BUS251: Chapters 21-30

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The best choice of business entity is driven primarily by the following factors: ________.

risk; tax; operational objectives

All of the following are methods that a sole proprietorship can raise money except: - sell ownership in the business - private loans - commercial loans - line of credit

sell ownership in the business

Every C corporation is considered a legal, taxable entity that is _______ for income tax purposes.

separate from the owners

A well-established and deep-seated principal of American law is that a corporation is a(n) ______.

separate person; separate entity

Most courts have used four factors to consider whether to pierce a corporation's protective veil, and if two are present is court is more likely to hold _______ personally liable for corporate debts.

shareholders

_______ are the owners of the corporation and while they do not directly manage the corporation, shareholders are granted certain rights to protect their ownership interests.

shareholders

Under Rupa's default rules, partner's right to manage the business implies that each partner has the ability to _______.

sign contracts on behalf of the partnership

_______ have no oversight committees (such as a board of directors), do not require any agreements among principals, and may be converted to another form of entity.

sole proprietorships

Most _______ are relatively small in terms of assets and revenues, and are not restricted in terms of the number of _______ and can operate in as many locations as the principal desires.

sole proprietorships; employees

Carlos is a member of an LLC along with three others. After one year, despite their best efforts, the business closes and the bank that extended them a loan sues for repayment. The bank may:

sue the LLC but may not sue Carlos

A franchise agreement generally covers the following: _______.

term of the agreement; territory rights; franchise fees

A franchise agreement that covers _______ rights usually provides the franchisee with an exclusive geographic area.

territory

Voting rights of LLC principals are governed by:

the operating agreement

Which of the following is not true regarding venture capital firms?

they are generally long-term investors

_______ is funding provided by a group of professional investors for use in a developing business, usually in a particular industry such as health care.

venture capital

To avoid the property provision, before the partnership is started, a partner must decide: _______ or _______.

whether the property is owned individually; whether the property is a capital contribution

Josh is a sole proprietor of an ice cream ship. Regina, a customer, slips and falls on some melted mint chocolate chip ice cream on the floor and breaks her leg. Regina files suit and wins a judgement of $50,000. Josh does not have any insurance and the total value of the assets of ice cream ship is $10,000. Which statement below is correct?

Josh will have to use his own personal assets to pay the remainder off the judgement

Mike owns Swibel Trucking, a successful trucking business, as a sole proprietorship. After many successful years in business, one night he decides he wants to change his business to a partnership so that he can share the burden and devote more time to pursue his hobby of duck watching full time. What steps must he take to change the type of business entity to a partnership?

None as a sole proprietor can convert to another business form at the proprietor's will.

The _______ does not allow any manager or member to avoid personal liability based on her willful misconduct or bad faith.

RULLC

Note that ________ imposes personal liability when members consent to an improper _______ of money made when the LLC is insolvent.

RULLCA; distribution

In the absence of a partnership agreement, the _______ is likely to govern a general partnership.

RUPA

Under the _______ partners do not have rights to _______ partnership property.

RUPA; specific

After the ULLCA was created, some states have started to adopt an act that modifies it called:

Revised Uniform Limited Liability Company Act

Some states have adopted the _______ model statute to regulate LLCs.

Revised Uniform Limited Liability Company Act (RULLCA)

Which entity wrote the Revised Model Business Corporation Act (RMBCA)?

The American Law Institute

Cyndy, Shelby, Kennedy and Kristin formed Double Dawn Paddle Board Yoga LLC as a manager-managed LLC naming Kennedy as the managing member. A local yogurt entrepreneur approaches Shelby offering to be the exclusive provider of pink yogurt for their company to give out after their yoga secessions. Loving pink yogurt, Shelby signs a 10 year contract whereby only their pink yogurt will be provided for their company. When Cyndy, Kennedy and Kristin find out what Shelby has done, they are furious and do not want to be bound by the 10 year contract Shelby signed as they all prefer blue yogurt. What most likely will be the outcome of this scenario?

The contract will not bind the LLC since Shelby did not have the authority to enter into a contract that binds the LLC.

Which of the following is true about sole proprietorship?

The owner reports income and expenses on the owner's own tax return

Corey wishes to start up a railroad reconstruction business called, "Oh Susanna Railroads" with his good friends Mike and Fred. In order to pursue this the business will need to secure a substantial amount of money which is far beyond their own personal assets or creditworthiness. He recently approached you asking if an LLC would be the best option for their business given that the owners of an LLC have limited liability. Which statement below would be the most accurate answer to Corey's inquiry?

While an LLC does have limited liability, given the fact that Corey specifically stated he will need to raise a lot of money, an LLC has limited capitalization methods and may be difficult to raise the required amount needed.

Suppose Joseph and James are shareholders of JJ, Inc and obtain a credit card from BIGBOX Credit Co. James and Joseph use the credit card in good faith to make purchases to operate the business. For several years, JJ Inc conducts business and pays its debts regularly. However, their business industry enters a 'great recession' and many are forced into default. Suppose that BIGBOX sues James and Joseph personally. Will the corporate veil protect them?

Yes, the corporate veil will protect them because they acted in good faith and paid their bills for three years.

Which of the following statements about a franchise is correct?

a franchise faces mandatory disclosures/

To form a corporation, principals file _______ with a state authority that sets out the corporation's name, purpose, number of shares issued, and address of the corporation's headquarters.

articles of incorporation

An LLC is formed by filing the _______ (also called the certificate of organization) with the designated public official in that state, such as the secretary of state or the state's corporation bureau.

articles of organization

A general partnership is legally defined as: ________. (1) (2) who are co-owners and co-managers of the business and (3) who share in the profits of their ongoing business.

association of two or more people; co-owners and co-managers; share profits equally

Two of the major advantages of a pass-through entity are that investors can _______ and _______.

assume the tax deductions and losses; earnings can be distributed without double taxation

The _______ sets the strategy and policies of the corporation and is independent from the shareholders and _______.

board of directors; officers

Large corporations may use more sophisticated forms of debt such as issuing _______ or _______.

bonds; debentures

To claim protection under the _______ rule, a director must have had no financial self-interest (or _______) in the disputed transactions or decision. (Choose two correct answers)

business judgement, self-dealing; duty of loyalty, self-dealing

A(n) _______ agreement allows remaining partners to purchase the partnership interest of a(n) _______ partner.

buy-sell; withdrawing

A corporation's _______ typically specify the date, time, and place for the annual shareholders meetings, as well as the number of officers and directors of the corporation.

bylaws

Under RUPA's default rules, each partner has an equal right to _______ the business.

co-manage

A(n) _______ loan is usually collateralized by an asset of equivalent value typically consisting of the proprietor's personal assets to get a lower interest rate.

commercial

Sole proprietors may raise money through _______ loans which is a more formal process from a lender such as a bank.

commercial

A(n) buy-sell agreement helps ensure the _______ of the partnership business and can avoid legal disputes if a valuation methodology is provided.

continuity

In examining the _______ doctrine, courts consider whether the officer, director, or controlling shareholder learned of the opportunity because of his role in the corporation.

corporate opportunity

Compared to other entities, a(n) _______ has perhaps the most formal filing and reporting requirements.

corporation

LLCs are mainly capitalized via _______ or through the sale of _______ ownership in the LLC itself.

debt; equity

LLPs are capitalized in the same way as a partnership, through _______ or _______.

debt; equity

Limited partnerships are generally funded either through _______ (e.g., by borrowing money from the principals or a commercial lender) or by selling _______ (e.g., by selling a percentage of ownership rights in the partnership and any profits of the business).

debt; equity

Because LLPs are pass-through entities, _______ are _______ and may sometimes help to reduce taxes on other sources of revenue on the individual's tax return.

deductible; losses

The operating agreement must determine if the LLC is a member-managed LLC or a manager-managed LLC so that third parties can:

determine who has the authority to make day to day decisions that bind the LLC

Partners must exercise due care in handling the affairs of the partnership and treat business affairs with _______.

diligence

The Federal Trade Commission regulations focus on mandatory _______ regarding the financial condition of the franchise, success rates, and other important

disclosures

A(n) LLC _______ occurs when an individual member decides to exercise the right to withdraw from the partnership.

dissociation

Frank wants to leave his partnership and wants to stop being a principal. What is this process called?

dissociation

Linda, Nancy and Pam stated an LLC two years again. Nancy wishes to now leave the LLC. This process is called:

dissociation

The process when an individual member of an LLC exercises the right to withdraw from the partnership is called ___________.

dissociation

When a partner no longer wishes to be a principal in the partnership, she may choose to leave the partnership. This is called ______.

dissociation

Upon a dissociation, the remaining LLC members may decide either to continue the LLC, or to trigger a(n)_______.

dissolution

Which of the following is not a part of the winding up process?

dissolution of the partnership

In the state of its incorporation, a corporation is referred to as a(n) ________.

domestic corporation

________ occurs when corporations pay taxes on their earnings, and shareholders pay taxes on any corporate earnings distributed to them in the form of dividends.

double taxation

Courts hold that a director breaches her _______ when she has failed to fulfill her role in oversight.

duty of care

A partner is entitled to a(n) _______ under the default rules.

equal share of profits

A(n) _______ limited partnership is simply a limited partnership that is used for estate planning for families of considerable wealth.

family

The fundamental purpose of a _______ limited partnership is to enable wealthy members of one generation to _______ as a gift to heirs.

family; distribute assets

In some states, if Joan Gates does business as "Gates Consulting" she would file for a certificate of _________ with a local or state office.

fictitious name

A __________ is a business entity that has a proven track record of success and sells the right to operate the business and use the business's trade secrets, trademarks, products, and so on.

franchise

A business entity that has proven track record which sells to another the right to operate the business and use the business's trade secrets, trademarks and products is a:

franchise

A(n) _______ should be thought of as a method of conducting business that centers on a contractual relationship rather than as a business entity.

franchise

Federal statutes define a(n) _______ as an arrangement of a continuing commercial relationship for the right to operate a business with a particular trade name or sell the seller's branded goods.

franchise

A franchisor sells the right to operate the business and use the business's trade secrets a(n):

franchisee

A franchise involves the two parties: the _________ who is a business entity that has a proven track record of success, who sells to a(n) _______ the right to operate the business and use the business's trade secrets, trademarks, and products.

franchisor; franchisee

LLP statutes provide ______ partnerships with the right to convert their entity and gain the protective shield ordinarily afforded only to limited partners or corporate shareholders.

general

Two or more individuals can form a(n) _______ partnership if they have demonstrated an intent to carry on as _______ of a business for profit.

general; co-owners

A limited partnership has at least one _______ partner (managing principal) and at least one _______ partner (investing principal).

general; limited

In a limited partnership, _______ partners manage the business but _______ partners may not participate in daily management of the business.

general; limited

To form a limited partnership, the _______ partner files a certificate of _______ partnership with the state government authority (usually the secretary of state's office).

general; limited

The _______ standard requires that partners exercise appropriate discretion in dealing with other partners and third parties concerning the partnership's business.

good faith

Equal share of profits in a partnership agreement allows partners to receive a _______ salary for the work they will perform on behalf of the partnership.

guaranteed

Each general partner in a limited partnership _______.

has personal liability; is liable for all of the partnership's debts and liabilities

A partnership may be dissolved when the partnership: _______.

has reached its agreed-upon term; by unanimous consent of the partners

In the case of De Lage Landen Financial Services v. Picasso Aesthetic and Cosmetic Dental Spa, Rubin, the sole principal of a professional corporation, lost the veil of corporate protection because:

he gave a personal guarantee

Partnership property is any property that is: _______.

held in the name of partnership; used for partnership business; purchased with partnership funds (also if it is acquired in the name of a partner with their title listed as "partner")

One important factor courts consider in piercing the corporate veil is _______.

inadequate capitalization

What is an advantage of a Subchapter S corporation that a standard corporation does not have?

it does not face double taxation

Which statement below is correct about a sole proprietorship?

it has low start-up costs and minimal filing.

Under RUPA, all partners face ______ liability for contract and tort-related obligations.

joint-and-several

When choosing a business entity, principals should consider the following factors: _______.

liability; taxation; ease of formation (also capitalization; taxation of income; and management & operation)

Perhaps the most important feature of an LLC is the _______ of its members.

limited liability

Frances wants to start a new small business and is seeking advice as to which type of entity would best suit his needs. His businesses has a high potential for liability and therefore he wants to protect his personal assets, but he does not want to spend a lot of time, effort or money in starting the business up or continuing the management of it. Additionally, he is looking for an entity that would give him the best tax advantages. Which type of business organization would suggest?

limited liability company

_______ partnerships are formed when a general partnership files a statement of qualification with the appropriate public official, but the conversion of the partnership must be approved by _______ of the ownership.

limited liability; a majority

A(n) limited partner's liability is _______.

limited to the amount contributed to the partnership

A(n) _______ partnership is an entity that exists by virtue of a state statute and has at least one general partner and one _______ partner.

limited; limited

A corporation formed to maintain a charitable operation is called a:

nonprofit corporation

The RULLCA sets forth seventeen _______ statutory provisions related to liability of the entity and its members that are not subject to change by the operating agreement.

nonwaivable

Partnership and agency law governs the relationship between the partnership and outside third parties and cannot be altered by a(n) _______ agreement.

partnership

A partnership where the partners have not agreed to remain partners until the expiration of a definite term or event is known as:

partnership at will

Property used for the partnership business may become subject to either: _______ or _______.

partnership ownership; partnerships claim to its use

Limited partnerships are _______ entities just like general partnerships.

pass-through

The ability to flow through to the investors the tax deductions and losses that are typically generated by an emerging company or a company with significant up-front debt is an advantage of a:

pass-through entity

If a corporation is a start-up or has limited assets, creditors will almost always require that the shareholders give a(n) _______.

personal guarantee

When dealing with an LLC, landlords often require a(n) _______ from the members whereby the members pledge assets to ensure payment of the business venture's obligations.

personal guarantee

LLC members are insulated from _______ for any business debt or liability (contract or tort) if the venture fails.

personal liability

Under RUPA's default rule, both ______ and _______ must be split equally among all partners.

profits; losses

When an individual begins to carry out a business venture's activities before actually filing the articles of incorporation, the individual is known as a(n) _______.

promoter

If a _______ makes a contract on behalf of a not-yet-formed corporation, she may have some degree of _______ to perform under the contract.

prompter, personal liability

A partnership agreement may limit a(n) _______ to a specified dollar amount.

reimbursement

To date, how many states in the US have adopted all or substantial portions of the Revised Uniform Partnership Act?

About 80 percent, 40 states

Gwendolyn Melvin wishes to start a children's sports store called, "Just Let 'Em Play!" as a sole proprietor. What form must she file so that she can use another name than her own?

DBA Certificate

Many corporations choose to incorporate in Delaware. Which of the following is NOT an advantage to incorporating in Delaware?

Delaware's tax structure provides significant tax benefits to out-of-state corporations incorporating in the state of Delaware

An operating agreement generally includes the following aspects of the LLC: _______.

Governing structure; dissolution; voting rights

Under both _______ and ______, each partner has the right to be informed of the partnership's business.

UPA; RUPA

Under RUPA, a partner's bankruptcy is a(n) _______ by law.

dissociation

A responsibility to act in the best interests of a partnership by the partners is called a(n):

fiduciary duty

A sole proprietor is liable:

for all the debts of the business

In a member-managed LLC, the management structure of the entity is similar to that of a(n) _______, with all the members having the authority to bind the business.

general partnership

Which of the following types of firms are allowed to use the LLP business structure?

law firms; accounting firms; family businesses

The owners of a limited liability company are called which of the following?

members

With regard to taxation, LLPs are treated as:

pass-through entities

Corporations also sell equity, also called ________, to capitalize their operations.

securities

The _______ are the owners of a corporation.

shareholders

A corporation comes into existence when:

the state accepts the articles of incorporation and issues the charter

Reid Sterling owns a sole proprietorship called Dunkle Distributing. Dunkle Distributing is a:

trade name

If Joan Gates wishes to "do business as" Gates Consulting, she would create a(n) _______ or DBA with a local or state office. (Choose all correct answers)

trade name; fictitious name

True or false: A corporation's bylaws are not filed with the state but are kept in the corporate records.

true

If the term in an LLC operating agreement expires but but the members want the LLC to continue, they must have a _______ vote to fix an additional term.

unanimous

If a partnership does not want to abide by the default rules promulgated by the RUPA and/or the UPA, the partners

Can override the default rules by a partnership agreement

Christin and Paola operate a business in which both have contributed $50,000 to the business's capitalization. Christin makes all business decisions, and Paola made Christin sign a partnership agreement saying that Paola is liable only for partnership debts up to $50,000.

Christin is a general partner, and Paola is a limited power

Which of the following does not require a duty of care or good faith to other principals?

a sole proprietorship

The RULLCA does not allow any manager or member to avoid personal liability based on her _______ or _______.

bad faith; willful misconduct

A venture capital firm is a group of professional investors using private equity to:

develop a business

Because it is not a taxable entity, an LLP:

files an information tax return

Sole proprietorships are limited in their options for raising money. These options include which of the following?

financing using the proprietorship's personal resources; financing the business through debt

Corporate formalities include all of the following except:

find investors

In partner-to-partner transactions, each partner owes each other _______.

full disclosure

A(n) _______ partnership is legally defined as: (1) an association of two or more people (2) who are co-owners and co-managers of the business and (3) who share in the profits of their ongoing business.

general

A close cousin to a commercial loan is a commercial ______ which allows a proprietor to draw against a predetermined credit limit.

line of credit

Similar to the board of directors in a corporation, an LLC may have:

managing members

In 1997, the IRS made LLCs

more attractive by eliminating strict operating requirements for qualifying as a partnership for tax purposes

Jed wants to pass his sole proprietorship on to his son Luke in his will. Can her do this?

no.

_______ carry out the directors' set course of direction through management of the day-to-day operations of the business.

officers

For tax purposes, LLPs are treated as _______.

pass-through entities

When choosing a business entity, principals should carefully consider the extent of _______ for debts and contracts.

personal liability

The origins of LLPs were rooted in protection of:

professional service partnerships

The United States Postal System is an example of what type of corporation?

public

Corporations are classified into one or more categories that reflect their overall _______.

purpose; capitalization; structure (also location)

Most states recognize at least ______ forms of business entities.

six

A partner violates his duty of loyalty if he personally takes advantage of a business opportunity that _______.

would have benefited the partnership

CJ and Danny have incorporated and obtained a $100,000 loan in their corporate name. The loan is payable with interest over five years. After paying on the loan regularly for two years, the business falters due to the economy, and CJ and Danny default on the loan. Their business has no assets. Which of the following statements best describes CJ and Danny's liability in this case?

CJ and Danny have no personal liability for the debt unless they pledged personal assets as collateral or signed a personal guarantee

The _______ is the federal regulatory authority that oversees the regulation of franchisors.

Federal Trade Commission (FTC)

Generally, in a(n) _____ all partners have liability protection for debts and liabilities of the partnership.

LLP

Fred, Mike, Reid and Connor create Double Done LLC, a family recreation center. Their operating agreement specifically states that Mike will make the day to day decisions and that Fred, Reid and Connor will have little input except for major decisions. This type of LLC is:

Manager-managed LLC

Mariel owns a toy store, which is a sole proprietorship. She wants to retire. What is the best way for Mariel to transfer the ownership of her business?

Mariel can sell the assets of the business to another party.

Limited partnerships may not sell ownership rights through the ______.

NYSE; NASDAQ

Stanton and Francesca have started a general partnership. Stanton has contributed 95 percent of the start-up capital and has the business experience and contracts, while Francesca's primary contribution is the labor necessary to operate the business. Management decisions are jointly made. At the end of the year, the business has shown a $100,000 profit. Stanton and Francesca have no formal written partnership agreement.

The RUPA mandates that each get $50,000

Which of the following require(s) a formal filing to be recognized as a valid business entity?

a limited partnership

With regard to taxation of partnerships,

a partnership must must file an information return

Which of the following gives a person the right to vote at an annual meeting?

a share of stock

A disagreement among partners is resolved through ______, and a _______ is usually required to win.

a vote; majority vote

A franchise conducts business:

according to an established contract

In a manager-managed LLC, non-managing members generally do not have the authority to: _______.

act on behalf of the business venture

Situations that require a unanimous vote under the RUPA include: _______.

admission of a. new partner; acts outside the ordinary course of business; amending the partnership agreement)

A partnership is considered fully terminated:

after winding up

A corporation formed outside the United States that transacts business in the United States is known as a(n) _______.

alien corporation

Today, _______ recognize LLCs and provide both procedural (formation) and internal default rules (in the event the parties are unable to agree otherwise) for the operation of LLCs.

all states

All of the following statements are true about double taxation except:

an LLC cannot face double-taxation

Under RUPA's default rules, each partner is entitled to receive _______ of the partnership's profits regardless of the partner's degree of involvement in the success of the business.

an equal share

A sole proprietorship is terminated either by _______ or by _______ in the case of the death or personal bankruptcy of the proprietor.

an express act of the principals; operation of law

Under the RUPA partners are not liable if they make a business decision that results in harm due to _______.

an ordinary mistake of judgement

A proprietors ownership interest in a sole proprietorship _______ to her heirs through a gift or an estate.

cannot pass

The _______ lists how much value each partner has contributed to their _______ capital accounts.

capital contribution; individual

Partners may wish to structure profits and losses to reflect: _______ or _______.

capital contributions; amount of work

LLC managers owe fiduciary duties of ______ and _______ to the other LLC members.

care; loyalty

Another name for articles of organization is:

certificate of organization

One of the first considerations for principals forming a corporation is _______.

choosing the state in which to incorporate

A sole proprietorship is generally not subject to _______ income taxation, and no tax return is filed on behalf of the business.

corporate

In a minority of the states, the articles of incorporation are called the:

corporate charter

Even after commencement of business operations, officers and directors have a responsibility to comply with _______.

corporate formalities

Corporations often borrow money from either: _______ or _______ to fund day-to-day operations.

corporate lenders; private investors

Generally, the ___ shields shareholders, directors, and officers of a corporation from personal liability in case the corporation runs up large debts.

corporate veil

Unlike a(n) _______, an LLC does not issue shares.

corporation

A(n) personal guarantee allows a _______ to obtain a judgment against the personal assets of one or more shareholders in the event of a default by the corporation. (Choose two correct answers)

creditor

The RULLC attempts to clarify the following two matters: _______ and the _______

deadlocks; rights of departing LLC members

An LCC is a flexible type of business entity that offers its owners many advantages:

easy formation; flexible operation; limited legal liability of the owners (also pass-through taxation)

Unless the partnership agreement specifies otherwise, all partners have which of the following?

equal management rights

Dissolution of an LLC is a process triggered by a(n) _______ or by a(n) _______ to dissolve the company.

event stated in the operating agreement; decision made by the members

In a limited partnership, one of the primary differences between general partners and limited partners is: _______.

extent of day-to-day management

Courts will sometimes pierce the corporate veil when _______ demands it.

fairness

True or false: Dissociation is the only way that a partnership may be dissolved.

false

A corporation is a(n) _______ legal entity that exists as an independent individual separate from its principals.

ficticious

Partners owe each other other several _______ duties which means acting in the partnership's best interests.

fiduciary

The duty of a partner to act in the best interests of the partnership is called ___________ duty.

fiduciary

A(n) _______ distributes its products to a broader market without the overhead costs of retail space, equipment, and employees.

franchise

In a limited partnership, the _______ partner is responsible for filing an information return with taxing authorities, but limited partnerships do not incur _________ tax liability for their profits.

general; corporate

Generally, a(n) _______ partner may withdraw at any time without causing _______ of the partnership.

general; dissolution

In analyzing the corporate opportunity doctrine, courts look for _______ and _______.

good faith; disclosure

The principal of a sole proprietorship reports business income and expenses on her own _______ and pays taxes on business income (or deducts business losses) based on the applicable _______.

individual tax return, individual tax rate; corporate tax return, individual tax return

Limited partnerships are required to file a(n) _______ return with the IRS each year.

information

Chaplan Corporation is a privately held corporation that wishes to offer ownership interests to the general public and commercial investors in order to generate more capital. This process is called:

initial public offerings

Officers, directors, and controlling shareholders of a corporation (known as _______) are in a unique position of trust to guide the corporation in a certain direction.

insiders

Currently, LLPs are often used to protect family businesses as they provide a way to resolve

issues of family fiduciary duties and rights to represent and bind the businesses

Which statement below is correct about a promoter's liability?

it ceases to exist at the moment the corporation is formed

The biggest advantage of a(n) _______, which is typically secured by collateral, is that the borrower only pays interest on the funds actually drawn instead of the full amount of a loan.

line of credit; secured

By law the capital contribution must be returned to each partner when the partnership assets are _______.

liquidated

The _______ prohibits a general partner from engaging in competition with the interests of the partnership and also prohibits other conflicts of interest.

loyalty; duty of care

Most states require the LLC articles of organization to contain only basic information, such as: _______.

name of entity; location of the principal place of business; names of owners

Under the RUPA, a partnership agreement may _______ the fiduciary duties.

not completely eliminate

The corporation's _______ are hired by the board and carry out the day-to-day operations of the corporation, by executing the strategy and mandates set out by the board of directors.

officers

All income and losses of an LLP are reported:

on the partners' individual returns

Evan wishes to start an LLC that will do businesses in Florida, Vermont and Alaska. In which state(s) must he file the articles of organization?

only one of the three states

LLCs frequently are governed by an agreement of its members in the form of a(n) ________.

operating agreement

The amount and methods of capitalizing an LLC are often controlled by the:

operating agreement

Like _______ agreements, _______ agreements cover many of the internal rules for the actual operation of the business, including a flexibility in terms of the rights and responsibilities of each member.

partnership; operating

In the context of business entities, ________ is a generic word for individuals who are entitled to the profits of a business based on their.

principal

The person who is entitled to the profits of a business based on the percentage of ownerships is:

principal

In a sole proprietorship, all debts and liabilities of the business are also personal debts and liabilities of the __________.

principal; owner; sole proprietorship

Each form of business entity has its attendant advantages, drawbacks, and legal consequences for the owners, known as ________, of the business.

principals

An LLC offers principals the same liability coverage as that of:

principals in corporations with pass-through taxation

_______ loans are typically through individuals who negotiate such items as interest rate directly with the proprietor.

private

_______ loans come from family members and friends and are paid back according to their individual agreement.

private

The most common type of corporation is the _______ corporation which does not sell ownership interests to the public.

privately held

_______ corporations have substantial flexibility in terms of their internal operating procedures and do not generally have to comply with rigorous corporate structures or formalities.

privately held

_______ corporations may also find that their expansion plans require even more capital than can be raised using private investors.

privately held

Matt and Mindy wish to incorporate their business but want to limit who can buy ownership interests in their business. Which type of corporation would you suggest?

privately held corporation

The two major categories of corporations are ______ and _____.

privately held; publicly held

In a general partnership:

profits and losses may be unequally split based on the partnership agreement

Fundamentally, officers and directors must exercise the degree of skill, diligence, and care that a(n) _______ would exercise under the same circumstances.

reasonably prudent person

If a partner within the ordinary course of business makes a payment on behalf of the partnership, the partner must be _______ for the expense.

reimbursed

A right to be informed about the partnership business involves the right to: _______.

request and review contracts; review minutes taken during meetings; financial information

When there is a possibility of _______, shareholders who have some degree of control over corporate decisions owe a duty of loyalty, especially to _______ shareholders.

self-dealing, minority

Businesses that are _______ and have a relatively low potential for liability usually do not require the protection and flexibility offered by more complex forms of business entities.

self-funded

Fundamentally, corporations are structured around an allocation of power based on three categories: _______.

shareholders; directors; officers

Inadequate capitalization may mean that a corporation is a(n) _______ company with nothing invested, or that _______ siphoned the profits and assets.

shell; shareholders

In cases where an LLP partner has engaged in some misconduct or tortious conduct, the LLP acts to _______, and _______.

shield the personal assets of other partners, not the partner who committed the negligence

The RUPA states that any partner may _______ on behalf of the partnership that is within the ordinary course of the partnership's business.

sign a contract; makes decisions that are binding on all partners

In Lewis v. Moore, the court ruled:

since Moore was a sole proprietor she was gree to dissolve it at any time; the sole proprietor has the right to dissolve the proprietorship at any time.

Raul wants a simple method to start-up a small marketing company. The marketing firm has relatively low revenue and expenses. Which type of business entity would you suggest?

sole proprietorship

The chief drawback to the _______ as a form of entity is the owner's complete lack of protection for unpaid debts and liabilities of the business.

sole proprietorship

The easiest single-person ownership entity to form and maintain is a(n) _______.

sole proprietorship

The simplicity of the _______ makes this entity a top choice for start-up businesses with relatively low annual revenues and expenses.

sole proprietorship

Because it is a pass-through entity, an LLC can avoid double-level taxation, which means _______.

taxes imposed on both the entity and its members

All of the following are characteristics of a general partnership except:

the association is only recognized in the state of incorporation

In Smith v. Van Gorkom, the court considered whether the business judgment rule protected board members who permitted the sale of a significant amount of stock by the retiring chairman of the board at an undervalued price, devaluing the company. Regarding the board's liability, in this case, the court stated each of the following except:

the board in this case had the expertise to make decisions without consulting outside experts but made a poor decision.

The business judgment rule protects officers and directors from liability for decisions that may have been unwise but did not breach ______.

the duty of care

Happy Hops Brewery Inc., has found that its business is expanding very quickly. The decision to fire three new delivery drivers would be made by:

the officers

Limited Liability means that:

the owners' personal assets are insulated from any business debts or liability if the LLC fails

Which of the following is NOT a right enjoyed by a shareholder of a corporation?

the right to elect and remove officers

The main goal of both the ULLCA and the RULLCA is:

to promote uniformity among various state LLC laws

True or false: In a partnership agreement, if all the partners agree that Billy's capital contribution should be greater because he has provided the lyrics and melodies for the band's songs, he may be entitled to a higher proportion of the profits.

true

When examining whether the business judgment rule applies, most courts look at the following factors: _______.

used the best information available; rational belief; no private interest

Under RUPA a majority of dissociations are the result of one of the following three events: _______, or _______, or _______.

voluntary separation from the partnership; a partner's bankruptcy; one partner gives specific notice to withdraw


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