to dissolve the company.
event stated in the operating agreement; decision made by the members
In a limited partnership, one of the primary differences between general partners and limited partners is: _______.
extent of day-to-day management
Courts will sometimes pierce the corporate veil when _______ demands it.
fairness
True or false: Dissociation is the only way that a partnership may be dissolved.
false
A corporation is a(n) _______ legal entity that exists as an independent individual separate from its principals.
ficticious
Partners owe each other other several _______ duties which means acting in the partnership's best interests.
fiduciary
The duty of a partner to act in the best interests of the partnership is called ___________ duty.
fiduciary
A(n) _______ distributes its products to a broader market without the overhead costs of retail space, equipment, and employees.
franchise
In a limited partnership, the _______ partner is responsible for filing an information return with taxing authorities, but limited partnerships do not incur _________ tax liability for their profits.
general; corporate
Generally, a(n) _______ partner may withdraw at any time without causing _______ of the partnership.
general; dissolution
In analyzing the corporate opportunity doctrine, courts look for _______ and _______.
good faith; disclosure
The principal of a sole proprietorship reports business income and expenses on her own _______ and pays taxes on business income (or deducts business losses) based on the applicable _______.
individual tax return, individual tax rate; corporate tax return, individual tax return
Limited partnerships are required to file a(n) _______ return with the IRS each year.
information
Chaplan Corporation is a privately held corporation that wishes to offer ownership interests to the general public and commercial investors in order to generate more capital. This process is called:
initial public offerings
Officers, directors, and controlling shareholders of a corporation (known as _______) are in a unique position of trust to guide the corporation in a certain direction.
insiders
Currently, LLPs are often used to protect family businesses as they provide a way to resolve
issues of family fiduciary duties and rights to represent and bind the businesses
Which statement below is correct about a promoter's liability?
it ceases to exist at the moment the corporation is formed
The biggest advantage of a(n) _______, which is typically secured by collateral, is that the borrower only pays interest on the funds actually drawn instead of the full amount of a loan.
line of credit; secured
By law the capital contribution must be returned to each partner when the partnership assets are _______.
liquidated
The _______ prohibits a general partner from engaging in competition with the interests of the partnership and also prohibits other conflicts of interest.
loyalty; duty of care
Most states require the LLC articles of organization to contain only basic information, such as: _______.
name of entity; location of the principal place of business; names of owners
Under the RUPA, a partnership agreement may _______ the fiduciary duties.
not completely eliminate
The corporation's _______ are hired by the board and carry out the day-to-day operations of the corporation, by executing the strategy and mandates set out by the board of directors.
officers
All income and losses of an LLP are reported:
on the partners' individual returns
Evan wishes to start an LLC that will do businesses in Florida, Vermont and Alaska. In which state(s) must he file the articles of organization?
only one of the three states
LLCs frequently are governed by an agreement of its members in the form of a(n) ________.
operating agreement
The amount and methods of capitalizing an LLC are often controlled by the:
operating agreement
Like _______ agreements, _______ agreements cover many of the internal rules for the actual operation of the business, including a flexibility in terms of the rights and responsibilities of each member.
partnership; operating
In the context of business entities, ________ is a generic word for individuals who are entitled to the profits of a business based on their.
principal
The person who is entitled to the profits of a business based on the percentage of ownerships is:
principal
In a sole proprietorship, all debts and liabilities of the business are also personal debts and liabilities of the __________.
principal; owner; sole proprietorship
Each form of business entity has its attendant advantages, drawbacks, and legal consequences for the owners, known as ________, of the business.
principals
An LLC offers principals the same liability coverage as that of:
principals in corporations with pass-through taxation
_______ loans are typically through individuals who negotiate such items as interest rate directly with the proprietor.
private
_______ loans come from family members and friends and are paid back according to their individual agreement.
private
The most common type of corporation is the _______ corporation which does not sell ownership interests to the public.
privately held
_______ corporations have substantial flexibility in terms of their internal operating procedures and do not generally have to comply with rigorous corporate structures or formalities.
privately held
_______ corporations may also find that their expansion plans require even more capital than can be raised using private investors.
privately held
Matt and Mindy wish to incorporate their business but want to limit who can buy ownership interests in their business. Which type of corporation would you suggest?
privately held corporation
The two major categories of corporations are ______ and _____.
privately held; publicly held
In a general partnership:
profits and losses may be unequally split based on the partnership agreement
Fundamentally, officers and directors must exercise the degree of skill, diligence, and care that a(n) _______ would exercise under the same circumstances.
reasonably prudent person
If a partner within the ordinary course of business makes a payment on behalf of the partnership, the partner must be _______ for the expense.
reimbursed
A right to be informed about the partnership business involves the right to: _______.
request and review contracts; review minutes taken during meetings; financial information
When there is a possibility of _______, shareholders who have some degree of control over corporate decisions owe a duty of loyalty, especially to _______ shareholders.
self-dealing, minority
Businesses that are _______ and have a relatively low potential for liability usually do not require the protection and flexibility offered by more complex forms of business entities.
self-funded
Fundamentally, corporations are structured around an allocation of power based on three categories: _______.
shareholders; directors; officers
Inadequate capitalization may mean that a corporation is a(n) _______ company with nothing invested, or that _______ siphoned the profits and assets.
shell; shareholders
In cases where an LLP partner has engaged in some misconduct or tortious conduct, the LLP acts to _______, and _______.
shield the personal assets of other partners, not the partner who committed the negligence
The RUPA states that any partner may _______ on behalf of the partnership that is within the ordinary course of the partnership's business.
sign a contract; makes decisions that are binding on all partners
In Lewis v. Moore, the court ruled:
since Moore was a sole proprietor she was gree to dissolve it at any time; the sole proprietor has the right to dissolve the proprietorship at any time.
Raul wants a simple method to start-up a small marketing company. The marketing firm has relatively low revenue and expenses. Which type of business entity would you suggest?
sole proprietorship
The chief drawback to the _______ as a form of entity is the owner's complete lack of protection for unpaid debts and liabilities of the business.
sole proprietorship
The easiest single-person ownership entity to form and maintain is a(n) _______.
sole proprietorship
The simplicity of the _______ makes this entity a top choice for start-up businesses with relatively low annual revenues and expenses.
sole proprietorship
Because it is a pass-through entity, an LLC can avoid double-level taxation, which means _______.
taxes imposed on both the entity and its members
All of the following are characteristics of a general partnership except:
the association is only recognized in the state of incorporation
In Smith v. Van Gorkom, the court considered whether the business judgment rule protected board members who permitted the sale of a significant amount of stock by the retiring chairman of the board at an undervalued price, devaluing the company. Regarding the board's liability, in this case, the court stated each of the following except:
the board in this case had the expertise to make decisions without consulting outside experts but made a poor decision.
The business judgment rule protects officers and directors from liability for decisions that may have been unwise but did not breach ______.
the duty of care
Happy Hops Brewery Inc., has found that its business is expanding very quickly. The decision to fire three new delivery drivers would be made by:
the officers
Limited Liability means that:
the owners' personal assets are insulated from any business debts or liability if the LLC fails
Which of the following is NOT a right enjoyed by a shareholder of a corporation?
the right to elect and remove officers
The main goal of both the ULLCA and the RULLCA is:
to promote uniformity among various state LLC laws
True or false: In a partnership agreement, if all the partners agree that Billy's capital contribution should be greater because he has provided the lyrics and melodies for the band's songs, he may be entitled to a higher proportion of the profits.
true
When examining whether the business judgment rule applies, most courts look at the following factors: _______.
used the best information available; rational belief; no private interest
Under RUPA a majority of dissociations are the result of one of the following three events: _______, or _______, or _______.
voluntary separation from the partnership; a partner's bankruptcy; one partner gives specific notice to withdraw
