BUL Unit 15
A lien for the value of material and labor expended in the construction of buildings and other improvements is a ____ . Mechanic's lien Atsy lien UCC 9 lien General power lien
Mechanic's lien
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.
A creditor can assign a general guarantor's promise to a new creditor for value. True False
True
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
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
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
A surety will remain liable when the creditor-principal agreement is modified if the surety consents to the modification Before the modification takes place At the time the modification takes place After the modification takes place Any of the above
Any of the above
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. Artisan's Mechanic's Judicial Guarantor's
Artisan's
A member of an LLC can never be personally liable for the debts of the LLC. True False
False
The majority of states have not yet enacted Limited Liability Partnership enabling statutes. True False
False
The owner may be liable for more than the contract price even if they follow the statutory procedures. True False
False
The release of the principal always releases the surety. True False
False
The surety relationship requires good faith, but not fair dealing. True False
False
In which of the following business forms are profits taxed at both the entity level and the owner level? General corporation Limited Partnership LLC LLP
General Corporation
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
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 Partnership Limited Liability Partnership General corporation Limited liability corporation
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
LLC's are taxed as partnerships unless the owners choose to be taxed as a corporation. True False
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.
Misconduct of the principal that induces a party to become a surety allows that surety to avoid the contract. True False
False
The general contractor is eligible for a mechanic's lien on the real property, but the subcontractors on the project are not. True False
False
A Limited Partnership must have ____________. At least one limited partner who participates in management decisions. An equal ratio of limited partners to general partners. At least one general partner. Equal capital contributions from both limited and general partners.
At least one general partner
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 Co-surety Special Guarantor
Co-surety
In a _______, a creditor must have made reasonable but unsuccessful attempts to collect from the principal before the guarantor can be held liable. Absolute guaranty. Unconditional guaranty. Conditional guaranty. Satisfaction guaranty.
Conditional guaranty.
Persons who contract with the owner to furnish labor or material or construct a building are known as _________. Contractors. Subcontractors. Authorized agents. Mortgagees.
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. Reimbursement Indemnification Contribution Subrogation.
Contribution
An artisan's lien is a special lien that applies exclusively to the liens artist receive on artwork they personally performed. True False
False
An artisan's lien is always assignable. 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
Bob voluntarily surrender's a watch that he repaird 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 now revived his lien since he was able to re-acquire possession of the property. True False
False
Bonding companies are usually uncompensated sureties. True False
False
If you form an LLC you are required to have a written operating agreement. 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
Individual members of the LLC can never bind the LLC in a valid and enforceable contract. True False
False
LLC combine the limited liability of the partnership and the tax advantages of corporations. 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
Limited Liability Companies are one of the oldest forms of business organization True False
False
Limited partnerships must have one general partner for every seven limited partners. True False
False
Modernly, surety and indemnification contracts are the same thing. True False
False
The Statute of Limitations does not apply to surety contracts. True False
False
The Statute of Limitations does not apply to surety contracts. True False
False
The general contractor is eligible for a mechanic's lien on the real property, but the subcontractors on the project are not. True False
False
____ is a proceeding by which a plaintiff seeks to reach the assets of the defendant that are in the hands of a third party. Garnishment Writ of Execution Habeus Corpus Burglary Attachment
Garnishment
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
Which of the following usually provides an investor the least protection from personal liability for the debts of the business? General Partnership Limited Partnership LLC Corporation
General Partnership
A __________ is a party whose promise is not limited to a single transaction or to a single creditor.
Guarantor
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.
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
Which of the following is a quality that an LLC shares with a corporation? 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. An LLC and a corporation are treated identically for tax purposes. 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.
All of the following are considered advantages of doing business as an LLC, except: The LLC insulates its members from personal liabilities for the debts of the business. Members of the LLC may lawfully avoid filing personal tax returns with the IRS. The LLC can function much like a general partnership, while avoiding many of the risks of a general partnership. The LLC can provide its members voting rights that are proportionate to the members' capital contributions.
Members of the LLC may lawfully avoid filing personal tax returns with the IRS.
The usual procedure for a party seeking to perfect a mechanic's lien to file or record a ____ in the office of the county in which deeds to real estate are recorded. Notice of lien Fixture warrant Writ of warrant Lis warrant
Notice of lien
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
Which of the following best describes the role of a general partner in a limited partnership? The general partner usually has an insignificant role in the overall business decisions of the limited partnership. 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 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 manages the partnership and remains responsible for partnership liabilities.
The general partner manages the partnership and remains responsible for partnership liabilities.
A principal who is discharged in bankruptcy is released from his duty to reimburse the surety. True False
True
A sub-surety becomes 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
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
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 a credit gets a judgment against the creditor, and then the surety pays the creditor, the surety gets to benefit from the judgement that was obtained by the creditor. True False
True
In a manager-membered LLC, an individual or small group has the authority to control and make decisions for the LLC. True False
True
In a memeber-managed LLC all members participate in management. True False
True
In the majority of states an LLC can be both formed and managed by only one member. True False
True
Limited Partnership must have at least one general partner. 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
Relative to corporate and partnership law there is not a comparble amount of case law involving LLCs. True False
True
Restatement of Security treats contracts of suretyship as interchangeable with guarantor contracts. 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 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
Surety agreements may also be created by operation of law. 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 manager of a manager-managed Limited Liability Company may be a non-member. 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
When dealing with an absolute guarantor, the creditor does not have to first attempt to collect from the debtor prior to proceeding against the guarantor. True False
True
If a judgment for dollar damages is not paid, the judgment creditor may apply for a ____ Writ of Execution Writ of Mandamus Writ of Santa Habeas Corpus
Writ of Execution
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
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
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____________. Attainder Attachment Garnishment Execution
Attachment
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
Limited Partnerships offer a convenient way for professional and family-owned enterprises to do business. True False
False
A surety owes a ____ to the principal for any profits obtained after the surety performs. Duty to Account Debt Thank you note ice cream
Duty to Account
Which of the following is recognized as a disadvantage to doing business as an LLC? Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions. 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.
A creditor can never be required to give the surety notice that the debtor is in default. 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 surety and guarantor have always been treated as the exact same thing. True False
False
A suretyship provides a lien credit a legal interest in the property of the debtor to secure repayment of the loan. True False
False
An "improvement" to real property necessarily increases the market value of the real property. True False
False
Contracts of suretyship are legally indistinguishable from contracts of indemnity. 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. 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.
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
An LLC that is managed by one or more of the owners is a ____________________LLC. Member-managed Manager-managed Proprietary Subchapter S
Member-Managed
A general guarantor's promise is not limited to a single transaction. 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 surety who only guarantees collection is entitled to notice. True False
True
BOTH perforance bonds and fidelity bonds are sureties. True False
True
In a manager-managed LLC, only the manager-members have access to the LLCs books. 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
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. Attachment. Sheriff's sale. Meeting of creditors. Discharge in bankruptcy.
attachment
In a Limited Partnership, the General Partner's fiduciary duty is ______. 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 to minimize financial risks taken on by all Limited 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: 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
In a manager-managed LLC ___________. No one member of the LLC has authority to make business decisions on behalf of the LLC. An individual or small group has the authority to control and make decisions for 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.
