Legal Environment of Business Exam 5 (Ch: 36-40, 42-44)
Which of the following requires a filing with the state in order to be created? (Choose 2 answers.) A corporation An LLC General partnerships Sole proprietorships
A corporation AND An LLC
What is true of the dissolution of a limited liability company (LLC)? Choose 2 answers. A court may order the dissolution of an LLC under certain circumstances, such as the members engaging in illegal conduct. When a member dissociates, the LLC is automatically dissolved. Members of an LLC may stipulate in their operating agreement that certain events will cause dissolution. An LLC may only be dissolved by court order.
A court may order the dissolution of an LLC under certain circumstances, such as the members engaging in illegal conduct AND Members of an LLC may stipulate in their operating agreement that certain events will cause dissolution.
Which of the following are considered "persons" who may be a limited partner? (Choose 3 answers.) A general partner in the same partnership. A trust A natural person A corporation
A trust AND A natural person AND A corporation
What is true of the tax liability of C corporations? C corporations pay income tax only on corporate income that has been distributed to the owners as dividends. C corporations do not pay any taxes. C corporations pay taxes on profits at the corporate level. C corporations only pay taxes on income that has not been distributed as dividends.
C corporations pay taxes on profits at the corporate level.
Which of the following are advantages of operating as a partnership? Choose 2 answers. Forming a partnership is simple and relatively inexpensive. Any partner may add a new partner at any time to help decrease the workload and liability and to bring in more capital. The partners are not personally liable for business debts if the partnership is registered with the state. Partnerships are not taxed.
Forming a partnership is simple and relatively inexpensive AND Partnerships are not taxed.
Which of the following are advantages of operating as a sole proprietorship? Choose 2 answers. The business may conduct an initial stock offering once it has made a profit in four consecutive quarters. The owner is not personally liable for business debts if the business is officially registered. Forming a sole proprietorship is simple and relatively inexpensive. Sole proprietorships are not taxed.
Forming a sole proprietorship is simple and relatively inexpensive AND Sole proprietorships are not taxed.
Which of the following are essential elements of a partnership? Choose 2 answers. Profits and losses are shared among the members. The name must include the word "partnership." All members have equal right to be involved in the management of the business. All members have signed a written partnership agreement.
Profits and losses are shared among the members AND All members have equal right to be involved in the management of the business.
Which type of corporation is taxed like a partnership, with shareholders paying personal income tax on business income? S corporation public corporation alien corporation C corporation
S corporation
The formation of a partnership without a partnership agreement requires which of the following? (Choose 2 answers.) Sharing of profits and losses Sharing of management duties The intent to form a partnership Five or more partners
Sharing of profits and losses AND Sharing of management duties
What is true of the liability for loss or injury caused by the wrongful acts or omissions of the members of limited liability companies (LLCs)? The LLC as an entity cannot be held liable, and members themselves are not personally liable. The LLC as an entity can be held liable, and members themselves are also personally liable. The LLC as an entity cannot be held liable, but members themselves are personally liable. The LLC as an entity can be held liable, but members themselves are not personally liable.
The LLC as an entity can be held liable, but members themselves are not personally liable.
At the first meeting of corporate shareholders, what business is normally conducted? (Choose 2 answers.) The filing of the articles of incorporation Voting on the business name The adoption of corporate bylaws The election of the board of directors
The adoption of corporate bylaws AND The election of the board of directors
In which of these situations might a court pierce the corporate veil? Choose 2 answers. More than half of the officers have resigned or been fired due to low profits. The corporation does not have sufficient capital to operate and meet its debts. Personal and corporate money is mixed together in one account. The corporation has borrowed money from a shareholder.
The corporation does not have sufficient capital to operate and meet its debts AND Personal and corporate money is mixed together in one account.
What happens when a limited partnership fails to substantially comply with all the requirements of the state statute regarding limited partnerships? The limited partnership may lose its limited partnership status. The limited partnership becomes a sole proprietorship. The limited partnership becomes an LLC. The limited partnership becomes a corporation.
The limited partnership may lose its limited partnership status.
Which of the following is required in the Articles of Organization for an LLC? (Choose 2 answers.) The agent's name and address The name of the business The principal place of business The attorney's name and address
The name of the business AND The principal place of business
Which of the following is a disadvantage of operating as a sole proprietorship? The owner of a sole proprietorship is personally liable for all business debts. Sole proprietorships are taxed at a higher rate than corporations. Forming a sole proprietorship requires extensive paperwork to be completed by a lawyer and filed with the appropriate state office. A sole proprietorship may only be run as a non-profit organization.
The owner of a sole proprietorship is personally liable for all business debts.
Which of the following is a necessary element of the business judgment rule? Choose 2 answer choices. The outcome of the action did not cause financial harm to the corporation. The person acted with extraordinary skill and care. The person acted in good faith. The person acted with the care of an ordinarily prudent person.
The person acted in good faith AND The person acted with the care of an ordinarily prudent person.
Which of the following defines the "implied powers" of a corporation? The power granted to a corporation by the U.S. Constitution The right to perform all acts reasonably necessary to accomplish a corporate purpose Any power arising out of a formally adopted resolution of the corporation The power granted to a corporation by the corporate bylaws
The right to perform all acts reasonably necessary to accomplish a corporate purpose
How does the governance of a closely held corporation compare to the statutory model of corporate governance? They are very similar, with directors having the most influence in both models. They are very similar, with shareholders having the most influence on the corporate governance in both models. They are very different, with shareholders having less influence than directors in a closely held corporation and more influence in the statutory model. They are very different, with shareholders having more influence in a closely held corporation than in the statutory model.
They are very different, with shareholders having more influence in a closely held corporation than in the statutory model.
In which of the following would the business judgment rule not help a manager escape liability? Choose 2 answer choices. When they did not act in the best interests of the corporation If they conducted a reasonable inquiry, but the activity still resulted in a poor outcome When they acted as an ordinarily prudent person in good faith would act When they committed an illegal act
When they did not act in the best interests of the corporation AND When they committed an illegal act
Where should Articles of Incorporation be filed? With the federal government With the state With the county recorder's office Articles of Incorporation are not filed.
With the state
You are thinking about buying a restaurant with some of your buddies from college. One of the first things you need to discuss is what kind of business entity you want to create. You want to make sure that you are liable for only what you do, not what any of your buddies do. However, you're also concerned about getting the best tax deal. Do you think there is a way to organize your business so that you are not liable for your buddies' actions or debts without risking paying more taxes? Yes, you could organize your business as a limited liability company. Yes, you could organize your business as a corporation. Yes, you could organize your business as a sole proprietorship. Yes, you could organize your business as a partnership.
Yes, you could organize your business as a limited liability company.
You have a brilliant idea for a new company. For children's birthday parties, you plan to provide a traveling children's show, complete with petting zoo and clowns, and take it wherever the party occurs. Two friends agree to help you with your venture, so you decide you probably need to incorporate, just so you look "official." Do you think there might be any drawbacks to incorporating? No, there are no drawbacks to incorporating. Yes, you may be liable for any bad acts committed by your friends. While there may be some drawbacks to incorporating, you are more interested in the tax benefits you will receive from incorporating. Yes, you may have to pay more taxes.
Yes, you may have to pay more taxes.
A general partnership differs from a limited partnership in: (Choose 2 answers.) the minimum number of partners. the limit on profits. a partner's management rights. the documents required for creation.
a partner's management rights AND the documents required for creation.
A written agreement outlining the roles of partners, their rights, and their duties are called: Articles of Organization. Operating agreements. a partnership agreement. Articles of Incorporation.
a partnership agreement.
At what point in dissolution does a partner's liability cease? as soon as the decision to dissolve has been made never after the winding up is complete and the partnership is dissolved after another partner has dissociated
after the winding up is complete and the partnership is dissolved
A member-managed LLC means: partners vote on financial decisions. the members elect a board of directors who make business decisions. shareholders vote on financial decisions. all members participate, and decisions are made by majority vote.
all members participate, and decisions are made by majority vote.
For tax purposes, sole proprietorships: are not taxed, and the owner is not taxed on their distribution. are pass-through entities. pay taxes on their own income, but the owner is not taxed on their distribution. pay taxes on the income of the business, and the owner is taxed on their distribution.
are pass-through entities.
Which of the following is a requirement for the formation of a limited liability company (LLC)? at least three members an initial stock offering articles (or certificate) of organization an operating agreement
articles (or certificate) of organization
The Board of Directors may conduct business: (Choose 2 answer choices) at any time. at special meetings. at regular meetings. privately and outside of meetings called by the corporation.
at special meetings AND at regular meetings.
In a manager-managed LLC, the designated manager may (choose 2 answers): be from outside the members of the company. be from within the members of the company. only be from outside the members of the company. only be from within members of the company.
be from outside the members of the company AND be from within the members of the company.
Ben and Jerry are partners in an ice cream shop. They both work in the ice cream shop and share profits and expenses equally. Jerry thinks that expanding their ice cream shop to include a soda fountain would attract more customers. Without getting Ben's approval on the deal, Jerry signs a contract with the construction company to begin building the soda fountain. When Ben finds out, he is furious and says that he will not be responsible for payment under the contract. The construction company can enforce the contract against: Jerry only. neither Ben nor Jerry. Ben only. both Ben and Jerry.
both Ben and Jerry.
Roy owns an engine repair shop, Roy's Custom Repair. Roy's customer Floyd is in the shop one day and trips over a tool lying on the ground. Floyd hits his head on the concrete floor and sustains massive injuries. Floyd sues Roy's Custom Repair for his injuries. If Floyd's lawsuit is successful, Floyd can recover from: Roy's Custom Repair only. both Roy's Custom Repair and Roy personally. Roy only. Roy, but only to the extent of Roy's capital investment in Roy's Custom Repair.
both Roy's Custom Repair and Roy personally.
What are the three ways in which a partnership can be dissolved? (Choose 3 answers.) by operation of law by a court decree by failing to make a profit by an act of the partners
by operation of law AND by a court decree AND by an act of the partners
If an action is permitted expressly by the corporate bylaws, but is prohibited by state law, a corporation: must amend their articles of incorporation. has the power to act. must challenge the state law. does not have the power to act.
does not have the power to act.
What is the combination of factors that sets sole proprietorships apart from all other business entities? limited liability, along with flexibility in taxation sharing the workload, along with ease of formation ease of formation, along with limited liability ease of formation, along with receiving all of the profit
ease of formation, along with receiving all of the profit
Owners of the following business associations have limited liability protection (choose 2 answers): general partnerships. sole proprietorships. limited liability partnerships. limited liability companies.
limited liability partnerships AND limited liability companies.
Which of the following is a duty of both corporate directors and corporate officers? limiting political endorsements to only candidates that the corporation supports purchasing stock in the company working at least forty hours per week for the corporation making a full disclosure of potential conflicts of interest
making a full disclosure of potential conflicts of interest
The management responsibilities of the board of directors of a corporation include: (Choose 3 answers.) making personnel decisions on the executive level and setting compensation for officers. making financial decisions about when to declare dividends. serving on an audit committee to supervise the accountants who audit the company's financial records. authorizing corporate policy decisions such as pursuing new product lines.
making personnel decisions on the executive level and setting compensation for officers AND making financial decisions about when to declare dividends AND authorizing corporate policy decisions such as pursuing new product lines.
Any partner: may create a business in direct competition with the partnership. may encumber the property of the partnership to satisfy personal debt. may act as an agent who binds the partnership. is entitled to compensation for their time, skill, and effort.
may act as an agent who binds the partnership.
The board of directors manages: shareholder proxies. employees' daily tasks. the business and affairs of the corporation. the day-to-day activities of a corporation.
the business and affairs of the corporation.
What principle protects corporate directors and officers from liability for bad decisions if they are made as honest mistakes rather than in negligence? no-fault liability duty of judgment the business judgment rule reasonable culpability
the business judgment rule
What documents spell out the powers of a corporation? Choose 2 answers. certificate of corporate power the charter (also called the articles of incorporation) the bylaws de facto documentation
the charter (also called the articles of incorporation) AND the bylaws
Which of the following are TWO disadvantages of a sole proprietorship? (Choose 2 answers.) personal liability for debts ease of formation ease of tax filing limited capital
personal liability for debts AND limited capital
Mason is the CEO and sole shareholder of Mason Products, Inc., a corporation that manufactures and sells bird calls. Mason regularly uses the corporate credit card to purchase personal items, including furniture and clothes, and even makes monthly payments on his Corvette using the corporate credit card. When Mason Products becomes insolvent, its creditors file suit against Mason personally to seek payment for corporate debts. In this situation, the court is likely to: not hold Mason responsible because as CEO, he is protected by the business judgment rule. pierce the corporate veil and hold Mason personally responsible. hold Mason responsible under the theory of ultra vires. not hold Mason personally responsible, because shareholders are not personally responsible for corporate debt.
pierce the corporate veil and hold Mason personally responsible.
Julian is a shareholder in Big Bang Corporation. Big Bang has had an excellent year and declares $5,000 in dividends to its shareholders. Julian is elated, because he can really use that $5,000. When Julian receives his dividend check, it will be in the amount of: $5,000, because the corporation pays taxes on profits, and, therefore, shareholders do not have to pay taxes on dividends. $5,000, because corporations pay an annual tax to do business in the state, and, therefore, shareholders are not taxed on their dividends. $5,000 minus taxes, because even though the corporation pays taxes on its profits, shareholders must also pay taxes on dividends. $5,000 minus taxes, because the corporation pays no taxes on its profits; all taxes are paid by the shareholders when dividends are awarded.
$5,000 minus taxes, because even though the corporation pays taxes on its profits, shareholders must also pay taxes on dividends.
What tax options are available to a limited liability company (LLC)? Choose 2 answers. An LLC with two or more members can choose to be taxed as a partnership or a corporation. An LLC with only one member may be taxed as a partnership or a sole proprietorship. An LLC with only one member can choose to be taxed as a corporation or a sole proprietor. An LLC with two or more members may only be taxed as a corporation.
An LLC with two or more members can choose to be taxed as a partnership or a corporation AND An LLC with only one member can choose to be taxed as a corporation or a sole proprietor.
Which of the following should be approved by shareholders? Choose 2 answers. A sale of old computers that the company no longer uses An acquisition of the company by another company A change in employee compensation A dissolution of the corporation
An acquisition of the company by another company AND A dissolution of the corporation
Partners have which of the following duties? Choose 3 answers. Litigating on behalf of the partnership Capital contribution Record keeping Fiduciary duties
Capital contribution AND Record keeping AND Fiduciary duties
What is the role of directors in a corporation? Choose 2 answers. Directors make policy decisions necessary for the management of the company. Each individual director has the authority to act as an agent for the corporation to make contracts. The directors are trustees, holding title to the corporate property for the benefit of the corporation. The board of directors selects and removes the corporate officers.
Directors make policy decisions necessary for the management of the company AND The board of directors selects and removes the corporate officers.
A shareholder has the right to inspect the corporate books, if done: for any purpose. to provide a competitor with an advantage. to determine voting alliances. in good faith and for a proper purpose.
In good faith and for a proper purpose.
Which of the following are qualities of a non-profit corporation? (Choose 2 answers.) Its goal is to earn a profit. It provides minimal dividends to company shareholders. Its goal is to not earn a profit. It does not provide dividends to shareholders.
Its goal is to earn a profit AND It does not provide dividends to shareholders.
Jasper, Saul, and Kenyon plan to open a new business providing sky-diving lessons and selling sky-diving equipment. Each of them plans to contribute the same amount of money to get the business started, and each will work for the business. Jasper is concerned about the possibility of being liable for the acts of Saul and Kenyon. Jasper also wants to make sure he does not pay more taxes than required. After reviewing the types of business entities available, Jasper suggests to Saul and Kenyon that they organize their new business as a(n): LLC. partnership. corporation. close corporation.
LLC.
Which statement is true about creating a sole proprietorship? No documentation is required to create a sole proprietorship. The owner of a sole proprietorship must file an official record of the business name with the secretary of state's office. There is a waiting period of 30 days between opening the business and the time a sole proprietorship becomes official. The members of a sole proprietorship must write and sign an operating agreement.
No documentation is required to create a sole proprietorship.
Which of the following is required to create a sole proprietorship? An intention between two or more people to run a business Filing Articles of Incorporation with the secretary of state Filing Articles of Organization with the secretary of state Nothing
Nothing
Which of the following is a disadvantage of operating as a partnership? Partnerships are taxed at the same rate as corporations. A partnership may not own real or personal property. A partnership may be formed for only one year at a time and the registration must be renewed annually. Partners may suffer financial loss if the partnership is not profitable.
Partners may suffer financial loss if the partnership is not profitable.
You plan to open a tattoo parlor, and you are trying to decide the best form of business entity to use. You decide on a sole proprietorship (a solely-owned business), because you want all the profits from the business and you don't want anyone telling you how to run your business. Do you think there might be any disadvantages to creating your tattoo parlor as a sole proprietorship? Yes. As a sole proprietor, you can be held personally liable for all the business's debts, and your options for raising capital will be limited. Yes. As a sole proprietorship, you will have to file numerous forms with the government to create your business. Yes. As a sole proprietor, you will have to file a separate business tax return, which means you will have to pay taxes twice. No. Because you are the only one involved in the business, there are no drawbacks to creating it as a sole proprietorship.
Yes. As a sole proprietor, you can be held personally liable for all the business's debts, and your options for raising capital will be limited.
You and your buddy want to start a new landscaping business. You equally invest in the equipment you need to get started. You will both be equally responsible for the work and will share the profits equally. After investigating the possible forms of business entities available, you decide a partnership would be the best for your landscaping business. What do you think you might need to do to form a partnership? You and your buddy must sign a written partnership agreement. You and your buddy must register your landscaping business with the county clerk. You and your buddy must file a certificate of organization with the government. You and your buddy just need to agree to be partners.
You and your buddy just need to agree to be partners.
Which of the following is a requirement for the initial formation of a corporation? a charter a minute book an initial stock offering a board of directors
a charter
A corporation that is formed in one state but does business in another state is referred to in the second state as: a foreign corporation. a domestic corporation. a distant corporation. an alien corporation.
a foreign corporation.
Ellie, Josie, and Dylan are partners in a car dealership. Ellie gives notice to Josie and Dylan that she wants to withdraw from the business. As a result of Ellie leaving the partnership, Josie and Dylan: must dissolve the partnership. can either continue the partnership without Ellie or agree to dissolve the partnership. must continue the partnership unless they get a court order to dissolve the partnership. can only dissolve the partnership if the partnership agreement states that it must dissolve when a partner dissociates.
can either continue the partnership without Ellie or agree to dissolve the partnership.
After dissolution, partners still have authority to do which of the following actions on behalf of the partnership? Choose 2 answers. complete transactions that were started before dissolution sign a contract to perform a service in the ordinary course of business take out a loan to pay creditors pay the debts of the partnership
complete transactions that were started before dissolution AND pay the debts of the partnership
Which of the following actions will usually dissolve a partnership? the partnership defaults on a loan one of the limited partners moves to another state completion of the purpose of the partnership a limited partner assigns his financial rights
completion of the purpose of the partnership
Pro Flowers LLC has been in business for five years. When one of its members dies, the other members of the LLC agree to dissolve the LLC. They proceed to wind up the business, collecting and liquidating all the assets of the LLC. Once that is done, the proceeds will be distributed: first to creditors, and then the remaining amount will be divided equally among the members. first to creditors, then members' capital contributions will be returned, and any remaining amounts are then distributed to members in equal shares or according to their operating agreement. first to members in the amount of their capital contributions, then to creditors, and any remaining amounts are then distributed to members in equal shares or according to their operating agreement. first to creditors, and then members' capital contributions will be returned.
first to creditors, then members' capital contributions will be returned, and any remaining amounts are then distributed to members in equal shares or according to their operating agreement.
Kelly lives in Arkansas and works in the data division of Acxiom Corporation. Acxiom has its headquarters in Conway, Arkansas. Acxiom is incorporated in Delaware, however, because of the corporate-friendly laws in that state. Kelly works in a(n): close corporation because Kelly works in a division of Acxiom located close to where she lives. domestic corporation, because Acxiom's headquarters is in the same state where Kelly works. foreign corporation because Acxiom is incorporated in a different state than the division where Kelly works. alien corporation because Acxiom is incorporated in a different state than the division where Kelly works.
foreign corporation because Acxiom is incorporated in a different state than the division where Kelly works.
Bly and Ahmik are partners in a sandwich shop. They have been struggling for the last couple of years and, finally, decide to close the sandwich shop and dissolve the partnership. During the winding-up process, Ahmik spends most of his time pursuing his next venture, so Bly is handling most of the work involved in collecting and preserving partnership assets and paying the debts of the partnership. If Bly requests payment for his services in winding up the partnership: he is not entitled to payment for those services, because he receives a share in the partnership profits. he is entitled to payment for those services only if the partnership agreement provides for it. he is entitled to payment for those services. he is not entitled to payment for those services, because it is part of his duty as a partner.
he is entitled to payment for those services.
A sole proprietorship differs from a corporation in: where in the United States they may be located. the ability to be an educational organization. how stock is sold. the ability to earn a profit. Assessment question
how stock is sold.
A sole proprietorship is similar to a partnership in: (Choose 2 answers.) the ability to have an owner/member who does not participate in the business. how taxes are paid directly by the owner, not the company. liability for debt. the minimum number of owners.
how taxes are paid directly by the owner, not the company AND liability for debt.
Myra owns a tanning salon called Bronze Beauties as a sole proprietorship. Myra has six employees who work at the salon. Myra contracts COVID-19 and, after battling the disease for six weeks, she dies, leaving behind a spouse and three children. Upon Myra's death, the Bronze Beauties tanning salon: passes to her spouse. passes to her three children. is automatically owned by her employees. is automatically dissolved.
is automatically dissolved.
Most limited liability company (LLC) statutes provide that unless the articles of organization specify otherwise, an LLC is assumed to be managed by: a board of six members and six non-member managers. a board of nine managers. one manager. its members.
its members.
A partnership in which the liability of all the partners is limited to the amount of their capital investment in the firm is called a: limited liability partnership. limited partnership. limited liability limited partnership. general partnership.
limited liability limited partnership.
Bart, Sam, and Greg create Big Barns Sales LLC, a company that builds pre-constructed barns. They file the certificate of organization with the secretary of state and create an operating agreement for the LLC. The operating agreement, however, does not address the method by which the LLC will be managed. Because management of the LLC is not addressed in the operating agreement, it is assumed the LLC will be: member-managed, and the member with the largest capital investment will control the decisions of the LLC. manager-managed; the members will designate a person or persons to manage the LLC, and none of the managers can be members. manager-managed, and the members will designate a person or persons to manage the LLC, which may include nonmembers. member-managed; all members will vote on decisions of the LLC, and the majority vote controls.
member-managed; all members will vote on decisions of the LLC, and the majority vote controls.
Tala operates Sunshine Event Planning as a sole proprietorship. Lately, Tala has become dissatisfied with her employee, Leon. Leon continually refuses to follow directions, calls in late to work, and generally is not performing up to Tala's standards. Before Tala can fire Leon, she must obtain approval from: the partners of Sunshine Event Planning. the Board of Directors of Sunshine Event Planning. no one. the shareholders of Sunshine Event Planning.
no one.
What type of corporation is formed for the purpose of doing a public service instead of making money? public privately held nonprofit publicly held
nonprofit
A foreign corporation is: one that was incorporated outside of the United States. one that was incorporated in a different state. one that it privately held. one that was incorporated in two or more different states.
one that was incorporated in a different state.
Which of the following documents spells out the rights and duties of the members of a limited liability company (LLC)? operating agreement bylaws charter certificate of organization
operating agreement
Limited liability means: owners are held personally liable for the debts of the business. owners are personally liable for the debts of the business, but only for the decisions they make. owners are only liable to the extent of their capital contribution to the business. the business cannot be held liable for its own debts.
owners are only liable to the extent of their capital contribution to the business.
In order to capitalize a sole proprietorship, an owner is likely to: take out a bank loan without a personal guarantee. sell membership shares. sell stock. pay out of their own pocket or undertake personal debt.
pay out of their own pocket or undertake personal debt.
Evelyn decides to open a business selling her one-of-a-kind cupcakes. Evelyn will be the sole owner of the business, although she will have a few employees. Evelyn plans to operate the business under the name "Cupcake Dreams." To legally operate her business, Evelyn will need to: file a certificate of organization. register her business name. file an operating agreement. do nothing, because it is a sole proprietorship.
register her business name.
Which of the following actions show a failure to uphold the duty of loyalty expected of corporate directors? Choose 2 answers. retiring before age 65 running a small side business that competes with the corporation using information that is not public knowledge to make a profit on purchases or sales of the company's stock serving on a board of directors for one of the corporations' suppliers
running a small side business that competes with the corporation AND using information that is not public knowledge to make a profit on purchases or sales of the company's stock
Which of the following rights may a member of a limited liability company (LLC) transfer to a non-member? voting on matters of business management inspecting the records of the LLC sharing the company's financial profits participating in management
sharing the company's financial profits
A partnership differs from a joint venture in: management rights. the minimum number of members. how the members share profits and losses. the scope of work for which the business is created.
the scope of work for which the business is created.
A corporate officer, as an agent of the corporation, has a duty of loyalty to make decisions that will benefit: (Choose 2 answers.) the stockholders. a charitable organization. the corporation itself. a subsidiary corporation.
the stockholders AND the corporation itself.
Mork and Mindy create a for-profit corporation, Mork's House, to provide shelter to homeless and abused women and children. Mork and Mindy are shareholders of the corporation. Zada is also a shareholder in the corporation, along with five others. Douglas manages the day-to-day operations of the corporation. The bylaws of the corporation provide that the corporation is established for the sole purpose of providing shelter, food, and care for homeless and abused women and children and for no other purpose. When the refrigerator in Mork's House stops working, Douglas purchases a new refrigerator from Home Depot and charges it to the corporation. If Zada challenges the purchase as going beyond the powers of the corporation: she will lose, because purchasing the refrigerator is an express power of the corporation. she will win, because the bylaws do not address purchases of appliances. she will lose, because purchasing the refrigerator falls under the implied powers of the corporation. she will win, because purchasing the refrigerator is an ultra vires act.
she will lose, because purchasing the refrigerator falls under the implied powers of the corporation.
Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park, to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a: franchise. sole proprietorship. limited liability company. corporation.
sole proprietorship.
The simplest form of business to establish is a: limited liability company. corporation. sole proprietorship. partnership.
sole proprietorship.
Ellie, Josie, and Dylan are partners in a car dealership. Ellie gives notice to Josie and Dylan that she wants to withdraw from the partnership, and Josie and Dylan decide to continue the partnership without her. Shortly after Ellie leaves the partnership, she has lunch with an old friend, Justin. Justin has been looking for a new car and asks about the price of a particular car he saw on the website of the dealership, because he does not know that Ellie has left the partnership. Instead of telling Justin that she has left the partnership, Ellie quotes Dylan a price for the car, and Dylan accepts. When Dylan goes to the car dealership to complete the deal: the dealership must honor the deal and reinstate Ellie as a partner. the dealership is not required to honor the deal because Ellie is no longer a partner. the dealership is not required to honor the deal whether or not it has provided Dylan notice of Ellie's dissociation. the dealership must honor the deal unless it has provided Dylan notice of Ellie's dissociation.
the dealership must honor the deal unless it has provided Dylan notice of Ellie's dissociation.
The legal effects of dissociation of a member of a limited liability company (LLC) include: (Choose 2 answers.) the dissociated member loses the right to participate in management. the LLC must purchase the dissociated member's share within 30 days. the dissociated member's duty of loyalty to the LLC terminates. the LLC must wrap up business and dissolve within 180 days.
the dissociated member loses the right to participate in management AND the dissociated member's duty of loyalty to the LLC terminates.
A sole proprietorship differs from a limited liability company (LLC) in: the documentation required for formation. ability to earn a profit. how stock is sold. the minimum number of owners.
the documentation required for formation.
The formation of LLCs is governed by: federal statute. the ULLCA. the laws of the state in which the LLC is created. private agreements.
the laws of the state in which the LLC is created.
Which of the following provisions are typically in a charter for a corporation? Choose 2 answers. the name and address of the corporation's agent the intended business purpose of the corporation the advertising plan for the corporation the trade secrets of the corporation
the name and address of the corporation's agent AND the intended business purpose of the corporation
Genna and four others are establishing a business to create monogrammed items of personal clothing to sell to the general public. Genna is concerned about entering into business with others and possibly being liable for their actions, so she convinces the others that they should incorporate. After doing some basic research on how to incorporate a business, Genna starts preparing the articles of incorporation. At a minimum, Genna must make sure that the articles of incorporation include: the name of the corporation, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator. the name of the corporation, the number of shares of stock the corporation is authorized to issue, and the name and address of each incorporator. the name of the corporation and the name and address of each incorporator. the name of the corporation, the number of shares of stock the corporation is authorized to issue, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator.
the name of the corporation, the number of shares of stock the corporation is authorized to issue, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator.
A sole proprietorship differs from a partnership in: liability for debt. how stock is sold. documentation required for formation. the number of owners.
the number of owners.
Who is liable for contracts entered into on behalf of the corporation before the corporation is formed? the promoter the Chief Executive Officer the corporation no one, because that cannot happen
the promoter
Lola, Jacy, and Tate plan to create a company to manufacture bicycles. After reviewing the pros and cons of the various forms of business enterprises, they decide to create a limited liability company. To create a limited liability company: they must file an operating agreement with the secretary of state and should create a certificate of organization, although a certificate of organization is not required. they must file a certificate of organization and an operating agreement with the secretary of state. they must file a certificate of organization with the county clerk and should create an operating agreement, although an operating agreement is not required. they must file a certificate of organization with the secretary of state and should create an operating agreement, although an operating agreement is not required.
they must file a certificate of organization with the secretary of state and should create an operating agreement, although an operating agreement is not required.
An operating agreement for a limited liability company: typically includes provisions about choosing the LLC's management. may not specify how profits are divided. is required for the operation of a limited liability company. must be in writing and signed by all the officers of the company.
typically includes provisions about choosing the LLC's management.
Anita is a member of Three Roses Nursery LLC, and is also one of the managers of the LLC. This means that Anita and her fellow member-managers vote on decisions that need to be made for the company, and the majority vote controls on those decisions. One day, the member-managers discuss a possible new contract with a potential supplier, Heartland Seedlings Co. Anita is a part-owner in Heartland Seedlings, and she would benefit greatly if Three Roses enters into the contract. The contract would cost Three Roses more money than their existing contract, but Anita pushes the other member-managers to agree to the contract anyway. By pushing the other member-managers to agree to the more expensive contract, Anita has: violated the duty of loyalty. violated the duty of candor. violated the duty of confidentiality. not violated any duties to the company.
violated the duty of loyalty.
A sole proprietorship has flexibility in decisions regarding: (Choose 2 answers.) how the business is taxed. when to schedule vacation. pricing of services or goods sold. how much stock is sold.
when to schedule vacation AND pricing of services or goods sold.
Jerry Hall and Lawrence Vaught practice law in the same building. They share equally in the overhead expenses, such as rent and utilities, required to keep the business running. Both Jerry and Lawrence handle their own cases, consult and accept their own clients, and purchase their own advertising. Jerry and Lawrence do occasionally handle a case together, and they have stationery that says "Hall and Vaught" on the letterhead. They each have their own stationery as well. Jerry and Lawrence keep their finances separate, except when they handle a case together; then, they split the proceeds equally. When a client of Jerry's becomes dissatisfied and sues Jerry for malpractice, she sues Lawrence as well. In deciding whether or not a partnership exists here, the court will look at: whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business. whether Jerry and Lawrence have signed a partnership agreement. whether Jerry and Lawrence share profits and losses in the business. whether Jerry and Lawrence list themselves as partners on their letterhead.
whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business.
Which of the following provisions are typically in an operating agreement for a limited liability company (LLC)? Choose 2 answers. whether the dissociation of a member, such as by death or departure, will trigger dissolution of the LLC the advertising plan for the company a record of the company's assets and debts how membership interests may be transferred
whether the dissociation of a member, such as by death or departure, will trigger dissolution of the LLC AND how membership interests may be transferred
You and three of your friends have stock in a corporation and are interested in voting one of your friends in as a new director for the corporation. There are three director positions open, but your group only owns a minority of the shares of stock in the corporation. Do you think there is anything you and your friends can do to ensure that your candidate for the board of directors wins? no, a majority always wins yes, if the bylaws of the corporation allow you to pool your votes and vote them all for a single candidate yes, if your candidate can get enough publicity no, unless you each agree in writing before the election to all vote the same way
yes, if the bylaws of the corporation allow you to pool your votes and vote them all for a single candidate
