BUL 3310 Unit 12

All of the following are considered advantages to a Limited Liability Partnership, except: -A limited liability partner is always insulated from personal liability of he or she commits malpractice. -A limited liability partner can avoid personal liability for partnership debts. -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 is always insulated from personal liability of he or she commits malpractice.

Which of the following parties could claim an artisan's lien? -A common carrier of goods. -A jeweler who repaired a watch -The owner of a storage facility -All of the above are eligible for an artisan's lien.

All of the above are eligible for an artisan's lien.

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

Artisan's lien.

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

Avoids double taxation

Rod and Todd have joint and several liability as sureties on a loan made to Rod's business by First Bank. Under this agreement, Todd is a _________________. -General guarantor -Special guarantor -Co-surety -Sub-surety

Co-surety

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. -Reimbursement -Indemnification -Contribution -Subrogation.

Contribution

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

Defaults.

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

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

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

False

Limited Liability Companies are one of the oldest forms of business organization

False

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

False

The Statute of Limitations does not apply to surety contracts.

False

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

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. -Fidelity -Performance -Bank -Fiduciary

Fidelity

When a ________ is purchased, a bonding company promises to pay an employer any loss, not to exceed a stated amount, caused by the covered employees' embezzlement. -Performance bond. -Fidelity bond. -Security agreement. -Nonperformance bond.

Fidelity bond.

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 partnership -General corporation -Limited liability corporation -Limited partnership

General corporation

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? -General corporation -General partnership -Limited partnership -Limited liability partnership

General partnership

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

Guarantor.

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

Limited Liability Partnership

All of the following could be recognized as advantages of doing business as a limited partnership, except: -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. -Limited partners can invest in a partnership while effectively protecting their personal assets. -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 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? -General partnership -Limited partnership -Limited Liability Partnership -Limited Liability Company

Limited partnership

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

Manager-managed

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

Manager-managed

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. -Partners can share in management of the partnership. -Partners can share partnership profits. -The general partnership allows for quick, easy and immediate control.

Partnership liabilities in a general partnership are limited to the amount of capital contribution.

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

Special guarantor.

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

State statutes

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

Subsurety.

A ________ provides security for a creditor without involving an interest in the property, where the security for the creditor is provided by a third person's promise to be responsible for the debtor's obligation. -Suretyship. -Artisan's lien. -Mechanic's lien. -Foreclosure sale.

Suretyship.

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

The Articles of Organization.

In a suretyship, security for the creditor is provided by -Granting the creditor an interest in the debtor's real property -A statutory lien on the debtor's personal property. -The promise of a third party to perform if the debtor does not perform. -A pledge by the debtor of personal property.

The promise of a third party to perform if the debtor does not perform.

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

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

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

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

True

Co-sureties share joint and several liability to the creditor

True

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

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

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

True

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

True

The two types of guaranty agreements are general and special.

True

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

True

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

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. -Satisfaction and accord. -Waiver. -Collection proceeding. -Confessed judgment.

Waiver.

Absent an agreement otherwise, the members of an LLC have a statutory right to -approve a merger -dissolve the LLC -inspect the books and records of the LLC -all of the above are statutory rights

all of the above are statutory rights