BUL3310-Bailey, Unit 15
In which of the following business organization do the losses as well as the profits pass through to the owners? LP LLC General corporation Both a and b
Both a and b
A surety is liable to the creditor as soon as the principal ________.
Defaults
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
General guarantee
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
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.
A ________ promises to be liable to the creditor only in the event that the surety refuses to perform and thereby defaults. Debtor. Co-surety. Subsurety. Obligee.
Subsurety
The limited liability partnership is often an attractive option for professional associations such as law firms, accountants and medical doctors. True False
True
If a judgment for dollar damages is not paid, the judgment creditor may apply for a ____
Writ of Execution
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.
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.
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. All of the above.
All of the above.
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 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.
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
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____________.
Attachment
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 ________________.
Execution
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.
A creditor in possession of collateral given to him or her by the principal may return it to the principal without the consent of the surety. True False
False
Any profits which a surety makes when called upon to perform the principal's duties belong to the surety. True False
False
Compared to other business entities, a general partnership requires filing complex documentation with the secretary of state's office before it is authorized to do business. True False
False
In a Limited Liability Company, the unanimous consent of the members is required to hire a new employee. True False
False
Limited partnerships must have one general partner for every seven limited partners. True False
False
Misconduct of the principal that induces a party to become a surety allows that surety to avoid the contract. True False
False
One of the disadvantages of a Limited Liability Partnership is double taxation. True False
False
The majority of states have not yet enacted Limited Liability Partnership enabling statutes True False
False
The owner may be liable for more than the contract price even if they follow the statutory procedures. True False
False
• An LLC must have at least two members that participate in management in order to lawfully do business. • True • False
False
A lien for the value of materials and labor used in the construction or improvement of real property is an artisan's lien. True False
False - Mechanics Lien
Bonding companies are usually uncompensated sureties. True False
False -Bonding companies are usually compensated sureties
Limited Partnerships offer a convenient way for professional and family-owned enterprises to do business
False-Limited Liability Partnerships
The Statute of Limitations does not apply to surety contracts. True False
False-The Statute of Limitations DOES apply to surely contracts
________ is a proceeding by which a plaintiff seeks to reach the assets of the defendant that are in the hands of a third party. Execution. Levy. Garnishment. Foreclosure.
Garnishment
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
A __________ is a party whose promise is not limited to a single transaction or to a single creditor.
General Guarantor
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 __________.
General Guaranty
Which business entity has the following characteristics: owners have unlimited personal liability for the debts of the business, and joint and several liability for the contracts and torts of the other owners; there are few formalities in creating the entity; profits are taxed only at the owner level?
General Partnership
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
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?
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
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?
Limited Partnership
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
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.
Partnership liabilities in a general partnership are limited to the amount of capital contribution.
Perfect Painters submitted a bid to paint the dorm rooms at State University during the summer. State Law requires that all bidders for state contracts post a bond protecting the state against loss if the bidder fails to perform within the contract time. The kind of bond Perfect Painters will post is a _______________bond. Fidelity Mechanic's Performance Artisan's
Performance
A _______ provides protection against losses that may result from the failure of a contracting party to perform the contract as agreed.
Performance bond
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 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 limited partner has liability to the full extent of his or her capital contribution. True False
True
A limited partner risks personal liability when he or she actively participates in the management of partnership affairs. True False
True
A principal who is discharged in bankruptcy is released from his duty to reimburse the surety. True False
True
A sub-surety becomes liable to the creditor only when another surety fails to perform. True False
True
Absent an agreement otherwise, a Limited Liability Company's operating agreement can only be amended with the unanimous consent of the members. True False
True
Both contractors and subcontractors are entitled to a mechanic's lien against the owner for nonpayment of their accounts. True False
True
California and New York allow only professional services firms to do business as Limited Liability Partnerships. True False
True
Contractors have a longer period in which to file mechanic's liens that subcontractors or suppliers have. True False
True
If the principal does not default, the surety never becomes liable to the creditor. True False
True
Limited partners may lose the full amount their capital contribution if the limited partnership incurs debts that exceed its assets. True False
True
One recognized advantage to a general partnership is that it allows partners to share in management and profits of the partnership. True False
True
Subrogation means the substitution of one person in place of another. True False
True
The manager of a manager-managed Limited Liability Company may be a non-member. True False
True
The two types of guaranty agreements are general and special
True
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
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
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.
Contribution
Contracts of suretyship are legally indistinguishable from contracts of indemnity. True False
False
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
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.
____ 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
An LLC where a single person or select group has the power to manage is a ____________________LLC
Manager-managed
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.
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
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
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.
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.
When holders of mechanic's liens are equal in priority, and there are not sufficient funds to satisfy all their claims, they will share the funds that are available on a pro-rata basis. True False
True
