BUL 3310 Exam 4 true and false

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LLC combine the limited liability of the partnership and the tax advantages of corportations

false

Limited Liability companies are one of the oldest forms of business organizations

false

Vic and Thom bought an antique corvette at auction with the intent of restoring it and selling it for a profit, which they will share equally. Vic and Thom have formed a professional association

false

a business organized as a proprietorship may have up to, but not more than 35 owners

false

a commonly citied disadvantage of an LLC is that its members often risk personal liability if the business of the LLC fails

false

a creditor can never be required to give the surety notice that the debtor is in default

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

false

a creditor must exhaust his or her judicial remedies against the principal before seeking to recover from the surety

false

a directors duty of care under the business judgement rule is a lower standard than that of professional negligence

false

a disadvantage of the limited liability company is that profits are taxed both as income to corporation and as dividends to the membes

false

a doctor who practices as part of a professional association cannot be sued for malpractice

false

a joint venture cannot sue or be sued

false

a lien for the value of materials and labor used in the construction or improvement of real property is an artisans lien

false

a limited partnership has to have at least two general partners and at least one limited partner

false

a member of an LLC can never be personally liable for the debts of the LLC

false

a partner's capital contribution may consist in business experience or service to the firm

false

a partnership cannot have a provision for the continuation of a partnership upon death of one of the partners

false

a partnership is a taxable entity

false

a shareholders desire to discover why a dividend was not paid is not a "proper purpose" for allowing the shareholder access to the corporations records

false

a shareholders right to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption

false

a surety and guarantor have always been treated as the exact same

false

a suretyship provides a lien credit a legal interest in the property of the debtor to secure repayment of the loan

false

absent an agreement otherwise, each partner is entitled to compensation for his or her services in managing business

false

an artisans lien is a special lien that applies exclusively to the liens artists receive on artwork they personally performed

false

an artisans lien is always assignable

false

an improvement to real property necesarily increases the market value of the real propety

false

an llc must have at least two members that participate in management in order to lawfully do business.

false

any money recovered in a successful derivative suit belongs to the shareholder who initiated the suit

false

any profits which a surety makes when called upon to perform the principals duties belong to the surety

false

any profits which a surety makes when called upon to perform the principals duties belongs to the surety

false

article 2A of the Uniform Commerical Code governs the sale of securities

false

bob voluntarily surrenders a watch that he repaired back to the owner. Bob had a lien on the property for the value of his labor. Bob later re-acquires the property. Bob has no revived his lien since he was able to re-acquire possession of the property.

false

bonding companies are usually uncompensated sureties

false

compared to other business entities, a general partnership requires filing complex documentation with the secretary of states office before it is authorized to do business

false

courts will allow creditors to pierce the corporate veil of any corporation that has only one shareholder

false

directors and shareholders may vote by proxy

false

directors have no personal liability for illegally declared dividends

false

directors may be compensated by their services

false

directors may vote on matters in which they have personal interest

false

if a partner assigns his or her interest in a partnership to a creditor, the assignee steps into the shoes of the pater and becomes entitled to participate in the management of the business

false

if you form an LLC you are required to have a written operating agreement

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

false

in a closely helf corporation, the majority shareholders have a statutory duty to purchase the stock of a minority shareholder who has died

false

in a limited liability company, the unanimous consent oft eh member is required to hire a new employee

false

in a limited partnership, a general partners fiduciary duty is breached when limited partners are not permitted to participate in managment

false

in a limited partnership, each limited partner has an equal right to participate in the management of the business

false

in a manager-managed LLC, only the manager-members have acsess to LLCs books

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 tiime

false

individual members of the LLC can never bind the LLC in a valid enforceable contract

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

false

limited partnerships must have one general partner for every seven limited partners

false

limited partnerships offer a convenient way for professional and family-owned enterprises to do business

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

false

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

false

misconduct of the principal that induces a party to become a surety allows that surety to avoid the contract

false

modernly, surety and indemnification contracts are the same thing

false

one of the disadvantages of a limited liability partnership is double taxation

false

participating preferred stock allows holders to trade their preferred shares for common shares when the trading price reaches a specified target

false

partners may use partnership property for both partnership and personal reasons

false

partnerships are required to give notice to creditors when they dissolve, but corporation are not required to give notice of their dissolution

false

partnerships are required to use the term "company" in their names

false

receivers have liability on the pre-incorporation contracts of the corporation

false

shareholders are taxed on the value of the stock they receive in the stock dividend

false

shareholders have virtually unrestricted access to corporate books and records

false

state laws regulating the sale of securities within the state are called red herring laws

false

stock that is issued and then repurchased by a corporation is watered stock

false

the articles of incorporation are drawn up at the first organizational meeting of the corporation

false

the general contractor is eligible for a mechanics lien on the real property, but the subcontractors on the project are not

false

the majority of states have not yet enacted limited liability partnership enabling statues

false

the owner may be liable for more than the contract price even if they follow the statutory procedures

false

the owner of a limited liability company (LLC) has unlimited personal liability for the debts of the LLC

false

the partnership must pay interest each year on the capital contributions of the partners

false

the person appointed by a corporation to receive service of process is the receiver

false

the release of the principal always releases the surety

false

the statue of limitations does not apply to surety contracts

false

the surety relationship requires good faith, but not fair dealing

false

there must be an equal ratio of limited partners to general partners in all limited partnerships

false

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

true

BOTH performance bonds and fidelity bonds are sureties

true

LLC are taxed as partnerships unless the owners choose to be taxed as a corporation

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

a buy and sell agreement normally specifies the terms under which a withdrawing or deceased partner's interest will be bought out

true

a buy and sell agreement specifies the terms under which a withdrawing or deceased partners interest will be bought out

true

a corporation is a person for purposes of the due process clauses of the 5th and 14th amendments

true

a corporation must qualify to do business in each state where it conducts business activities

true

a corporation officer may be personally liable to the injured third party if he or she aided the corporation in violating a copyright infringing on a patent

true

a creditor can assign a general guarantors promise to a new creditor for value

true

a directors duty of care is that of a normally prudent businessperson in the management of his or her own affairs

true

a general guarantors promise is not limited to a single transaction

true

a limited partner has liability to the full extent of his or her capital contribution

true

a limited partner normally has no liability beyond his or her contribution

true

a limited partner risks personal liability when he or she actively participates in the management of partnership affairs

true

a limited partnership allows limited partners to be only liable for their capital contribution

true

a limited partnership must have at least one general partner and one limited partner

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

a partner in a trading partnership has the implied power to make warranties on goods sold by the partnership

true

a person may become a partner without making capital contribution

true

a principal who is discharges in bankruptcy is released from his duty to reimburse the surety

true

a promotor has a fiduciary responsibility toward the prospective corporation

true

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

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

a shareholder who holds watered stock is potentially liable to the creditors of the corporation should the corporation become insolvent and unable to meet its obligations

true

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

true

a sub-surety becomes liable to the creditor only when another surety fails to perform

true

a subchapter s corporation is taxed the say way a partnership is taxed

true

a surety who only guarantees collection is entitled to notice

true

a suretys obligation is generally a promise to do what the principal agreed to do

true

absent an agreement otherwise, a limited liability company's operating agreement can only be amended with the unanimous consent of the members

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

because the LLC is a relatively new type of business entity, there are often fewer published court options adressing LLC issues

true

boards of directors normally have the power to purchase insurance to indemnify directors who are sued personally for corporation related actions

true

both contractors and subcontractors are entitled to a mechanics lien against the owner for nonpayment of their accounts

true

california and new york allow only professional services firms to do business as limited liability partnerships

true

co-sureties share joint and several liability to the creditor

true

contractors have a long period in which to file mechanics liens that subcontractors of suppliers have

true

contracts of suretyship are legally indistinguishable from contracts of indemnity

true

corporations normally have the power to make charitable contributions

true

courts will not allow a merger of corporations if the only purpose is to get rid of minority shareholders

true

directors are fiduciaries of the corporation and may have liability to both contract and tort

true

if a credit gets a judgment against the creditor, and then surety pays the creditor, the surety gets to benefit from the judgement that was obtained by the creditor

true

if a director discovers illegal activity he or she must report the activity or problem, and if the officers of the corporation refuse to take action, the director must resign and notify the appropriate authorities

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

if the formalities of creating limited partnership are not met, a partnership will be treated by courts as a general partnership

true

if the principal does not default, the surety never becomes liable to the creditor

true

in a closely held corporation, shareholders owe each other substanitially the same fiduciary duties that partners owe one another.

true

in a limited liability company, the losses stay with the corporation although the profits pass through to the shareholders

true

in a manger-membered LLC, an individual or small group has the authority to control and make decisions for the LLC

true

in a member managed LLC all members participate in managment

true

in a member-managed LLC all members participate in management

true

in most states corporations can have perpetual existence

true

in the majority of states an LLC can be both formed and managed by only one member

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

legal capacity is the ability of an organization to sue and to own property

true

limited partners may lose the full amount of their capital contribution if the limited partnership incurs debts that exceed its assets

true

limited partnership must have at least one general partner

true

members of professional associations and professional corporations are eligible under the tax code to participate in pension and profit sharing plans

true

modification of the creditor-principal agreement generally discharges the surety

true

most states consider a shareholder attempt to oust management to be a proper purpose for allowing shareholders access to corporation books and papers

true

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

true

once a cash dividend is declared, it becomes a debt of the corporation

true

one partner has the ability to veto admissions of a new partner into the business

true

one recognized advantage to a general partnership is that it allows partners to share in managment and profits of the partnership

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

partnership must be kept in the firm's place of business and be accessible to all partners

true

partnerships typically buy life insurance policies on each partner in order to fund the required pruchase of the partner's interest in the partnership when the partner dies.

true

premiums paid by corporations for the health insurance it provides employees are tax-deductible exprense

true

professional corporation are business entities organized under state law

true

professional corporations are under business entities organized under state law

true

relative to corporate and partnership law there is not a comparable amount of case law involving LLCs.

true

restatment of security treats contracts of suretyship as interchangeable with guarantor contracts

true

shareholders are entitled to notice when a special meeting is called

true

shareholders may dissent from both stock-for-stock mergers and cash-for-stock mergers

true

shareholders may vote on matters in which they have a personal interest

true

shareholders of a corporation may also be employees of that corporation

true

shareholders of corporations pay taxes on the dividends distributed by the corporation

true

some states use the alter ego theory to require corporations to assume liability for contracts negotiated on their behalf by the promotors

true

state law determines whether or not a mortgage will have priority over a mechanics lien

true

state laws regulating the sale of securities within the state are called blue sky laws

true

states have statue of limitations limiting the time after the dissolution of a corporation when creditors of the corporation may sue former shareholders on corporate debts

true

stock warrants are not transferable and cannot be sold on any stock exchange

true

subrogation means the substitution of one person in place of another

true

surety agreements may also be created by operation of law

true

the admission of a new partner automatically dissolves the partnership

true

the agreement to purchase stock in a future corporation is a pre-incorporation subscription

true

the bankruptcy of a parter will cause the dissolution of the partnership by the operation of law

true

the business judgment rule protects directors who are loyal and careful, from liability for business decisions that results in loss to the corporation

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

the directors duty of loyalty continues after the directors resignation

true

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

true

the manager of a manger-managed limited liability company may be a non-member

true

the party who signs the application for a corporate charter is the incorporator

true

the provisions of the law and partnership agreement govern the operations of the partnership

true

the surviving corporation in a merger assumes the liabilites and obligations of the merged corporation

true

the surviving partner is entitled to compensation for winding up the affairs of the partnership

true

the tax code does not allow corporations to deduct as expenses excessive or unreasonable compensation to officers and employees

true

the two types of guaranty agreements are general and special

true

to create a limited liability corporation, articles of organization must be filed with the state's secretary of states office

true

under rupa, a partnership may take title to real life property as a tendendcy in partnership

true

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

true

usury laws do not apply to corporations when they borrow money

true

voluntary surrender of persona property subject to an artisans lien generally terminates the lien

true

when dealing with an absolute guarantor, the creditor does not have to first attempt to collect from the debtor prior to proceeding agains the guarantor

true

when holders of mechanics 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


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