BUS FINAL KNOWLEDGE CHECKS

Sole Proprietorship

- no special formalities - only required to comply with local laws concerning licensing and permitting, taxes, etc. and who has not created some other business organization to operate that business through -default business entity when there is just one owner - pass through tax entity - unlimited liability - business dissolved when owner dies or retires --- cannot transfer or sell ownership of the business - only business ASSETS can be sold

Chop is a painter in Cycle R US, a bicycle repair shop. Chip has the right to

- share in partnership profits -participate in management - share in the ownership of partnership property

partner authority to bind comes from

-actual express (partnership agreement and/or UPA) - implied reasonably necessary to carry out express - apparent authority - third party reasonably relied on and transaction within the course/scope of the business

The essential elements of a partnership

1. sharing profits and losses 2. joint ownership of partnership business 3. equal right to be involved in the management of the business

partnershipp

2 or more individuals carryon a business for profits

LLC

= artificial "legal person" provides limited personal liability protection to its owners (members)

articles of organization

= document required to form a business

new partner

= no personal liability for existing obligations only capital contribution is at risk

dissociation of partner

= no rights to manage; only entitles to have interest bought out

Vick and Georgia agree to go into business together. They do not formally declarer that their business has a specific form of organization. Vick and Georgia's business is

A partnership, is default form

A member who dissociates from the LLC still have management rights

False

If there are three equal partners in a business, one of them can sell a third of the assets to someone else

False

A LLC is a citizen only in the state in which it was formed

False, citizen in every state where member lives

To form a limited liability corporation, articles or organization must be filed with an attorneys office

False, files with state or gov, never with attorneys office

at the option of the partners, a partnership can pass through entity or a taxpaying entity

False, pass-through entity only

In a limited partnership, all owners are considered to be limited partners and have limited liability

False, this is an example of limited liability partnership

To obtain a contract with Oscar, Leidy misrepresents that she is a partner with Kirk. Kirk overhears Leigh's misrepresentation but says nothing to Oscar. Leidy breaches the contract. who is liable to Oscar?

Leidy and Kirk

Dr. Jones and Dr. Smith are partners in a medical clinic. Jones manages the clinic, which is organized as a limited liability partnership. A court holds Smith liable in a malpractice suit. Jones is

Liable only to the extent of her investment int he firm; all all partners have limited liability and have the authority to manage the business

the personal assets of a partner may be seized to satisfy partnership debts

True, their personal assets are at risk

uniform partnershop act (UPA)

applies in absence of an express agreement (partnership agreement)

corporation

articifal legal person - separate and distinct from its owners will lose this designation if bc of fraud, commingling, undercapitalized, not following formalities = piercing the veil

federal jurisdiction purpose

citizen in every state where a member resides

Liability in a limited liability partnership

consists of all limited partner limited liability (only investment at risk) limited partners have equal right to management

articles of incorporation

document required to form a business organization

partners owe

duty of care a loyalty to the partnership

shareholders

elect the Board of Directors at the first annual shareholder meeting

Directors and officers are protected from liability due to bad business decisions under which rule the doctrine of ultra vires

false

In a limited liability corporation, the owners are subject to personal liability

false

Management of a LLC must include at least one of its members

false

shareholders may inspect the corporate records at any time and for any purpose

false

the shareholders have a duty to elect officers to operate the corporation

false

the UPA governs the operation of partnerships in spite of a different agreement among the partners

false because if the partnership has an agreement that covers a specific area....

general policy for a corporation is determined by the shareholders

false, board of directors

A partnership can be formed only by the express agreement of the parties

false, can also be implied

the board of directions are responsible for the daily operations of the corporation

false, duty of directors

Members in a LLC are given shares to signify their ownership interest in the company

false, given membership

a single person carryon a business for profit with control over its operation can be considered a partnership

false, need two people to be partnership

The board of directors are the owners of the corporation

false, shareholders

LLC Tax

has the option to be taxed like a corporation (pay taxes on profits) or a partnership (pass-through entity)

who hired officers

hired by the board of directors and responsible for daily operations

liability in general partnership

joint and several --> unlimited personal liability (personal assets at risk) only general partner can manage the partnership

bylaws are

legally required and are also adopted at the first organization meeting

Liability in limited partnership (limited partner)

limited personal liability (only investment at risk) cannot participate in management or will lose the limited liability protection - treated like general partner - joint and several liability

board of directors

management decision, initial directors either appointed in the articles or elected by the incorporates at the first organizational meeting

partners have rights to share in

management, participate in partnership business, share in profits, and ownership of the property generally not entitled to compensation unless involved in the daily operations right to an accounting; inspect records

Pacer Inc. is a LLC in which the owners manage the company, this is referred to as

member managed

default management for LLC

member managed - articles or organization have to specify that the LLC will be member managed

operating agreement

not required - outlines how the business will be managed and operating

partnership agreement is

not required, can be express or oral

directors and officers have a duty

of care and loyalty

share

ownership interest

business judgment rule

provides a shield for directors and officers

piercing the corporate veil

shareholder liability

Jay is a general partner is Kappa Sales, a limited partnership. Jay is liable for the firms debts

the full extent of the debts

franchise

the license of a trademark, trade name, or copyright in the selling of goods or services for a franchise fee to another

must have written agreement if

the purpose of partnerships is to sell real estate or will be for more than one year --> statute of frauds (writing requirement applies)

directors have rights

to inspect facilities and records; indemnification

corporation liable for the

torts and crimes of its agents, directors, officers and employee = respondent superior

A LLC is considered to be an individual

true

A LLC is taxed like a partnership and has the liability of a corporation

true

A limited partnership provides personal liability protections from business debts and obligations for the limited partners only

true

Some states require that a LLC have at least two members to be entitles to the highest amount of limited liability

true

The law recognizes a partnership as a separate entity for the purpose of suing or owning property

true

a shareholder can have someone vote on their behalf at the annual meeting through a proxy

true

as a general rule, shareholders are not personally responsible for the debts of the corporation

true

duty of care means that the board and officers must use reasonable skill and be fully informed before making a decision

true

officers of a corporation are hired by the board of directors

true

the members of a LLC should protect their interests by creating a written operating agreement

true

a sole proprietor who uses a name for the business that is not their own must register that name with the appropriate government agency

true, "doing business as"

In a LLC when a member guarantees payment of a loan to the company, the member is not entitles to a limited liability protection

true, personal guarantee

Liability in limited partnership (general partner)

unlimited personal liability