Business Law Chapter 39 Limited Liability Companies & Related Forms 6th ed

A disadvantage to general partnership is that ______.

All partners may be held liable for partnership debts.

Voting rights in an LLC are ______.

Apportioned according to the capital contribution of each member

In which of the following entities are profits taxed at the entity level?

General corporation

In which of the following entities is ownership interest easily transferrable, and there are no legal limits to the number of owners?

General corporation

In a general partnership, how do partners share in the debts of the partnership?

Jointly and severally liable.

In a ______, one owner has unlimited personal liability for the debts of the business while other owners are liable only to the extent of their investments.

Limited partnership

Profits and losses are passed through to the owners in which organization?

Limited partnership

An individual or small group has the authority to control and make decisions for the LLC in a ______ LLC.

Manager-managed

A general partner in a limited partnership (LP) ______.

Manages the partnership and remains responsible for partnership liabilities

LLCs and corporations are alike in that ______.

Owners are personally liable for debts only to the extent of the money they put into the business

LLCs and LPs both ______.

Pass both profits and losses on to the owners

Businesses avoid double taxation using ______.

Pass-through principle

The ability to purchase the interest of another member in the LLC before it is offered to an outside buyer is the ______.

Right of first refusal

An LLC's articles of organization must be filed with the ______ prior to doing business.

Secretary of State

A general partnership provides investors ______ from personal liability compared to other business entities?

The least protection

A limited liability company may be member-managed or manager-managed.

The owners of the LLC are responsible for managing the company in a member-managed LLC. A manager-managed LLC is operated by managers who are appointed to run the company.

Individual members of an LLC can NOT ______.

Use LLC funds to satisfy personal debts.

In a limited partnership (LP), an individual who is actively managing the business may ______.

Be risking limited liability

A general partner who uses partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership has ______.

Breached fiduciary duty

Which of the following is NOT a right of individual members of an LLC?

a. Access to the LLC's books and records. (b. The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.)xx c. The right to vote against an amendment to the LLC's operating agreement. d. Request the LLC be dissolved.

A manager-managed LLC may be managed by any of the following EXCEPT:

a.A non-owner, hired to run the day-to-day activities. b.One member, chosen to manage the day-to-day activities. c.An external manager, appointed by the members. (d.Each member equally manages the LLC.)xx

Which document is filed with the state Secretary of State by a limited partnership (LP) as part of its formation process?

a.Articles of partnership (b.Certificate of limited partnership)xx c.Articles of corporation d.Operating agreement

Members of an LLC do NOT have the statutory right to ______.

a.Dissolve the LLC b.Inspect the books and records of the LLC (c.Hire an office manager)xx d.Approve a merger

The following apply to a limited partnership (LP) EXCEPT:

a.Liability can be reduced. b.Must have at least one general partner. c.Taxation is similar to a general partnership. (d.A limited partner cannot lose limited liability protection.)xx

Which of the following is NOT an advantage of doing business as a limited partnership (LP)?

a.Limited partners can invest in a partnership while effectively protecting their personal assets. b.A limited partnership is often a convenient and attractive option to investors. c.A limited partnership allows limited partners to be liable only to the extent of their capital contribution. (d.Limited partners cannot actively share in management of the partnership, without incurring the risks of personal liability.)xx

General partnerships involve the following EXCEPT:

a.Partners can share partnership profits. b.The general partnership allows for quick, easy, and immediate control. (c.Partnership liabilities in a general partnership are limited to the amount of capital contribution.)xx d.Partners can share in management of the partnership.

Courts are NOT likely to consider which of the following when ruling whether a partner breached a partnership fiduciary duty?

a.Prior court decisions. (b.The partner's personal net worth.)xx c.Applicable state partnership statutes. d.Language in the partnership agreement.

The ______ is the document filed with the state that creates an LLC; the ______ sets out details of its ongoing business.

articles of organization; operating agreement

The business entity in which one owner has unlimited personal liability for the debts of the business, while other owners are liable only to the extent of their investments unless they actively manage the business, is a ______.

limited partnership

An LLC is most like a general partnership when it is ______-managed.

member

Creation of a limited partnership (LP) includes filing ______ with the Secretary of State.

Certificate of Limited Partnership

The following statements about the member-managed LLC operation are true EXCEPT:

(a.Only the managing members have access to the books and records of the LLC.)xx b.Any member of the LLC may bind the LLC on a contract. c.Articles of organization must be filed with the state as part of the application process. d.The application must state that it is to be a member-managed LLC.

Characteristics of an LLC include the following EXCEPT:

(a.Profits and losses stay with the LLC.)xx b.Owners have limited liability for the debts of the business. c.Organized under state law. d.Owners must declare to the state how the organization will be managed.

The following rights are provided to members of an LLC by law and cannot be waived in the operating agreement EXCEPT:

(a.The right to purchase land for the LLC.)xx b.The right to dissolve the LLC c.The right to approve the merger. d.The right to access the LLC books.