Chapter 17 examples from the book

What tax options are available to a limited liability company (LLC)? a. An LLC with only one member can choose to be taxed as a corporation or a sole proprietor. An LLC with two or more members can choose to be taxed as a partnership or a corporation. b. An LLC with two or more members may only be taxed as a corporation. c. An LLC with only one member may be taxed as a partnership or a sole proprietorship.

A. An LLC with only one member can choose to be taxed as a corporation or a sole proprietor. An LLC with two or more members can choose to be taxed as a partnership or a corporation.

The legal effects of dissociation of a member of a limited liability company (LLC) include: a. the LLC must purchase the dissociated member's share within 30 days. b. the dissociated member loses the right to participate in management. the dissociated member's duty of loyalty to the LLC terminates. c. the LLC must wrap up business and dissolve within 180 days.

B. the dissociated member loses the right to participate in management. The dissociated member's duty of loyalty to the LLC terminates.

Which of the following provisions are typically in an operating agreement for a limited liability company (LLC)? Choose 2 answers. a. how membership interests may be transferred b. a record of the company's assets and debts c. the advertising plan for the company d. whether the dissociation of a member, such as by death or departure, will trigger dissolution of the LLC

a. how membership interests may be transferred d. whether the dissociation of a member, such as by death or departure, will trigger dissolution of the LLC

Owners of the following business associations have limited liability protection (choose 2 answers): a. limited liability partnerships. b. limited liability companies. c. general partnerships. d. sole proprietorships.

a. limited liability partnerships. b. limited liability companies.

Which of the following documents spells out the rights and duties of the members of a limited liability company (LLC)? a. operating agreement b. certificate of organization c. bylaws d. charter

a. operating agreement

Limited liability means: a. owners are only liable to the extent of their capital contribution to the business. b. owners are held personally liable for the debts of the business. c. the business cannot be held liable for its own debts. d. owners are personally liable for the debts of the business, but only for the decisions they make.

a. owners are only liable to the extent of their capital contribution to the business.

Which of the following is a requirement for the formation of a limited liability company (LLC)? a. at least three members b. articles (or certificate) of organization c. an initial stock offering d. an operating agreement

b. articles (or certificate) of organization

Most limited liability company (LLC) statutes provide that unless the articles of organization specify otherwise, an LLC is assumed to be managed by: a. one manager. b. its members. c. a board of nine managers. d. a board of six members and six non-member managers.

b. its members.

In a manager-managed LLC, the designated manager may (choose 2 answers): a. only be from within members of the company. b. only be from outside the members of the company. c. be from within the members of the company. d. be from outside the members of the company.

c. be from within the members of the company. d. be from outside the members of the company.

A member-managed LLC means: a. partners vote on financial decisions. b. shareholders vote on financial decisions. c. the members elect a board of directors who make business decisions. d. all members participate, and decisions are made by majority vote.

d. all members participate, and decisions are made by majority vote.

Which of the following rights may a member of a limited liability company (LLC) transfer to a non-member? a. inspecting the records of the LLC b. voting on matters of business management c. participating in management d. sharing the company's financial profits

d. sharing the company's financial profits

The formation of LLCs is governed by: a. private agreements. b. federal statute. c. the ULLCA. d. the laws of the state in which the LLC is created.

d. the laws of the state in which the LLC is created.

What is true of the dissolution of a limited liability company (LLC)? a. Members of an LLC may stipulate in their operating agreement that certain events will cause dissolution. A court may order the dissolution of an LLC under certain circumstances, such as the members engaging in illegal conduct. b. An LLC may only be dissolved by court order. c. When a member dissociates, the LLC is automatically dissolved.

A. Members of an LLC may stipulate in their operating agreement that certain events will cause dissolution. A court may order the dissolution of an LLC under certain circumstances, such as the members engaging in illegal conduct.

Which of the following is required in the Articles of Organization for an LLC (choose 2 answers)? a. The principal place of business b. The name of the business c. The attorney's name and address d. The agent's name and address

a. The principal place of business b. The name of the business

What is true of the liability for loss or injury caused by the wrongful acts or omissions of the members of limited liability companies (LLCs)? a. The LLC as an entity cannot be held liable, and members themselves are not personally liable. b. The LLC as an entity can be held liable, and members themselves are also personally liable. c. The LLC as an entity cannot be held liable, but members themselves are personally liable. d. The LLC as an entity can be held liable, but members themselves are not personally liable.

d. The LLC as an entity can be held liable, but members themselves are not personally liable.

An operating agreement for a limited liability company: a. is required for the operation of a limited liability company. b. must be in writing and signed by all the officers of the company. c. may not specify how profits are divided. d. typically includes provisions about choosing the LLC's management.

d. typically includes provisions about choosing the LLC's management.