LEGAL3000 CH 4

T/F A limited liability partnership limits the liability of general partners.

False

T/F Profits and losses from an LLC must be distributed in the same proportion to all members

False

T/F Some small businesses may issue stocks to employees instead of compensation when money is tight.

True

T/F The designation of d/b/a refers to the description for a business that is operating under a fictitious name.

True

True or false: A general partnership is considered a legal entity.

True

Which of the following is NOT TRUE of LLC taxation? a. An LLC must retain all losses. b. Losses in an LLC are not required to be distributed evenly among members. c. An LLC may be taxed as either a partnership or as a corporation d. An LLC is not taxed at the entity level

a. An LLC must retain all losses

Hudson's Bay Company, a Canadian department store chain, is a example of a ______________corporation. a. alien b. not- for-profit c. foreign d. domestic

a. alien

New contracts of a corporation are also called___________. a. novations b. articles of incorporation c. promotions d. subchcapter S agreements

a. novations

Corporations created to assist doctors, lawyers, accountants, and so on are known as ______________corporations. a. professional b. closely held c. not-for-profit d. alien

a. professional

Which of the following is true of tort liability in general partnership? a. If only one partner commits the tort, the partners cannot be jointly sued. b. A partner can be sued even if he/she did not commit the tort. c. Only the partner who committed the tort is liable. d. If the partner who committed the tort is released from the partnership, the other partners are not liable.

b. A partner can be sued even if he/she did not commit the tort.

The Managing Partners of a limited partnership is known as the __________ partner. a. Specific b. General c. Liable d. Limited

b. General

The ________________makes decisions regarding the day-to-day operations of a corporation. a. board of directors b. executives c. shareholders d. capital investors

b. executives

Common Stock Shareholders generally have____________, including the right to purchase newly issued stock, over other parties. a. Shareholders voting rights b. preemptive rights c. rights to company ownership d. preferred rights

b. preemptive rights

Which of the following is NOT TRUE of bonds? a. The collateral of a bond is a business's credibility and its ability to repay the loan. b. Physical assets may be used as collateral on a bond. c. A corporation may issue a bond of any amount regardless of its earnings d. A bond is a debt security sold to investors.

c. A corporation may issue a bond of any amount regardless of its earnings

Which of the following is NOT TRUE of corporations? a. Executives carry out the day-to-day operations of the corporation b. Directors will not be subject to lawsuit from shareholders as long s they act in a reasonable and prudent way. c. Executives are not subject to the same duty of care in carrying out the corporations's purposes as the board of directors. d. The board of directors hires executives of a corporation.

c. Executives are not subject to the same duty of care in carrying out the corporations's purposes as the board of directors.

The ____________partner of a limited partnership may invest capital, but may not participate in management of the business. a. Specific b. General c. Limited d. Liable

c. Limited

Peter's Pet Palace, a pet store chain with five shareholders, is an example of a _______________corporation. a. publicly held b. not-for-profit c. closely held d. professional

c. closely held

A ________________is a distribution of corporate profits to shareholders. a. Preferred stock b. common stock c. dividend d. bond

c. dividend

HealthyUS is a corporation formed in Maine, but it now operates in Vermont. This is an example of a ____________corporation. a. alien b. not-for-profit c. foreign d. domestic

c. foreign

Limited liability company owners are called ___________. a. general partners b. directors c. members d. limited partners

c. members

If the object of the partnership may not be completed in _________________, the partnership must be in writing. a. two years b. six months c. one year d. five years

c. one year

Which of the following is NOT TRUE of general partnerships? a. Partners have joint ownership of business assets b. Partners share profits and losses according to the partnership agreement. c. partners must always agree to split the profits and losses evenly d. Partners have an equal right to engage in the management of the business.

c. partners must always agree to split the profits and losses evenly

In a sole proprietorship, the sole proprietor assumes _________________ liability. a. organizational b. zero c. personal d. limited

c. personal

A ____________is the most common form of U.S. business. a. limited liability company b. limited partnership c. Sole proprietorship d. general partnership

c. sole proprietorship

All must be included in an article of incorporation EXCEPT which of the following? a. the corporate name and address b. the number of shares to be issued c. the executives' names and addresses d. the agent of service

c. the executives' names and addresses

All should be included in a certificate of limited partnership EXCEPT which of the following? a. A description of the partnership b. A list of all members of the partnership c. A statement of the partnership's purpose d. A scope of potential business opportunities and investment.

d. A scope of potential business opportunities and investment

Which of the following is NOT TRUE of a business operating under sole proprietorship? a. A sole proprietor pays only personal taxes. b. No government approval is required to set up a sole proprietorship. c. If the owner dies, the business usually dies as well. d. A sole proprietorship is considered a separate legal entity.

d. A sole proprietorship is considered a separate legal entity.

Which of the following is not true of the owner of a sole proprietorship? a. He or she bears 100 percent of liability for claims against the business. b. He or she is personally responsible for all contracts into which he or she enters. c. His or her only access to capital is that which can be developed on his or her own. d. He or she is required by law to adopt a fictitious business name.

d. He or she is required by law to adopt a fictitious business name.

Which of the following is true of general and limited partners in a limited partnership? a. General and limited partners are jointly responsible for partnership debt. b. General partners are not liable for partnership debts. c. General partners are required to invest capital and refrain from managing the business. d. Limited partners are not liable for partnership debts.

d. Limited partners are not liable for partnership debts

Members of a general partnership have a _________relationship to each other; that is, each owes the other a due care in actions associated with partnership. a. legal duty b. general duty c. information duty d. fiduciary

d. fiduciary

Stock that is more expensive to purchase but carries higher dividends and a priority right to purchase other stock offered is known as ________ stock. a. capital b. common c. preemptive d. preferred

d. preferred