BUL Exam 4 conceptual only
In a manager-managed LLC ___________. No one member of the LLC has authority to make business decisions on behalf of the LLC. An individual or small group has the authority to control and make decisions for the LLC. All members of the LLC participate equally in business decisions. The authority of the members of the LLC to make decisions is directly proportionate to the amount their capital contribution.
An individual or small group has the authority to control and make decisions for the LLC.
A surety will remain liable when the creditor-principal agreement is modified if the surety consents to the modification Before the modification takes place At the time the modification takes place After the modification takes place Any of the above
Any of the above
The purpose of a buy and sell agreement is to Create a trading partnership Arrange for the evaluation of the business and the method for financing the purchase of a withdrawing or deceased partner's interest. Determine the compensation for partners who manage the business. Set guide lines for selling the goodwill of the business.
Arrange for the evaluation of the business and the method for financing the purchase of a withdrawing or deceased partner's interest.
Which of the following section of the Uniform Commercial Code governs the sale of securities Article 2 Article 2A Article 8 Article 9
Article 8
Subchapter S corporation will avoid double taxation if which of the following applies? All the shareholders agree to be taxed as in a partnership The corporation files Articles of Partnership in the state where it has its principal place of business The corporation has no retained earnings All of the above
All the shareholders agree to be taxed as in a partnership
The formal document that represents the agreement of the parties to form a partnership is the ___________. Partnership charter Partnership certificate Articles of partnership Uniform Act of Partnership
Articles of partnership
The written agreement between two or more persons that creates a partnership and sets for the rights and duties of each partner is the_____________. Articles of incorporation Articles of partnership By laws charter
Articles of partnership
Mel, who owns a car repair shop, replaced the clutch in Ellen's car. Until Ellen pays for the repairs, Mel has a ______lien on the car. Artisan's Mechanic's Judicial Guarantor's
Artisan's
A security interest in personal property in favor of one who has performed services on the personal property is an ________. Mechanic's lien. Artisan's lien. Color of title. Security Deposit.
Artisan's lien
A Limited Partnership must have ____________. At least one limited partner who participates in management decisions. An equal ratio of limited partners to general partners. At least one general partner. Equal capital contributions from both limited and general partners.
At least one general partner
Jason has filed suit against Luke claiming $50,000 in damages. While the claim is being litigated, Jason can ask the court for a writ to seize property belonging to Luke which could be used to satisfy a judgment. The seizure prevents Luke from selling or otherwise disposing of the property during the proceedings. The writ Jason will ask for is a writ of________________. Attachment Attainder Execution wrong Garnishment wrong
Attachment
Pearl sued Sam and was awarded a judgment against him for $50,000. Sam has a savings account with First Bank that can be seized in partial satisfaction of the judgment. The writ the court will use ordering First Bank to turn over to it the funds in Sam's account is a writ of____________. Attainder Attachment Garnishment Execution
Attachment
Under the "pass through" principle, a business entity Avoids double taxation Assigns assets of the business to a receiver. Delegates duties of the business to a subcontractor Conducts high risk activities through a subsidiary.
Avoids double taxation
A shareholder who dissents from a merger is entitled to Be paid the fair value of her stock Revoke her dissent within 10 days of the stock appraisal Sue the board of the surviving corporation in a derivative suit. All of the above are shareholder rights.
Be paid the fair value of her stock
Bill is a limited partner in K&L Limited Partnership. Which of the following statements about his partnership interests is false? Bill made a capital contribution to K&L Bill has a right to share in K&L profits. Bill must share in K&L losses up to his capital contribution. Bill has a right to make management decisions for K&L.
Bill has a right to make management decisions for K&L.
To protect instate investors, most states have statutes regulating the sale of stocks and other securities within the state. These state statutes are referred to as ________________laws. Blue sky Asset protection Investment trust White knight
Blue Sky
A director would incur personal liability if The corporation failed to withhold taxes from the wages of employees The board declared an illegal dividend The shares of the corporation lost more than 20 of their market value. Both a and b
Both a and b
Directors have which of the following fiduciary duties? The duty of loyalty The duty of due care The duty to obey instructions Both a and b are duties of directors
Both a and b are duties of directors
Which of the following statements is true about a partnership name? The name is an asset of the partnership that may be sold or assigned The name must include the word "company" in it. The partnership must comply with the state's assume name provisions. Both a and c
Both a and c
A partnership that fails to comply with a state's assumed name statute Will be given a trade name by the attorney general Will not be able to use the courts of the state to sue its debtors May exposed the partners to criminal liability Both b and c
Both b and c
The capital contribution of a partner may consist in all of the following except Patent rights Cash Business experience Real property
Business experience
If a plaintiff shareholder cannot show that a director's decision was made in violation of his duties of loyalty or care, the court will allow the decision to stand under the __________rule. Business judgment Entire fairness Corporate governance Unocal
Business judgement
The agreement among the partners that spells out how the firm's assets will be valued and how the interests of a retiring or deceased partner will be bought out is a(n) ___________________ agreement. Reciprocity Marshalling Buy and sell Accounting
Buy and sell
The rules that govern the corporation, including the number of directors it will have, the method of electing directors, the time and place of shareholder meetings, etc., are found in the corporation's ____ . By laws Articles of incorporation Charter State incorporation code
By laws
The court order directing that the share of profits due a partner be given to his or her creditor to satisfy a judgment is a ____ order. Charging Marshaling Accounting Collection
Charging
The document that the state issues evidencing that a corporation has been duly formed is the corporation's ____ . By laws Articles of incorporation Charter Certificate of authority to do business
Charter
Rod and Todd have joint and several liability as sureties on a loan made to Rod's business by First Bank. Under this agreement, Todd is a ____ . General Guarantor Co-surety Special Guarantor
Co-surety
A _________ is the voluntary relinquishment of the right to a mechanic's lien before a notice of lien is filed. Satisfaction and accord. Waiver. Collection proceeding. Confessed judgment.
Collection proceeding.
In a _______, a creditor must have made reasonable but unsuccessful attempts to collect from the principal before the guarantor can be held liable. Absolute guaranty. Unconditional guaranty. Conditional guaranty. Satisfaction guaranty.
Conditional guaranty.
An extension of time of payment between a creditor and principal must be a valid agreement supported by ______ if it is to have an impact on the surety's liability. Consideration Collateral Personal property. Real property.
Consideration
The combination of two corporations that results in the dissolution of both corporations and the emergence of a new corporation is an ____ . Merger Consolidation Purchase of assets Bulk Transfer
Consolidation
Persons who contract with the owner to furnish labor or material or construct a building are known as _________. Contractors. Subcontractors. Authorized agents. Mortgagees.
Contractors
Bob is a co-surety with Sue on a loan that was made to Sue's business. If the business defaults on the loan and Bob is required to pay the full amount, Bob has the right of ____________ against Sue. Reimbursement Indemnification Contribution Subrogation.
Contribution
What is the form of business organization that is subject to the most regulation at the state and federal level? Corporation Partnership Limited Partnership Professional Association
Corporation
What kind of business organization is subject to the most regulation at the state and federal level? Corporation Partnership Limited Partnership Professional Association
Corporation
Which of the following best describes the "double taxation" on corporate profits? The profits of a corporation are taxed at twice the rate of the highest individual tax rate. The income an individual gets from dividends is taxed at twice the rate of the income he gets from wages. The IRS is twice as likely to audit returns with dividend income as it is to audit returns with income from wages only. Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends
Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends
A bond holder is a _________of the corporation; and a shareholder is a ______of the corporation. Owner-----------------Creditor Creditor-------------Owner Owner----------------Beneficiary Beneficiary----------Owner
Creditor---------------Owner
Minority shareholders have the best chance of electing directors in a corporation that uses the ____ method of voting. Proxy Cumulative Non-cumulative Straight
Cumulative
A surety is liable to the creditor as soon as the principal ________. Enters into the contract. Makes an initial payment. Files for bankruptcy Defaults
Defaults
The suit that a shareholder would bring against the officers of a corporation to enjoin ultra vires acts or acts that impair corporate assets is a __________suit. Direct Derivative Proxy Peremptory
Derivative
Any change in the identity of the partners, whether through death, withdrawal, or the adding of a new partner, results in the ________________of the old partnership. Termination Winding up Dissolution Disengagement
Dissolution
DEF Corporation, which is incorporated in Maryland, is a ____ corporation in Maryland. Foreign Domestic Alien Native
Domestic
A partner who does not participate in management and whose existence is not known by the public is a _____________ Silent partner Dormant partner Secret partner Phantom
Dormant Partner
A surety owes a ____ to the principal for any profits obtained after the surety performs. Duty to Account Debt Thank you note ice cream
Duty to Account
Frank is a seller of imported pottery. To induce a new wholesaler to sell him goods on credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the business. In fact, Ed had no partnership interest and Frank was a sole proprietor. Ed now has liability to the wholesaler based on The complicity theory Vicarious liability Estoppel Respondeat superior
Estoppel
Paul sued Dan and won a $90,000 judgment against him. Paul has identified property belonging to Dan that would be used to satisfy the judgment. The order the court will give to the sheriff instructing him or her to seize and sell Dan's property is a writ of ________________. Attachment Garnishment Execution Expropriation
Execution
State law requires that state chartered banks post bonds to protect the banks from losses caused by embezzlement by bank employees. The bonds posted by banks are __________bonds. Fidelity Performance Bank Fiduciary
Fidelity
When a ________ is purchased, a bonding company promises to pay an employer any loss, not to exceed a stated amount, caused by the covered employees' embezzlement. Performance bond. Fidelity bond. Security agreement. Nonperformance bond.
Fidelity bond.
A "certificate of limited partnership" is a document that is Filed with the state Secretary of State by the limited partnership as part of its application process. Issued by the IRS to acknowledge a limited partnership's tax status. Issued by the limited partners jointly to the general partner. Issued by the general partner to the limited partners.
Filed with the state Secretary of State by the limited partnership as part of its application process.
ABC Corporation, which is incorporated in Delaware, has its corporate offices and main manufacturing plant in Ohio. ABC is classified as a _______________corporation in Ohio. Domestic Foreign Native Alien
Foreign
a surety has no obligation to the creditor unless the principal __________
fails to perform
A __________ is a party whose promise is not limited to a single transaction or to a single creditor.
general Guarantor
Three major U. S. banks have launched a service to process online electronic payments, creating in the process a major competitor of PayPal's. If the banks were to buy out PayPal in the future, this would constitute a ______________________merger. Horizontal Vertical Market product extension Conglomerate
horizontal
A partnership whose primary purpose is to manufacture things or to provide services is a ____________partnership. Professional Entrepreneurial Trading Non-trading
non-trading
By statute, a limited partnership must have a minimum of ___________general partners. one two four five
one
What is the provision of the tax rule that makes income taxable only for the individuals who receive it, and not for the business entity that produces it? Double taxation Pass through Dividend retention Income averaging
pass through
A _______ provides protection against losses that may result from the failure of a contracting party to perform the contract as agreed. Performance bond. Foreclosure sale. Finance agreement. Payment schedule.
performance bond
A corporation ceases to exist as a legal entity when The directors vote unanimously to dissolve the corporation The shareholders vote unanimously to dissolve the corporation The directors of the corporation notify corporation creditors of the dissolution. The state issues a certificate of dissolution
The state issues a certificate of dissolution
One method for determining a fair value of the stock of a shareholder who dissents from a proposed merger is the __________________. Promotion of justice rule The 80% rule The weighted average method The ex post facto method.
The weighted average method
Which of the following statements about LLC's is false? LLC's are a relatively new form of business organization. There is an extensive body of law based on court decisions governing LLC's. Shareholders have no personal liability for the debts of the LLC. The LLC is not a taxable entity
There is an extensive body of law based on court decisions governing LLC's.
Which of the following statements about the rights and duties of doctors who practice medicine in a professional corporation is true? Doctors have no personal liability for medical malpractice suits. Because they are also owners of the corporation, doctors have no protection from discrimination based on age. The professional corporation can have no more than ten owner-employee doctors. They are eligible to participate in tax advantaged pension plans.
They are eligible to participate in tax advantaged pension plans.
What is the limit of shareholders in subchapter S corporations? Ten Thirty-five 100 Tere is no limit
Thirty-five
All of the following are functions of an LLC's Operating Agreement, except: To set forth rules concerning voting rights for members of the LLC. To indemnify members of the LLC from liability for any unlawful acts. To make rules concerning the transfer of interests in the LLC. To address circumstances in which the LLC would dissolve.
To indemnify members of the LLC from liability for any unlawful acts.
A partnership whose primary business purpose is the buying and selling of goods is a ________partnership. Professional Entrepreneurial Trading Non-trading
Trading
A partnership that buys and sells commodities is a _______________partnership; a partnership that produces goods or sells services is a _____________partnership. Code--------------------------statutory Code--------------------------common law Trading-----------------------non-trading Trading-----------------------common law
Trading------------------non-trading
Which of the following statements about treasury stock is false? Treasury stock can be resold only at par value. It is stock that the corporation acquired by gift or by purchasing from shareholders. Most states require that corporations purchase treasury shares only with accumulated profits or surpluses. Creditors of the corporation or the state itself may block the purchase of treasury stock.
Treasury stock can be resold only at par value.
A shareholder who cannot attend a shareholder meeting may give another person the right to vote her shares in that election. This temporary grant of authority is an ____ . Warrant Proxy Assignment Delegation
proxy
Acts of a corporation that goes beyond the powers granted to it by the state or in its charter are ____ acts. Criminal Ultra Vires Preemptive Peremptory
Ultra Vires
Individual members of an LLC may do all of the following, except: Bind the LLC in legally enforceable contracts. Voting on business personnel issues. Making capital contributions to the LLC. Using LLC funds to satisfy personal debts.
Using LLC funds to satisfy personal debts.
PaperCo makes paper products from recycled materials. If PaperCo acquires the recycling plant from which it buys most of its raw materials, the acquisition would be a ______________merger. Horizontal Vertical Conglomerate Market product extension
Vertical
When a partnership ceases to exist, the process of reducing the firm's assets to cash, paying off the creditors, returning the capital contributions of the partners, and distributing profits is called ____ . Dissolution Winding up Marshaling of assets Termination
Winding up
If a judgment for dollar damages is not paid, the judgment creditor may apply for a ____ Writ of Execution Writ of Mandamus Writ of Santa Habeas Corpus
Writ of Execution
Which of the following statements about corporate bonds is true? Bond holders are creditors of the corporation Bond holders have the right to vote for directors Bonds pay a stated rate of interest. a and c
a and c
Which of the following is not required to create a partnership? A written agreement between the parties. Two or more persons An understanding to share profits and losses A common interest and intent to conduct business activities together.
a written agreement between the parties
The document that is written evidence of an ownership interest in a corporation is an ____ Stock warrant Charter Stock certificate Proxy statement
stock certificate
The document that is written evidence of an ownership interest in a corporation is an ____ Stock warrant Charter Stock certificate Proxy statement
stock certificate
ABC Corporation has a $150,000 open line of credit with Local Bank. Alice, the president of ABC, promised Local Bank that she will be liable if ABC defaults on any or all of the draws it takes against its line of credit. Under this agreement, Alice is a __________________. Special guarantor xx General guarantor Co-principal Co-surety
wrong
____ is a proceeding by which a plaintiff seeks to reach the assets of the defendant that are in the hands of a third party. Garnishment Writ of Execution Habeus Corpus Burglary Attachment
Garnishment
In which of the following business forms are profits taxed at both the entity level and the owner level? General corporation Limited Partnership LLC LLP
General Corporation
Which business entity has the following characteristics: liability of the owners is limited to their investments; ownership interest is easily transferrable and there are no legal limits to the number of owners; owners elect the managers of the business who operate under duties of loyalty and due care; the entity is organized under state law and may have perpetual existence; profits are subject to double taxation?
General Corporation
Which of the following usually provides an investor the least protection from personal liability for the debts of the business? General Partnership Limited Partnership LLC Corporation
General Partnership
In a limited partnership LP, what are the partners who have unlimited personal liability for the debts of the LP? General partners Joint partners Limited partners Silent partners
General partners
Which business entity is defined as "an association of two or more owners who carry on as co-owners a business for profit?" Proprietorship General partnership Subchapter S corporation Limited Liability Company
General partnership
In a limited partnership, the _________partner has unlimited personal liability for the debts of the partnership; the ____________partner is liable only to the extent of his or her capital contribution. Limited-----------------general General----------------limited Senior------------------limited General----------------junior
General----------------limited
Any third party who promises a creditor to be liable for a principal's payment is either a surety or _________. Obligee. Guarantor. Principal Debtor Obligor.
Guarantor.
The merger that creates the greatest number of antitrust issues is a ____ merger. Conglomerate Horizontal Market extension Vertical
Horizontal
Which of the following is the order in which partnership assets will be distributed upon termination of the partnership? Outside-creditors, partner-creditors, undistributed profits, capital contributions. Capital contributions, outside-creditors, partner-creditors, undistributed profits. Partner-creditors, outside-creditors, undistributed profits, capital contributions Outside-creditors, partner-creditors, capital contributions, undistributed profits.
Outside-creditors, partner-creditors, capital contributions, undistributed profits.
A lien for the value of material and labor expended in the construction of buildings and other improvements is a ____ . Mechanic's lien Atsy lien UCC 9 lien General power lien
Mechanic's lien
When ABC Corporation was formed, the directors authorized an issue of 1,250,000 shares at $1,000 a share. These shares are classified as _______________stock. Treasury Watered Par value No par value
Par value
Shares that are issued with a face value are Par value shares No par shares Treasury shares Non-certified
Par value shares
Shares that are issued with a face value are Par value shares No par shares Treasury shares Non-certified
Par value shares
The business entity that consists in an association of two or more persons to carry on as co-owners a business for profit is an__________. Limited partnership Limited liability company Partnership Professional association
Partnership
Dominant shareholders in closely held corporations who exploit their control of the corporation to benefit themselves at the expense of minority shareholders are guilty of Ultra vires acts Quo warranto acts Oppressive conduct Unfair trade practices
Oppressive Conduct
All of the following could be accurate statements about a general partnership, except: Partnership liabilities in a general partnership are limited to the amount of capital contribution. Partners can share in management of the partnership. Partners can share partnership profits. The general partnership allows for quick, easy and immediate control.
Partnership liabilities in a general partnership are limited to the amount of capital contribution.
The prerogative of existing shareholders to buy new issues of stock in the same proportion as their current holdings is their ____ right. Buy and sell Redemption Subscription Preemptive
Preemptive
When a corporation dissolves, holders of ____ stock have priority in the distribution of corporation assets. Preferred Common Treasury Participating
Preferred
When a corporation dissolves, holders of ____ stock have priority in the distribution of corporation assets. Preferred Common Treasury Participating
Preferred
Why are corporations said to have a burden of "double tax"? Profits are taxed at the corporate level as income and again at the shareholder level as dividends Corporations are taxed at both the state and federal level. Corporations must file federal tax returns twice a year because their taxing period runs for only six months Corporations compute their federal tax liability by multiplying their state tax liability by two.
Profits are taxed at the corporate level as income and again at the shareholder level as dividends
A partner who does not participate in the management of the business is a ____ partner; a partner who participates in decisions and advises management, but whose partnership interest is not known to third parties is a ____ partner. Dormant-------------------Silent Secret----------------------Dormant Silent----------------------Secret Silent-------------------Dormant
Silent----------------------Secret
A ________ is a party who limits his or her promise to a single transaction or to a single creditor. General guarantor. Special guarantor. Creditor. Obligee.
Special guarantor.
Allison is going to create a lawn service business. Allison would like to limit her liability by creating a subchapter "S" corporation. She does not know if the state she lives in allows for a single shareholder corporation. Where should Allison look to find the answer to her question?
State statutes
Instead of giving shareholders a cash dividend, ABC Corporation gave each shareholder 2 shares of a new stock issue for each share of stock the shareholder already owned. This is an example of a ____ . Super Delegate Dividend Stock Dividend Stock Split Stock Subscription
Stock Dividend
Jo and Anna, who are mother and daughter, are co-owners of Joanna's Frocks. When the bank loaned money to the business, Jo and Anna agreed to be sureties on the loan. Under the loan agreement, Anna will be liable only if Jo defaults on her obligation as a surety. Anna is a __________on the loan. General guarantor Special guarantor Co-surety Sub-surety
Sub-surety
Another name for a tax option corporation is a Limited liability Company Professional corporation Subchapter S corporation Joint venture
Subchapter S corporation
A ________ provides security for a creditor without involving an interest in the property, where the security for the creditor is provided by a third person's promise to be responsible for the debtor's obligation. Suretyship. Artisan's lien. Mechanic's lien. Foreclosure sale.
Suretyship
What is another name for a Subchapter S Corporation? Hybrid Limited Partnership Tax option corporation Limited Liability Company Professional Corporation
Tax option corporation
A document that an LLC must submit to the secretary of state's office prior to doing business is ______. The Operating Agreement. A Partnership Agreement. The Articles of Organization. A Security Interest Filing.
The Articles of Organization.
Which of the following statements about cash dividends is false? Cash dividends become a debt of the corporation once they are declared. Directors have personal liability for illegally declared dividends Shareholders who receive illegal cash dividends may be forced to return them to the corporation. The cash may come from any source, including the corporation's capital stock.
The cash may come from any source, including the corporation's capital stock.
In a successful derivative suit, any money awarded in the judgment will go to The corporation The plaintiff shareholder The plaintiff shareholder and the corporation will share the money equally. There can be no award of money because only equitable remedies are available in derivative suits.
The corporation
Which of the following would not be grounds for dissolving a corporation? A quo warranto proceeding The shareholders are deadlocked in electing a board of directors. Oppressive conduct by a controlling shareholder. The corporation has not made a profit or declared dividends in two years.
The corporation has not made a profit or declared dividends in two years.
Which of the following is not normally included in the Partnership Agreement? The name of the partnership. The capital contribution of each partner. A buy and sell agreement The daily work schedule for each partner.
The daily work schedule for each partner.
May is one of three limited partners in a limited partnership. Each limited partner made a capital contribution of $50,000. Assume there is a judgment against the partnership for $300,000 and that both the partnership and the general partner are insolvent. What is the maximum amount that May will have to pay on the judgment? 0: May is a limited partner so has no liability for the debts of the partnership under any circumstances. $50,000: May's capital contribution can be applied to the debt, but she is not personally liable beyond that. $100,000: May will be liable for up to 1/3 of the judgment since there are three limited partners. $300,000: As a limited partner May has joint and several liability for the debts of the partnership so she could be personally liable for the full amount.
$50,000: May's capital contribution can be applied to the debt, but she is not personally liable beyond that.
AMJ Partnership has 3 partners: Amy made a 60,000 capital contribution; May, made a 20,000 capital contribution; and June made a 10,000 capital contribution. The partnership agreement is silent about how profits will be divided. If the partnership makes 90,000 in profits, how will it be distributed? 60,000 to Amy; 20,000 to May; 10,00 to June 30,000 each to Amy, May and June 45,000 to Amy; 30,000 to May; 15,000 to June The partners will have to determine the distribution by a 23 partnership vote
30,000 each to Amy, May and June
The AMJ Partnership has 3 partners: Amy, who made a 60,000 capital contribution; May, who made a 20,000 capital contribution; and June, whose capital contribution was 10,000. The partnership agreement is silent about how profits will be divided. If the partnership makes 90,000 in profits, how will it be distributed? 60,000 to Amy; 20,000 to May; 10,00 to June 30,000 each to Amy, May and June 45,000 to Amy; 30,000 to May; 15,000 to June The partners will have to determine the distribution by a 23 partnership vote.
30,000 each to Amy, May and June
Which of the following is NOT one of the recognized disadvantages of doing business as a corporation? A corporation must comply with a great number of state and federal regulations. Corporate profits are subject to double taxation. A corporation must qualify to do business in each state in which it engages in business activities. A corporation can be in existence for a maximum of ninety-nine years.
A corporation can be in existence for a maximum of ninety-nine years.
In a Limited Partnership, the General Partner's fiduciary duty is ______. A duty to ensure all Limited Partners has an equal voice in partnership affairs and decisions. A duty to ensure that the General Partner optimizes his or her investment in the partnership. A duty of good faith and fair dealing to all partners in the partnership. A duty to minimize financial risks taken on by all Limited Partners in the partnership.
A duty of good faith and fair dealing to all partners in the partnership.
All of the following are considered advantages to a Limited Liability Partnership, except: A limited liability partner is always insulated from personal liability of he or she commits malpractice. A limited liability partner can avoid personal liability for partnership debts. The limited liability partnership can function much like a general partnership, without the same risks of personal liability as a general partnership. Partnership proceeds may "pass through" the partnership for income tax purposes.
A limited liability partner is always insulated from personal liability of he or she commits malpractice.
A partnership will not terminate by operation of law if A partner dies A partner files for bankruptcy A partner becomes insolvent The purpose of the partnership becomes illegal
A partner becomes insolvent
The "weighted average method" refers to a way of voting for directors that protects the rights of minority shareholders. A way of distributing dividends in closely held corporations A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger. A way of resolving antitrust issues when competitor corporations merge.
A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger.
Phil has a 1/4 partnership interest in Green & Sons. He has been denied access to the partnership books and records for over a year and he suspects that one of the partners has been engaging in secret business transactions using partnership funds. Phil wants to know the status of the business. Phil's remedy in this situation is to go to a court of equity for an ______________. Charging order Marshalling order Accounting Decree of insolvency
Accounting
Phil has a partnership interest in Best Bike. He has been denied access to the books and records and he suspects that one of the partners is engaging in secret business transactions using partnership funds. Phil wants to know the status of the business. Phil should request an______: Charging order Marshalling order Accounting Decree of insolvency
Accounting
John was a limited partner in Commercial Properties Limited. When the general partner became ill, John took over all the management duties of Commercial Properties. Ace Office Equipment, a supplier of Commercial Properties, is suing Commercial Properties over several months of unpaid bills. Under modern laws governing the operation of limited partnerships, which of the following statements best describes John's personal liability for Commercial's debt to Ace Office Equipment? Ace can hold John personally liable for Commercial's debt because he is a limited partner in the business. Ace can hold John personally liable for Commercial's debt because he assumed management of Commercial. Ace can hold John personally liable for Commercial's debt only if Ace knew that John had taken over the management duties. Under no circumstances can John be liable beyond his capital contribution.
Ace can hold John personally liable for Commercial's debt only if Ace knew that John had taken over the management duties.
Which of the following decisions would require a unanimous vote of the partners? Hiring an accountant to prepare the partnership information return for federal taxes. Buying materials from a new supplier. Having the parking lot repaved and installing new lights. Admitting a new partner into the partnership
Admitting a new partner into the partnership
Sharing in net profits is not prima facie evidence that a partnership exists if the profits were paid by the partnership As rent For wages As an annuity to the spouse of a deceased partner All of the above
All of the above
Which of the following parties could claim an artisan's lien? A common carrier of goods. A jeweler who repaired a watch The owner of a storage facility All of the above are eligible for an artisan's lien.
All of the above are eligible for an artisan's lien
An important factor to consider in the creation of a business organization is: Liability Control Taxation All of the above are important factors to consider
All of the above are important factors to consider
Jay, who is a partner in an accounting firm, is being sued for malpractice by a client. If the jury finds for the client, which of the following parties will have liability on the judgment? The partnership as an entity Jay individually Each of the other partners individually All of the above have liability on the judgment.
All of the above have liability on the judgment.
Which of the following would bring about the dissolution of the partnership? The time the partnership is to last, as stated in the partnership agreement, has expired All of the partners agree to end the partnership One of the partners dies. All of the above would bring about the dissolution of a partnership
All of the above would bring about the dissolution of a partnership
Which of the following is considered a disadvantage of doing business as a general partnership? A general partnership is not a taxable entity under IRS rules. Income in a general partnership flows directly to the partners. All partners can participate in management of the partnership. All partners are/may be held liable for partnership debts.
All partners are/may be held liable for partnership debts.
Which of the following is recognized as a disadvantage to doing business as an LLC? Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions. Individual members of the LLC can never bind the LLC in a valid and enforceable contract. Compared to other business entities, the LLC is taxed more heavily by the IRS. An LLC requires the participation of several owners, which can sometimes complicate day-to-day business decisions.
Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions.
Edgar Esquire has an insurance contract with Lawyers Insurance Company which provides that Lawyers Insurance will pay any malpractice judgment against Edgar up to $3 million. The insurance contract between Edgar and Lawyers Insurance Company is one of __________. Suretyship Special guarantee General guarantee Indemnity
Indemnity
Nelson and Jack are both avid sailors. When a sailing acquaintance put his older, but still highly desirable, boat up for sale, Nelson and Jack agreed to pool their resources to buy and fix up the boat, then sell it and split the profits. This is an example of a ____ . general partnership limitied partnership Joint venture proprietorship
Joint Venture
Which business entity has the following characteristics: an informal association of two or more persons that is formed to accomplish a single business transaction? Joint venture Limited partnership Professional association General partnership
Joint Venture
States give corporations many rights, among them is the right to sue and the right to own property in the corporation's name. What do such legal rights collectively constitute for a corporation? Goodwill Legal capacity Business identity Competitive advantage
Legal Capacity
Partnership agreements often fund the purchase of a deceased partners' partnership interests with Life insurance policies Distributions of retained earnings Levies on partnership interests Partner advances
Life insurance policies
Which business entity has the following characteristics: owners are normally professionals engaged in selling their services; owners have both limited liability for the debts of the entity and limited liability for the contracts and torts of the other owner-professionals; the entity is organized under state law; profits are taxed only at the owner level? General partnership Limited partnership Limited Liability Partnership Limited Liability Company
Limited Liability Partnership
In which of the following business organizations does an owner risk losing his or her limited liability by actively and publicly managing the business? Limited Partnership Limited Liability Partnership General corporation Limited liability corporation
Limited Partnership
Which business entity has the following characteristics: one owner has unlimited personal liability for the debts of the business while other owners are liable only to the extent of their investments; owners lose their limited liability if they actively manage the business; the entity is organized under state law; both profits and loses pass through to the owners? General partnership LLC wrong Limited Partnership General Corporation
Limited Partnership
All of the following could be recognized as advantages of doing business as a limited partnership, except: A limited partnership allows limit partners to be liable only to the extent of their capital contribution. Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities. Limited partners can invest in a partnership while effectively protecting their personal assets. A Limited Partnership is often a convenient and attractive option to investors.
Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities.
Which of the following statements about the limited partner in a limited partnership is false? Limited partners may participate fully in the management of the partnership. There must be at least one limited partner. Limited partners must approve any changes to the partnership agreement. Limited partnerships that invest in real estate are typically good tax shelters for the limited partners.
Limited partners may participate fully in the management of the partnership.
An LLC in which non-owners are hired to run the day to day activities of the firm is a ______LLC. Member-managed Manager-managed Proprietary Subchapter S
Manager-managed
An LLC where a single person or select group has the power to manage is a ____________________LLC. Manager-managed Member-managed Proprietary Subchapter S
Manager-managed
What is the equitable rule that 1 distributes assets of an insolvent partnership first to creditors of the partnership and 2 does not let partnership creditors reach the assets of individual partners until the partners' personal creditors are satisfied? Equitable distribution Comity of assets Marshaling of assets Partnership partition
Marshaling of assets
Megan has joined Alliance Partners, making a 50,000 capital contribution. Alliance has been in business for 10 years and Megan is worried about her liability for pre-existing debts. Which statement best describes her liability for the debts Alliance had when she joined the partnership? Megan has unlimited personal liability and her entire capital contribution may be used to satisfy the debts. Megan has unlimited personal liability, but her capital contribution cannot be used because it is new money. Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them. Megan has no personal liability for the debts and her capital contribution cannot be used to satisfy old debts.
Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them.
An LLC that is managed by one or more of the owners is a ____________________LLC. Member-managed Manager-managed Proprietary Subchapter S
Member-Managed
Which of the following is a quality that an LLC shares with a corporation? Members are only personally liable for debts to the extent of the money they put into the business. Members of an LLC usually have little to no control in major business decisions. An LLC and a corporation are treated identically for tax purposes. Both an LLC and a corporation require complex and costly procedures and filings before they can legally do business.
Members are only personally liable for debts to the extent of the money they put into the business.
All of the following are considered advantages of doing business as an LLC, except: The LLC insulates its members from personal liabilities for the debts of the business. Members of the LLC may lawfully avoid filing personal tax returns with the IRS. The LLC can function much like a general partnership, while avoiding many of the risks of a general partnership. The LLC can provide its members voting rights that are proportionate to the members' capital contributions.
Members of the LLC may lawfully avoid filing personal tax returns with the IRS.
Stock which has no stated value when it is sold is ____ stock. Watered No par value Par value Restricted
No par value
Allfam is a closely held family corporation, many of whose shareholders are employees of the corporation. In an attempt to reduce its taxes, Allfam paid its shareholder-employees enormous salaries and deducted the salaries as a corporate expense. Is Allfam permitted to do this? Yes, this is a legitimate way for closely held corporations to reduce their taxes. No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends. No, the shareholder-employees will have do return the excess portion of their salaries to the corporation. No, the IRS will disallow the deductions for this year, but will allow the corporation to treat them as carry-forward losses for next year.
No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends.
Preferred stock that is entitled to receive only the stated preferred dividend and no other is ____ preferred stock. Participating Non-participating Cumulative Non-cumulative
Non-participating
Preferred stock that is entitled to receive only the stated preferred dividend and no other is ____ preferred stock. Participating Non-participating Cumulative Non-cumulative
Non-participating
The usual procedure for a party seeking to perfect a mechanic's lien to file or record a ____ in the office of the county in which deeds to real estate are recorded. Notice of lien Fixture warrant Writ of warrant Lis warrant
Notice of lien
Which of the following statements about the operation of a member-managed LLC is false? Articles of organization must be filed with the state as part of the application process. The application must state that it is to be a member-managed LLC. Only the managing members have access to the books and records of the LLC Any member of the LLC may bind the LLC on a contract.
Only the managing members have access to the books and records of the LLC
Which of the following statements about the taxation of corporations is false? Premiums paid for employee health insurance plans are fully deductible. Profits retained by the corporation are normally taxable to the shareholders under the corporate pass through rule. Salaries paid to employees are deductible expenses for the corporation. Most states impose license fees or franchise taxes on corporations doing business in the state.
Profits retained by the corporation are normally taxable to the shareholders under the corporate pass through rule.
The right of first refusal refers to the right of LLC members to Dissent from a business decision by a non-member manager. Vote against admitting another member. Purchase the interest of another member in the LLC before it is offered to an outside buyer Purchase an asset of the LLC before it is offered for sale to the public.
Purchase the interest of another member in the LLC before it is offered to an outside buyer
States have the power to cancel or revoke the charters of corporations that engage in illegal activities. These forfeiture hearings are called ____ proceedings. Divestiture Quo warranto Ultra vires Appraisal
Quo warranto
The person who is designated to receive notices and service of process for a corporation is its General agent Special agent Registered agent Factor
Registered agent
Megan agreed to act as a surety on a personal loan First Bank made to Arthur. When Arthur defaulted on the loan, Megan paid off the loan obligation. Megan now has the right of ________against Arthur. Contribution Indemnification Reimbursement Subrogation
Reimbursement
Which of the following statements about the rights and duties of shareholders is false? Shareholders have virtually unrestricted access to corporate books and records Majority shareholders may have fiduciary duties to minority shareholders in closely held corporations. Shareholders must approve changes to the corporate charter. Shareholders are entitled to notice of the annual meeting and all special meetings.
Shareholders have virtually unrestricted access to corporate books and records
A partner who does not participate in the management of the partnership is a ________partner. Silent Dormant Secret Junior
Silent
Which of the following best describes the role of a general partner in a limited partnership? The general partner usually has an insignificant role in the overall business decisions of the limited partnership. The general partner defers to the business decisions of the limited partners of the limited partnership, unless those decisions seem economically unreasonable. The general partner may participate in the business decisions of the limited partnership, but he or she will never be held personally liable for the debts of the business. The general partner manages the partnership and remains responsible for partnership liabilities.
The general partner manages the partnership and remains responsible for partnership liabilities.
Which of the following would a represent a breach of fiduciary duty by a general to the limited partners in a limited partnership? The general partner takes action to personally profit from the business of the partnership. The general partner takes action to minimize the risks and debts that are incurred by the partnership. The general partner enters into contracts on behalf of the partnership without first consulting the limited partners. The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership.
The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership.
A member of an LLC risk personal liability for participating in all of the following activities, except: In the name of the LLC, the member secretly loans money to a close friend. The member knowingly files a false tax return with the IRS. The member volunteers to assume personal responsibility for a loan payments made by the LLC. The member consistently votes against decisions that are ultimately approved by the majority of other members of the LLC.
The member consistently votes against decisions that are ultimately approved by the majority of other members of the LLC.
Which of the following is FALSE about the name of a corporation? The name must include words like "company" or "corporation" to indicate that the entity has limited liability. The name cannot be deceptively similar to any other corporation incorporated in that state. The name can never be changed once it is registered with the state. States allow corporations to reserve a name for a limited time while the corporation is being formed
The name can never be changed once it is registered with the state.
Which of the following statements about proprietorships is true? Proprietorships are taxable entities apart from the owners. A business can have up to thirty-five owners and still be a proprietorship. A proprietorship cannot generate more than 10 million in proceeds per tax year. The owner of a proprietorship is personally liable for all the debts of the proprietorship.
The owner of a proprietorship is personally liable for all the debts of the proprietorship.
When considering whether a partner has breached his or her fiduciary duties to the partnership, courts are likely to consider all of the following, except: Specific language of the Partnership Agreement. Applicable state partnership statutes. Prior court decisions. The partner's personal net worth.
The partner's personal net worth.
In a suretyship, security for the creditor is provided by Granting the creditor an interest in the debtor's real property A statutory lien on the debtor's personal property. The promise of a third party to perform if the debtor does not perform. A pledge by the debtor of personal property.
The promise of a third party to perform if the debtor does not perform.
Which of the following is not a right of a partner? The right to participate in the management of the business. The right to draw yearly interest on his or her capital contribution The right to inspect the partnership books and records The right to sue for an accounting if another partner has taken a secret profit.
The right to draw yearly interest on his or her capital contribution
All of the following are rights held by an individual member of an LLC, except: The right to request that the LLC be dissolved. Access to the LLC's books and records. The right to vote against an amendment to the LLC's operating agreement. The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.
The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.
Absent an agreement otherwise, the members of an LLC have a statutory right to approve a merger dissolve the LLC inspect the books and records of the LLC all of the above are statutory rights
all of the above are statutory rights
The theory under which courts pierce the corporate veil of corporations whose shareholders do not treat the corporation like a separate legal identity is the ____ theory. Alter ego Ultra vires Quo warranto Promotion of justice
alter ego
A(n) _______ is a legal proceeding accompanying an action in court by which a plaintiff may acquire a lien on a defendant's property as a security for the payment of any judgment that the plaintiff may recover. Attachment. Sheriff's sale. Meeting of creditors. Discharge in bankruptcy.
attachment