Quiz 3 (Ch 14, 15, & 16)
Which of the following is true of LLC taxation?
An LLC is not taxed at the entity level. but income and losses flow through member's individual returns.
Which of the following is true of an LLC?
An LLC is regarded a separate legal entity from its members.
A sole proprietor has limited personal liability. (T/F)
False
A sole proprietorship cannot be easily transferred when the owner desires to do so (T/F)
False
The right to share in the profits of the partnership is the right to share in the earnings from the investment of capital. (T/F)
True
The owner of an LLC is called ________.
a member
The earnings and losses from a sole proprietorship are reported on ________.
the proprietor's personal income tax filing
Which of the following best describes an entrepreneur?
(A & B) A. A person who forms a new business from scratch B. A person who operates a new business from scratch
A member of a manager managed LLC who is not a manager has a fiduciary duty of loyalty to the LLC and other members (T/F)
False
Agents of an LLC are not permitted to enter into contracts on behalf of the LLC. (T/F)
False
An S corporation must have more than 100 shareholders. (T/F)
False
An S corporation must pay federal income tax at the corporate level. (T/F)
False
Corporations are not allowed to enter into contracts in their own name. (T/F)
False
In a sole proprietorship, the business is considered a separate legal entity. (T/F)
False
Limited liability companies are created by federal law. (T/F)
False
Limited partners have unlimited personal liability for the debts and obligations of the limited partnership (T/F)
False
Preferred stockholders are given the right to vote for the board of directors of the corporation. (T/F)
False
Shareholders have unlimited liability for the debt and obligations of a corporation. (T/F)
False
Shareholders of a corporation act as agents of the corporation. (T/F)
False
The dissolution of a general partnership discharges the liability of an outgoing partner for existing partnership debts and obligations. (T/F)
False
Unless otherwise stated, the franchisor is liable for the torts of its franchisee (T/F)
False
Which of the following is true of general partnership?
General partnerships can be either formally documented or implied from the conduct of the parties.
Which of the following is true of creating a sole proprietorship?
None of the above
Which of the following must be included in the articles of incorporation?
The number of shares the corporation is authorized to issue.
A member is the owner of an LLC (T/F)
True
A sole proprietorship does not does not pay taxes at the business level. (T/F)
True
An entrepreneur is a person who forms and operates a business (T/F)
True
General partnerships do not pay federal income taxes (T/F)
True
Generally, the franchisor and the franchisee are separate entities. (T/F)
True
Generally, the liability of LLC members for debts of the LLC is limited to the extent of their capital contribution and therefore they are not personally liable for the LLC's debts, obligations, and liabilities beyond their contribution. (T/F)
True
Licensing refers to a business arrangement that occurs when the owner of intellectual property contracts to permit another party to use the intellectual property. (T/F)
True
One of the powers of a shareholder is the right to elect the board of directors. (T/F)
True
Receipt of a share of business profits is prima facie evidence of a general partnership. (T/F)
True
The Uniform Limited Liability Company Act is a model act that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCs. (T/F)
True
The designation of d.b.a. refers to the description for a business that is operating under a trade name. (T/F)
True
The income or losses of an LLC "flow through" to the members' individual income tax returns which avoids double taxation. (T/F)
True
To form a corporation, articles of incorporation must be filed with the secretary of state of the state of incorporation. (T/F)
True
Under the RULPA, the law of the state in which the limited partnership is organized governs the partnership. (T/F)
True
Upon dissolution, profits are paid out to partners only after creditors and capital contributions have been satisfied (T/F)
True
