business law exam 3 full
Xavier consults with an attorney and some business acquaintances from the chamber of commerce about the management of his LLC. He is told that management may take one of two forms, a member-managed LLC or a manager-managed LLC. In the second form: a. the managers may be members, nonmembers, or a combination of both. b. a state-appointed receiver manages the firm. c. members may not participate in management of the LLC.
A
Henry and Ryan each invest $10,000 in a limited partnership as limited partners, so each has a 50% interest. Tracey sues the limited partnership and obtains a $100,000 judgment. Henry's liability is: a. $50,000. b. $100,000. c. $10,000.
C
Product Management, LLC, has forty members. Two of the members died the previous year. Under the Uniform Limited Liability Company Act (ULLCA), on the death of the two members: a. the other members may continue to carry on the LLC's business, even if the operating agreement mandates dissolution on the death of a member of the LLC. b. the LLC must dissolve. c. the other members may continue to carry on the LLC's business unless the operating agreement provides otherwise.
C
Tuller wants to start a commercial trucking business and also wants to form his own limited liability company (LLC). Tuller, as the only member of the LLC, will make all relevant decisions, contribute all of the investment, and be responsible for all of the risks and rewards. Tuller's proposed LLC will be accepted by: a. no state, as at least two members are uniformly required to create an LLC. b. a few states. c. a majority of states.
C
Mary, Thomas, and Franklin form an LLC for the purpose of running a restaurant. Each invests $10,000 into the LLC. Two weeks after the LLC is formed, Joanne patronizes the restaurant and suffers from severe food poisoning. If Joanne sues the LLC: a. the members could be personally liable, but not for their investments in the LLC. b. the members could be both personally liable and liable for their investments. c. neither the members nor their investments will be liable in any capacity. d. the members could be liable for $10,000 each, the amount of their investment
D
Michael, Sarah, and Mindy are partners in a limited partnership that buys commercial real estate. Michael and Sarah are limited partners and Mindy is a general partner. Business is booming so Mindy asks Sarah for help. Sarah offers to buy land from LandInvest Co., and holds herself out as a representative of the limited partnership. Sarah drafts the contracts, participates in the negotiation, and completes the sale on her own. Sarah also takes on bookkeeping and related tasks to free up Mindy to locate new sellers. If a dispute arises with LandInvest Co. related to the contract and LandInvest Co. sues the limited partnership, it is possible that: a. Mindy will not be personally liable as a general partner. b. All of the limited partners will held personally liable. c. Sarah will not be held personally liable because she is a limited partner. d. Sarah will be held personally liable even though she is a limited partner
D
A joint stock company is generally treated as a partnership.
T
A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members.
T
A limited liability company can be taxed as a partnership.
T
If a limited liability company (LLC) agreement does not cover a topic, the state LLC statute will govern.
T
Limited liability companies are entities apart from their owners.
T
Limited liability companies are treated as citizens of every state of which their members are citizens.
T
Limited liability company operating agreements typically contain provisions relating to management.
T
Members of limited liability companies are shielded from personal liability in many situations.
T
Most courts apply the same principles to joint ventures as they apply to partnerships.
T
Most states apply to a foreign limited liability company (an LLC formed in another state) the law of the state where the LLC was formed.
T
The law considers all new, single-owner businesses to be sole proprietorships unless the owner affirmatively adopts some other form.
T
Unless a limited liability company indicates otherwise, the Internal Revenue Service automatically taxes it as a partnership.
T
Oliana is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Oliana does not participate in, know about, or ratify, Oliana would be liable for none of the obligations. all of the obligations, jointly and severally. all of the obligations, jointly but not severally. only the contractual obligations.
all of the obligations, jointly and severally
Transworld Import Company and USA Export, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.
b. a joint stock company.
Dairy Products, Inc., and Eden Farms Corporation form a joint venture to make and test-market Frosty Ice Cream. A joint venture is usually formed for a. an implied duration of not more than six months. b. a single transaction or project. c. a stated duration of not more than one year. d. a perpetual existence.
b. a single transaction or project.
Coco is considering forms of business organization for her concessions business—Coco's Cakes. Most states require that a limited liability company have a. no minimum number of members. b. at least one member. c. at least two members. d. at least three members, including one general partner.
b. at least one member.
Qatar Global Investments is a foreign entity—a firm owned and operated by investors in a foreign country. With respect to a limited liability company in the United States, Qatar Global can a. act as a creditor, but cannot otherwise invest or participate. b. become a member. c. not become a member, but can participate in its operations. d. not become a member or otherwise participate in its operations.
b. become a member.
StartUp Investors, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be a. distributed according to the members' proportionate shares of ownership in the firm. b. divided equally among the members. c. forfeited to the state. d. reinvested in the business until the dispute is resolved.
b. divided equally among the members.
Location! Realty, LLC, is a limited liability company. Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of a. all states. b. every state in which its members are citizens. c. no state. d. only the state in which it was formed.
b. every state in which its members are citizens.
Sable and Rex agree while talking on the phone to form a partnership—The Home Source—to deal in transfers of real property. To be enforceable, their agreement must be filed in the appropriate state office. be in writing. involve the exchange of valid consideration. not involve a third party.
be in writing
Silvano owns Textbooks Plus, a sole proprietorship that sells textbooks and other school supplies. When Silvano dies, Textbooks Plus will automatically dissolve. pass to Silvano's heirs. pass to the state. be offered for sale to its creditors and competitors.
dissolve
StartUp Investors, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be distributed according to the members' proportionate shares of ownership in the firm. divided equally among the members. forfeited to the state. reinvested in the business until the dispute is resolved.
divided equally among the members
A member of a limited liability company (LLC) has the power and the right to dissociate from the LLC at any time.
f
A sole proprietor does not own the entire business.
f
Agency relationships do not permeate the business world.
f
One of the key advantages of the corporate form is the unlimited liability of its owners.
f
The alter-ego theory can be applied to a corporation, but not a limited liability company.
f
The law governing limited liability companies is uniform.
f
The partnership is a pass-through entity and a taxpaying entity.
f
There are no important consequences if the procedures for incorporation are not followed precisely.
f
Bee Hive Honey, LLC's members include Chad, Dolores, and others. For purposes of suing and being sued, Bee Hive Honey is a. an aggregate of Chad, Dolores, and the other members. b. a natural person in the members' "family." c. a legal entity apart from the owners. d. a non-participating third party.
c. a legal entity apart from the owners.
Otto is considering forms of business organization for Pro Tree Service, his landscaping firm. Like most states, Otto's state requires that to form a limited liability company, he must file with a central state agency a. articles of certification. b. articles of formation. c. articles of organization. d. no specific documents.
c. articles of organization
As the beneficiary of a business trust, Kevin's liability for trust debts and obligations is a. limited to his capital investment in the trust. b. limited to his personal assets. c. nothing. d. unlimited.
c. nothing.
Arnie is a member of Bowling & Billiards, LLC, a limited liability company. Arnie can participate in the firm's management a. only to the extent that he assumes liability for the firm's debts. b. only to the extent of his investment in the firm. c. to any extent. d. to no extent.
c. to any extent.
Oni's Adventure Travel and Paquito's Wild River Tours form a joint venture. Oni can participate in the venture's management a. only to the extent that she assumes liability for the venture's debts. b. only to the extent of her investment in the venture. c. to any extent. d. to no extent.
c. to any extent.
Tyler and Stanton are members of an LLC. They have no operating agreement. Tyler and Stanton have a dispute. They look to the LLC statute for an answer, but the statute does not cover this situation. In this case, courts often: a. apply state corporate law. b. apply state partnership law. c. force the members to solve the dispute themselves.
B
Arnie is a member of Bowling & Billiards, LLC, a limited liability company. Arnie can participate in the firm's management A. to any extent B. only to the extent that he assumes liability for the firm's debts C. only to the extent of his investment in the frm
A
Bee Hive Honey, LLC's members include Chad, Dolores, and others. For purposes of suing and being sued, Bee Hive Honey is A. a legal entity apart from the owners B. an aggregate of Chad, Dolores, and the other members C. a natural person in the members "family" D. a non-participating third party
A
Buckley is a general partner in Cut-Rate Shipping, LLLP, a limited liability limited partnership, which cannot pay its debts. Buckley is personally liable for the debts A. to no extent B. in proportion to the number of partners in the firm C. to the extent of his capital contribution
A
Hillside Vineyards is a family limited liability partnership. All of the partners must be A. natural persons or persons acting as fiduciaries for natural persons B. natural persons only C. persons acting as duciaries for natural persons only
A
Jason, Julian, and Rebecca are members of a longstanding and successful LLC. The three members want to dissolve their LLC and distribute their assets but they know the LLC has debts. Once all the LLC's assets have been sold, the proceeds: a. are distributed to pay off creditors first and member capital contributions next. Any remaining amounts are then distributed to members in equal shares or according to the operating agreement. b. are equally shared among the members without regard to other liabilities. c. are distributed to pay off member capital contributions first and creditors next. Any remaining amounts are distributed to members in equal shares or according to the operating agreement.
A
Julie, Manuel, and Emilio are three dentists who formed a limited liability partnership (LLP) for their dental practice. Emilio accidentally removes the wrong tooth of a patient. The patient sues the partnership for negligence and wants to hold all three doctors personally liable. A court will most likely find: a. Emilio personally liable for negligence, but not Julie and Manuel. b. Emilio and Julie personally liable for negligence, but not Manuel. c. all partners personally liable for negligence.
A
Marvin and Maria start selling handmade jewelry to distributors nationwide and intend to form an LLC. Marvin and Maria enter into four contracts with distributors while the LLC is in the process of being formed, but before the LLC is formally in existence. Once Marvin and Maria form the LLC: a. if the LLC adopts the contracts, it can then enforce the contract terms. b. the contracts are enforceable if this were a corporation, but not for an LLC. c. the contracts are unenforceable by the LLC, only Marvin and Maria personally. d. the contracts are unenforceable by any party.
A
Nikki and Orlando are limited partners in Port City Exports, a limited partner ship. To avoid personal liability for partnership obligations, they must not A. participate in the firm's management B. acquire an interest in the rm C. contribute property to the rm
A
Charlotte and Regina are opening a new business venture to sell gourmet cupcakes. One of the important characteristics in starting a limited liability company is: a. choosing the name. b. limited liability for members. c. the number of shareholders.
B
Mack is an oil executive. He wants to start a new company with different partners to explore some drilling opportunities. His attorney advises him about the various business forms. When discussing the LLC form, his attorney mentions that one of the biggest disadvantages of the LLC form is that: a. it is taxed like a partnership unless the members choose differently. b. there is no uniform law governing LLCs in the United States. c. LLC members pay no taxes
B
Matt and Chad form an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member but they do live in a state that has adopted the ULLCA, which means that: a. Matt will lose all of his interest in the LLC. b. the LLC must purchase Matt's interest at fair value within 120 days. c. the LLC must dissolve within 120 days.
B
The seven members of Fast Commerce, LLC, want to start their company as quickly as possible. The members, in their haste, do not bother to draft an operating agreement. If a dispute arises between two of the members: a. the federal uniform LLC statute will apply to the dispute. b. the state LLC statute will apply to the dispute. c. in many states, the state LLC statute will not apply because an operating agreement is required for an LLC to exist.
B
Anson is a citizen of Connecticut. He suffers severe injuries in a car accident. He hires a Michigan attorney to bring a multimillion-dollar claim against the car manufacturer. The attorney belongs to an LLC whose members are from several states including Connecticut. After losing the product liability claim, Anson brings a malpractice lawsuit against the attorney. He: a. must file in federal court. b. may file in a state court in Connecticut or Michigan, or in federal court. c. may file only in a Connecticut state court. d. may file in a state court in Connecticut or Michigan.
D
Doug, Frank, and Sarah want to form an entity for their new accounting firm. They want to ensure that each avoids personal liability for the malpractice of the other partners so they should form: a. a limited partnership. b. a joint venture. c. a general partnership. d. a limited liability partnership.
D
A limited liability company must be managed by nonmembers.
F
A member of a limited liability company (LLC) has the power and the right to dissociate from the LLC at any time.
F
For federal income tax purposes, one-member limited liability companies are not taxed.
F
Generally, a dissociated member of a limited liability company (LLC) has the right to buy his or her interest in the LLC from the other members.
F
If a member's dissociation from a limited liability company is rightful, normally the dissociated member has the right to force the LLC to dissolve.
F
In a limited partnership, a limited partner has full responsibility for the partnership and for all its debts.
F
Limited personal liability obviates the need to obtain for insurance for significant business liability risks.
F
The alter-ego theory can be applied to a corporation, but not a limited liability company.
F
The law governing limited liability companies is uniform. T/F
F
Bee Hive Honey, LLC's members include Chad, Dolores, and others. For purposes of suing and being sued, Bee Hive Honey is an aggregate of Chad, Dolores, and the other members. a natural person in the members' "family." a legal entity apart from the owners. a non-participating third party.
a legal entity apart from the owners
Dollars & Sense, Inc., is incorporated in the state of New Jersey and is doing business in the state of New York. In New York, Dollars & Sense is properly referred to as a domestic corporation. a foreign corporation. an alien corporation. a public corporation.
a foreign corporation
Dreem Land Corporation and EZ Investments Company transfer their property to Financial Managers, Inc., which manages the property and distributes the profits to Dreem and EZ. This form of a business organization is a. a business trust. b. a joint stock company. c. a joint venture. d. a syndicate.
a. a business trust.
As the trustee of a business trust, Bertoldi is required to a. distribute the trust's profits. b. assume responsibility for the trust's debts. c. draft a written trust agreement. d. none of the choices.
a. distribute the trust's profits.
Lauren, Marcella, and Norell form a syndicate to buy a professional soccer franchise. This syndicate could be set up as a. a joint venture. b. a corporation. c. a sole proprietorship. d. a limited liability company.
b. a corporation.
Custom Auto Body & Detailing, LLC, is a limited liability company. Unless indicated otherwise on the Custom Auto's federal tax form, the firm will be taxed as a. a cooperative. b. a corporation. c. a joint venture. d. a partnership.
d. a partnership.
Business Enterprise Company agrees to sell a commercial office building and parking garage to City Investments, Inc., which assigns the rights to the realty to Downtown Properties, LLC. Downtown Properties does not yet exist, but once it is created and comes into existence, the contract on novation will most likely be a. quasi. b. voidable. c. void. d. enforceable.
d. enforceable.
Gabriella is a beneficiary of a business trust. As a beneficiary, she is required to a. distribute the trust's profits. b. assume responsibility for the trust's debts. c. draft a written trust agreement. d. none of the choices.
d. none of the choices.
Medical Professionals Supply Source is an unincorporated cooperative. Unincorporated cooperatives are often treated like a. business trusts. b. corporations. c. joint stock companies. d. partnerships.
d. partnerships.
Rafaela Art Gallery and Sequoia Exhibitions form a joint venture. When a dispute arises, Rafaela files a suit against Sequoia. The court is most likely to apply the same principles to this joint venture as it applies to a. business trusts. b. cooperatives. c. corporations. d. partnerships.
d. partnerships.
Kalin, Liza, and other consumers form MuniMart Cooperative. This form of business organization makes it possible for these individuals to a. avoid personal liability for the acts of the cooperative. b. obtain an exemption from state laws governing corporations. c. pay no taxes on their business income. d. pool their resources to gain an advantage in the marketplace.
d. pool their resources to gain an advantage in the marketplace.
Luke and Maya form Northwest Air Express, a general partnership. The essential elements of this partnership do not include a sharing of profits and losses. a joint ownership of the business. an equal right to management in the business. goodwill.
goodwill
Sophie and Tiny incorporate their beverage-container business as U-Twist Products, Inc. The first board of directors may be appointed by the firm's initial board of directors. incorporators. first officers. preferred shareholders.
incorporators
Kari is the sole proprietor of Living Earth Garden Shop. As a sole proprietor, on the business's profits, Kari pays no income taxes. only personal income taxes. only business income taxes. both personal and business income taxes.
only personal income taxes
A foreign corporation normally does not need a certificate of authority to sell goods or services via the Internet or by mail.
t
A limited liability company can be taxed as a partnership.
t
A partner may pursue his or her own interests without automatically violating the partner's fiduciary duties to the partnership and the other partners.
t
A publicly held corporation is any corporation whose shares are publicly traded in a securities market.
t
A sole proprietor is free to make any decision he or she wishes concerning the business.
t
A straight majority vote of the shares represented at a shareholders' meeting is usually required to pass resolutions.
t
Dividends can be paid from the undistributed net profits earned by the corporation.
t
If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level.
t
If a limited liability company (LLC) agreement does not cover a topic, the state LLC statute will govern.
t
In choosing a form of business organization for a new enterprise, important factors include the ability to raise capital.
t
Limited liability companies are entities apart from their owners.
t
Limited liability company operating agreements typically contain provisions relating to management.
t
Limits on a partner's authority normally are effective only with respect to third parties who are notified of the limitation.
t
Members of limited liability companies are shielded from personal liability in many situations.
t
Shareholders have the power to vote to elect or remove members of the board of directors.
t
Lewis is a director of Mines & Refineries, Inc. Using information that is not available to the public, Lewis makes a profit trading in Mines & Refineries stock. Lewis is most likely liable for breach of no duty or rule. the business judgment rule. the duty of loyalty. the duty of care.
the duty of loyalty
Alain is chairman of the board of Barber & Beauty Supply Corporation. Consuela, a consumer, is injured while using a Barber & Beauty product. She sues Barber & Beauty and Alain individually. The corporation may pay Alain's legal fees under under the director's right to participation. under the director's right to compensation. under the director's right to indemnification. only on the firm's own initiative.
under the director's right to indemnification
