Chpt 17.2
business trust
A business form created by a written trust agreement that sets forth the interests of the beneficiaries and the obligations and powers of the trustee(s).
joint stock company
A business form similar to a corporation in some respects (transferable shares of stock, management by directors and officers, perpetual existence) but otherwise resembling a partnership.
cooperative
An association organized to provide an economic service, without profit, to its members. A cooperative can take the form of a corporation or a partnership.
syndicate
An investment group that undertakes to finance a particular project; may be organized as a corporation or as a general or limited partnership.
joint venture
An organization created by two or more persons in contemplation of a limited activity or a single transaction; similar to a partnership in many respects
A joint stock company has many features of a corporation. Which of the following is NOT one of the ways in which a joint stock company is like a corporation? a. its shareholders have personal liability b. it is usually managed by directors or officers of the company c. it can have perpetual existence
a
A syndicate may be organized as a corporation or as a general or limited partnership. a. True b. False
a
Abby and Zeke begin a joint venture together selling fruitcakes door to door. Each invests $500. The joint venture generates large debts, and there is not sufficient income from the joint venture to pay them. Abby and Zeke as joint venturers are: a. personally liable. b. liable only to the amount invested. c. personally liable in proportion to the amount invested. d. liable only to the amount of assets available in the joint venture.
a
Chapter 32 B LawBecause risk is associated with the potential for higher profits, businesspersons are motivated to choose organizational forms that limit their liability while allowing them to take risks that may lead to greater profit a. True b. False
a
For the most part, special business forms are hybrid organizations—that is, they combine features of other organizational forms, such as partnerships and corporations. a. True b. False
a
In what order are proceeds from the sale of an LLC's assets distributed? a. pay off debts to creditors, return members' capital contributions, distribute remainder to members in equal shares b. return members' capital contributions, pay off debts to creditors, distribute remainder to members in equal shares c. distribute remainder to members in equal shares, pay off debts to creditors, return members' capital contributions
a
LLCs are legal entitles apart from their owners and as such can sue or be sued, enter into contracts, and hold title to property. a. True b. False
a
LLCs share many characteristics with corporations, such as they must be formed and operated in compliance with state law. a. True b. False
a
The events causing a member to be dissociated from the LLC include voluntary withdrawal, expulsion by members or by court order, incompetence, and death. a. True b. False
a
Tyler and Stanton are members of an LLC. They have no operating agreement. Tyler and Stanton have a dispute. They look to the LLC statute for an answer, but the statute does not cover this situation. In this case, courts often: a. apply state partnership law. b. order the LLC to dissolve. c. apply state corporate law. d. force the members to solve the dispute themselves.
a
Under the ULLCA, managers in a manager-managed LLC owe fiduciary duties (the duty of loyalty and the duty of care) to the LLC and its members, just as corporate directors and officers owe fiduciary duties to the corporation and its shareholders. a. True b. False
a
When a member dissociates from an LLC, he or she loses the right to participate in management. a. True b. False
a
Which of the following is a true hybrid of a partnership and a corporation? a. joint stock company b. joint venture c. business trust d. syndicate
a
_______ is formed to control the market and thereby enable members to sell their goods at higher prices.
a seller-marketing cooperative
A cooperative must be incorporated in order to be recognized. a. True b. False
b
A joint venture is generally treated like a corporation for tax purposes. a. True b. False
b
A major difference between a joint venture and a partnership is that: a. a partnership is composed of members, and a joint venture is not b. a joint venture is a one-time association, whereas a partnership is ongoing c. partners are taxed individually, but joint ventures are not
b
Creative Concepts Co. and Retail Investment, Inc., form a joint venture to purchase and sell high-end real estate to foreign buyers. Creative Concepts contributes $400,000 in capital, and Retail Investment contributes $600,000 in capital. The first year resulted in $2,000,000 in profits. Unless otherwise agreed, joint venturers: a. retain profits with the joint venture until the joint venture is dissolved by at least one member. b. share profits and losses equally. c. share profits and losses by proportion to the amount invested. d. share profits and losses according to the state's Uniform Joint Venture Act.
b
If a member dies or otherwise dissociates from an LLC, the LLC ______________. a. must continue b. may continue if the remaining members agree c. cannot continue
b
If a member wrongfully dissociated from the LLC, he or she may still participate in the winding up process. a. True b. False
b
LLCs are created by state statute and are uniform across the states. a. True b. False
b
One of the benefits of LLCs, and one that helps promote investment, is the fact that: a. investors must be accredited b. foreign investors are allowed to become LLC members c. members are registered with the SEC
b
The members of an LLC have little flexibility in operating or managing a business. a. True b. False
b
Upon dissolution of an LLC, all assets must be sold immediately. a. True b. False
b
When a member dissociates from an LLC, he or she retains the right to participate as an agent for the LLC. a. True b. False
b
Xavier consults with an attorney and some business acquaintances from the Chamber of Commerce about the management of his LLC. He is told that management may take one of two forms, a member-managed LLC or a manager-managed LLC. In the second form: a. the managers must be certified public accountants (CPAs). b. the managers may be members, nonmembers, or a combination of both. c. members may not participate in management of the LLC. d. a state-appointed receiver manages the firm.
b
A group of fifty homeschooling parents in New Jersey get together and form a nonprofit membership organization for the purpose of buying teaching materials and supplies at a discount and selling the materials and supplies to members. The parents have probably formed a: a. syndicate. b. joint stock company. c. cooperative. d. business trust
c
Jason, Julian, and Rebecca are members of a longstanding and successful LLC. The three members want to dissolve their LLC and distribute their assets, but they know the LLC has debts as well. Once all the LLC's assets have been sold, the proceeds are: a. distributed equally to the members, and then creditors are paid with the remaining assets. b. distributed to pay off member capital contributions first and creditors next. Any remaining amounts are distributed to members in equal shares or according to the operating agreement. c. distributed to pay off creditors first and member capital contributions next. Any remaining amounts are then distributed to members in equal shares or according to the operating agreement. d. equally shared among the members without regard to other liabilities.
c
Mack is an oil executive. He wants to start a new company with different partners to explore some drilling opportunities. His attorney advises him about the various business forms. When discussing the LLC form, his attorney mentions that one of the biggest disadvantages of the LLC form is that: a. LLC members pay no taxes. b. it is taxed like a partnership, unless the members choose differently. c. there is no uniform law governing LLCs in the United States. d. its members have limited liability for LLC debts.
c
Marvin and Maria start selling handmade jewelry to distributors nationwide, and intend to form an LLC. Marvin and Maria enter into four contracts with distributors while the LLC is in the process of being formed but before the LLC is formally in existence. Once Marvin and Maria form the LLC: a. the contracts are enforceable if this were a corporation, but not for an LLC. b. the contracts are unenforceable by any party. c. once the LLC is formed and adopts the contracts, it can then enforce the contract terms. d. the contracts are unenforceable by the LLC, only Marvin and Maria personally.
c
Mary, Thomas, and Franklin form an LLC for the purpose of running a restaurant. Each invests $10,000 into the LLC. Two weeks after the LLC is formed, Joanne patronizes the restaurant and suffers from severe food poisoning. If Joanne sues the LLC, a. the members could be personally liable, but not for their investments in the LLC. b. neither the members nor their investments will be liable in any capacity. c. the members could be liable for $10,000 each, the amount of their investment. d. the members could be both personally liable and liable for their investments.
c
Norman wants to start a new company with different partners to explore real estate opportunities in several states. When discussing the LLC form, Norman's attorney mentions that one of the biggest disadvantages of the LLC form is that: a. it is taxed like a partnership, unless the members choose differently b. its members pay no taxes c. there is no uniform law governing LLCs in the United States
c
The seven members of Fast Commerce, LLC, want to start their company as quickly as possible. The members, in their haste, do not bother to draft an operating agreement. If a dispute arises between two of the members: a. the federal uniform LLC statute will apply to the dispute. b. the LLC will dissolve. c. the state LLC statute will apply to the dispute. d. in many states, the state LLC statute will not apply because an operating agreement is required for an LLC to exist.
c
Tuller wants to start a commercial trucking business and also wants to form his own limited liability company (LLC). Tuller, as the only member of the LLC, will make all relevant decisions, contribute all of the investment, and be responsible for all of the risks and rewards. Tuller's proposed LLC will be accepted by: a. no state, as at least two members are uniformly required to create an LLC. b. all states, as no state requires at least two members to create an LLC. c. a majority of states. d. a few states.
c
When a group of members join to form an LLC, the name of the organization must: a. convey the purpose of their organization b. be registered with the SEC c. include the words "limited liability company" or the letters LLC
c
Xavier consults with his attorney about the management of his LLC. He has chosen the manager-managed LLC form of management in which: a. a state-appointed receiver manages the firm b. the managers must be certified public accountants c. the managers may be members, nonmembers, or a combination of both d. members may not participate in management of the LLC
c
The Big R is a cooperative that has several outlets in the Simi Valley area. Its stores sell farm and ranch supplies. It was formed to obtain quantity discounts and pass them along to its members. Big R is a type of
consumer-purchasing cooperative
When a group of fifty home-schooling parents in California form a nonprofit membership organization to buy teaching materials at a discount, the parents have probably formed a ______
cooperative
An LLC's members may want to reinvest the profits in the business rather than distribute the profits to members. In that situation, the members prefer that the LLC be taxed as a ______
corporation
A limited liability company (LLC) combines the tax characteristics of: a. a corporation with the liability of shareholders b. a partnership with the liability of partners c. a corporation with the liability of a partnership d. a partnership with the liability of a corporation
d
Anson is a citizen of Connecticut. He suffers severe injuries in a car accident. He hires a Michigan attorney to bring a multimillion-dollar claim against the car manufacturer. The attorney belongs to an LLC whose members are from several states, including Connecticut. After losing the product liability claim, Anson brings a malpractice lawsuit against the attorney. He: a. may file only in a Connecticut state court. b. may file in a state court in Connecticut or Michigan, or in federal court. c. must file in federal court. d. may file in a state court in Connecticut or Michigan.
d
Charlotte and Regina are opening a new business venture to sell gourmet cupcakes. One of the important characteristics in starting a limited liability company is: a. choosing the name. b. the amount of start-up capital required. c. the number of shareholders. d. limited liability for members.
d
Matt and Chad form an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member, but they do live in a state that has adopted the ULLCA, which means that: a. the LLC must dissolve within 120 days. b. Matt must find a new member to purchase his interest at a fair value. c. Matt will lose all of his interest in the LLC. d. the LLC must purchase Matt's interest at fair value within 120 days.
d
Product Management, LLC has forty members. Two of the members died the previous year. Under the Uniform Limited Liability Company Act (ULLCA), on the death of the two members the: a. other members may continue to carry on the LLC's business, even if the operating agreement mandates dissolution on the death of a member of the LLC. b. LLC continues, but only with a court order allowing the LLC to do so. c. LLC must dissolve. d. other members may continue to carry on the LLC's business, unless the operating agreement provides otherwise.
d
Which of the following is NOT typically a part of the contents of an LLC's articles of organization filed with the central state agency? a. the name of the business b. the business's principal address c. the name and address of a registered agent d. the members' names e. the hours of operation of the business f. how the LLC will be managed
e
Normally, the dissociated member has the right to have his or her _____ bought out by other members.
interest
What are the options that exist for management of an LLC? Choose two
member-managed; manager-managed
An LLC that has only ______ member(s) cannot be taxed as a partnership
one
A member of an LLC has the _____ to dissociate from the LLC at any time, but he or she may not have the ______ to dissociate.
power; right
Shari gets together with a group of her friends to pool their funds to buy a house, fix it up, and rent it out. This is a joint venture arrangement but also could be known as a _______
syndicate
Generally, an incorporated cooperative distributes dividends, or profits, to its owners on the basis of
the owner's transactions with the cooperative
An LLC that has ______ can choose to be taxed either as a partnership or as a corporation.
two or more members