Business Law Final Exam

A corporate director "owns" the corporation. - True - False

False

A corporation that earns a profit is required pay a dividend to shareholders. - True - False

False

Limited Liability Company statutes typically provide that if members do not set forth how profits will be divided, they will be divided in proportion to each members' capital investment. - True - False

False

One of the disadvantages of doing business as a sole proprietorship is the high annual fee that must be paid to the secretary of state. - True - False

False

Jose' and Kyle are members of StrikeOuts, LLC. With respect to liability for StrikeOuts' debts, which of the following is true? - StrikeOuts, LLC is liable, but Jose' and Kyle are shielded from personal liability for StrikeOuts' debts. - Jose' and Kyle are personally liable for StrikeOuts' debts. - The Secretary of State in the state of its organization is proportionally liable for StrikeOuts' debts if the LLC was properly organized. - StrikeOuts, LLC, Jose', and Kyle are all shielded from liability for StrikeOuts' debts.

StrikeOuts, LLC is liable, but Jose' and Kyle are shielded from personal liability for StrikeOuts' debts.

Articles of Organization of a limited liability company (LLC) typically include information as to how the LLC will be managed. - True - False

True

During the winding up process, a partnership's creditors must be paid before partners can receive their capital contributions. - True - False

True

If profit sharing exists in a business, it creates the presumption that a partnership exists. - True - False

True

Limited liability companies that have 2 or more members can be taxed as a corporation. - True - False

True

One of the disadvantages of a sole proprietorship is the lack of continuity on the death of the proprietor. - True - False

True

Sally is the incorporator of Candy Cane Lane, Inc. Randi is a shareholder, Philip is a director, and Verna is an officer. The day-to-day operations of Candy Cane Lane are overseen by - Verna. - Randi. - Sally. ​- Philip.

Verna

If a corporation substantially complied with all conditions precedent to incorporation, it is known as - a corporation by estoppel. - a de facto corporation. - a de jure corporation. ​- a benefit corporation.

a de jure corporation.

XYZ, Inc. is incorporated in the state of Maine and is doing business in the state of California. In California, XYZ, Inc. is known as - a domestic corporation. - a foreign corporation. - an alien corporation. ​- a public corporation.

a foreign corporation.

For purposes of suing/being sued, entering into contracts, and/or holding title to property, LLCs are ​- an aggregate of its members. ​- a non-entity ​- a legal entity apart from its owners. ​- a foreign LLC.

a legal entity apart from its owners.

A particular general partnership has seven partners - two partners own 25% each and the other five partners own 10% each. The partners have not entered into a partnership agreement. Under the UPA, if these seven partners are voting on an ordinary management issue - a majority of the partners must agree. ​- the two partners who own 25% each must agree. - ​the senior partner decides. ​- 2/3 of the partners must agree.

a majority of the partners must agree.

Trevor and Adalberto are members of BatterUp, LLC . Unless it chooses otherwise, BatterUp will be automatically taxed as - a syndicate. ​- a corporation. ​- a proprietorship. ​- a partnership.

a partnership.

If Hammer, Inc.'s shares are publicly traded in securities markets, Hammer, Inc. is - a close corporation. - a privately held corporation. - a public corporation. ​- a publicly held corporation.

a publicly held corporation.

Teri owns and operates a bike shop without creating a separate business entity. Teri receives all profits from the shop and is responsible for all business debt. The bike shop is - ​a partner in a partnership. - ​a franchise. ​- a sole proprietorship. - none of the other responses.

a sole proprietorship

Advantages of doing business as an LLC include - limited liability of individual members - limited liability of individual members - flexibility - all of the other responses

all of the other responses

Event(s) that may trigger a member's dissociation from an LLC may include - voluntary withdrawal - court order - bankruptcy - all of the other responses

all of the other responses

Cora, Darla, and Erma are partners in a sub shop called Sandwichez, splitting the profits equally. Cora contributes 65 percent of the capital. When Sandwichez is dissolved, it has more liabilities than assets. Under the UPA, losses will be paid by - all of the partners in proportion to their capital contributions. ​- all of the partners in proportion to their shares of the profits. ​- Cora because she contributed most of the capital. ​- Darla and Erma because they contributed the least of the capital.

all of the partners in proportion to their shares of the profits.

The stated purpose of Sporties, Inc. is to sell sporting goods. If Nadya, Sporties' chief executive officer, enters into a contract with Marlo's Grocers to sell a line of frozen foods, she has likely committed - an ultra vires act. - a de facto act. - a de jure act. ​- a legal act.

an ultra vires act.

Sid and Teri come to an agreement over the telephone to form a partnership. In order to be enforceable under the Statute of Frauds, Sid and Teri's agreement must ​- be filed in the appropriate state office. ​- be in writing. - ​be signed by a notary public. ​- not involve a third party.

be in writing.

When the owner of a sole proprietorship dies, the sole proprietorship - ceases to continue. ​- passes to the owner's heirs. ​- passes to the state. - is offered for auction to its creditors and competitors.

ceases to continue

Graham's Cakes, Inc. sells a franchise to Paul. The area of law that most applies to the franchise agreement is - contract law. - tort law. - criminal law. - constitutional law.

contract law

Dean and Ellen seek to form a limited partnership. In most states, the limited partnership will be created when Dean and Ellen - file a certificate of limited partnership. ​- execute a partnership agreement. ​- accept their first client. ​- make their capital contributions.

file a certificate of limited partnership.

Ean wants to raise funds for his business, but remain a sole proprietorship. In order to do this, he may - bring in a partner. - issue stock. - get a bank loan. - all of the above.

get a bank loan

Among the biggest attributes of an LLP are that it limits the personal liability of the partners and ​- it allows the partnership to continue as a pass-through tax entity. ​- LLP statutes do not vary from state to state. ​- it can only do business in the state in which it was formed. - it offers the advantage of double taxation credits.

it allows the partnership to continue as a pass-through tax entity.

An advantage of a sole proprietorship is - ​its greater organizational flexibility. - ​its limited liability. - ​its perpetual existence. - ​the ease of transferring the business to other family members.

its greater organizational flexibility

A new partner's liability for the debts of a partnership that were incurred prior to his/her admission is - limited to his/her capital contribution to the firm. - ​limited to his/her personal assets. ​- nonexistent. ​- unlimited.

limited to his/her capital contribution to the firm.

Berta owns Rocket Power, Inc. She uses corporate funds to pay personal expenses, uses the corporate vehicle for a family vacation, and fails to keep minutes of corporate business. Sue claims she has been injured by an employee of Rocket Power. If Sue sues Berta and Rocket Power, Berta - can dismiss the case because she took steps to incorporate. - must file for bankruptcy. - may be personally liable for the judgment because the court may pierce the corporate veil. - must amend Rocket Power's articles of incorporation.

may be personally liable for the judgment because the court may pierce the corporate veil.

Darlene leases a building from Carlo within which she will run her new restaurant. The two year lease requires Darlene to pay Carlo $2,000 per month plus 15 percent of monthly profits from the restaurant. Darlene and Carlo are - not partners, because Carlo does not have an ownership interest or management rights in the restaurant. - partners in a partnership for one year, which may be renewed if both parties agree. - not partners, because the percentage of monthly profits to Carlo is for a sum less than half of the profits. - partners in a partnership for two years.

not partners, because Carlo does not have an ownership interest or management rights in the restaurant.

Sole proprietors pay _____________ on business profits. ​- no taxes. - personal income taxes. - business entity income taxes. - personal and business entity income taxes.

personal income taxes

A corporation may avoid double taxation by - retaining earnings rather than declaring a dividend. - declaring a dividend before April 15. - issuing preferred stock. - all of the above.

retaining earnings rather than declaring a dividend.

Jake and Blake are members of AL Central, LLC. A dispute between them arises that is not addressed in the firm's operating agreement. This dispute will be governed by - the applicable state LLC statute. - ​the Uniform Limited Liability Company Act. ​- the principles of partnership law. - the attorney general in the state in which the LLC is organized.

the applicable state LLC statute

Eva is a limited partner in EverGreen LP, a lawn service, which cannot pay its debts. Eva is liable for the debts ​- in proportion to the number of partners in the firm. ​- to no extent. ​- to the extent of her capital contribution to the firm. ​- to the full extent.

to the extend of her capital contribution to the firm

Ryne is a member of BattersUp, LLC. He is liable for the LLC's debts ​- in proportion to the total number of other members. ​- to the extent of his investment in the firm. ​- in proportion to his profit derived from the firm. ​- he is liable to the full extent of the debt.

to the extent of his investment in the firm.

Avie owns and operates a sole proprietorship. Avie's liability is: ​- limited by state statute and varies from state to state. ​- limited to the extent of capital expenditures. ​- limited to the extent of the original investment. - ​unlimited.

unlimited

Mari opens and assumes financial risk for Dunkers, a basketball academy, without setting up a separate business entity. Mari is - a partner. - ​a franchisor. - a member. - ​a sole proprietor.

​a sole proprietor.

A corporation is owned by - the board of directors.​ - the officers. ​- the shareholders. - all of the above.

​the shareholders