Business Law Chapter 14 Limited Liability Companies and Limited Liability Partnerships

The following are traditional ways an LLP are capitalized: -insurance purchase -gambling winnings -debt -sale of equity

-debt -sale of equity

An LLC is created by what state-required filing?

Article of organization

Articles or certificates of organization are filed with the state to create a(n) ______.

LLC

If an LLC has no operating agreement, the default source of law is the state's ______ statute.

LLC

LLCs may select between being taxed as a partnership or as a(n):

corporation

The dissolution or liquidation of an LLC is most likely to occur: (Check all that apply.) -at the end of the fiscal year, after all taxes are paid. -when a majority of the members vote to end the business. -when a competitor offers to buy the business. -when an event defined in the operating agreement occurs, such as the death of a member.

-when an event defined in the operating agreement occurs, such as the death of a member -when majority of the members vote to end the business

Larry, Moe, and Curly have formed the Three Stooges General Partnership. Moe is concerned that he may one day be personally liable if someone is injured and sues the business over Larry's wild antics. What should the three general partners do to prevent such personal liability?

Convert the GP to an LLP

LLCs and LLPs limit the personal __________ of business principals, while avoiding the double taxation found in corporations.

Liability

The abbreviation LLP denotes a limited liability

Partnership

The protections from personal liability provided by a limited liability partnership ______ the same in each state.

are not

A ____ call is the collection of additional contributions from LLP partners.

capital

Debt and the sale of equity ownership are the primary ways an LLC is

capitalized, funded, or financed

An LLC is a limited liability ______.

company

A limited liability company (LLC) offers its principals the same amount of liability protection afforded to principals of a(n) __________.

corporation

LLCs may be taxed as: (Check all that apply.) -corporations. -single-owner entities. -non-profits. -pass-through entities.

corporation pass through entities

A limited liability company (LLC) offers business owners the liability protection of a

corporation and the taxation of a partnership.

_____ of an LLC is a liquidation or termination process that will close the business.

dissolution

Managers of an LLC owe the members the ______ duties of care and loyalty.

fiduciary

Owners of an LLC owe each other the fiduciary duties of care and ______.

loyalty

Basic information required by the state to create an LLC typically includes the name of both the business and its __________, as well as its principal location.

members

Basic information required by the state to create an LLC typically includes the ______ of the business, its principal location, and the names of its members.

name

The LLC _____ agreement usually controls the amount and methods of capitalizing the business.

operating

The members of an LLC agree on how to operate the business in a(n) __________ agreement.

operating

An LLC is governed through its

operating agreement

LLPs are taxed in the same way general partnerships are, as _____ - _____ entities.

pass-through

Limited liability partnerships (LLPs) are taxed as

pass-through entities

A key benefit for members of an LLC is that they are protected from ________ liability for the obligations of the business.

personal

The "limited" in LLC refers to the idea that LLC members are protected from ___________ liability for any business debt or liability if the venture fails.

personal

Partners in a general partnership may wish to convert to an LLP in order to avoid the ____________ liability they could otherwise incur for each other's mistakes, or for the partnership debts.

potential

A general partnership that wishes to become an LLP must file a statement ___________ of with the appropriate government office.

qualification

The protections provided by an LLP may include business debts, liabilities, and negligence of another partner, all depending on ___________ law.

state

What form should a general partnership file in order to become a limited liability partnership (LLP)?

state of qualification

If an LLC has no operating agreement, it will be governed by the default rules set out by the state's LLC ________.

statute, law, statutes, or laws

LLCs and LLPs were created to allow business principals to avoid double __________ while still providing limited liability.

taxation

The protections against personal liability for an LLP's business debts and obligations

vary widely among the states.