D216 Unit 6: Forms of Business Organization (14%)

Partners A and B agree to share profits and losses as well as joint ownership of the business. To what else must they agree in order to form a partnership under the Uniform Partnership Act (UPA)? Sale of any potential goodwill to a qualified buyer Dissociation from the other Limited liability for the other Equal right to be involved in the business's management

Equal right to be involved in the business's management

PA45. When winding up a limited liability company (LLC), who would be paid first from the sales proceeds? Members who are creditors of the LLC Members for their capital contributions Members for their equal shares Members in accordance with the operating agreement

Members who are creditors of the LLC

PA47. Who are the owners of a corporation? Shareholders Members Partners Directors

Shareholders

U6_A_2: What is the term to describe the process when the partners are collecting assets, paying debts, and accounting for the value of partner's interest in the partnership? Dissociation Buy-sell agreement Winding up Profit sharing

Winding up Winding up is the process of collecting, liquidating, and distributing the assets from the firm.

As the promoter of Glassworks LLC, Hans enters into a contract with Interstate Transport Company. Once formed, Glassworks can forego an adoption process and simply enforce the contract. obtain the benefits of the deal without obligation. pierce Interstate's "corporate veil" to hold Hans liable on the contract. adopt the contract through novation.

adopt the contract through novation Businesspersons sometimes enter into contracts on behalf of a business organization that is not yet formed. These contracts are referred to as preincorporation contracts.

Members 1 and 2 formed a limited liability company (LLC) in a state that has adopted the Uniform Limited Liability Company Act (ULLCA). Member 1 later decides to dissociate from the firm. By when must Member 1's interest be purchased by this LLC? 60 days 180 days 30 days 120 days

120 days The Uniform Limited Liability Company Act requires a limited liability company to purchase a dissociating member's interest within 120 days.

The acquisition of a share of stock makes a person an owner and a shareholder in a corporation. Shareholders exercise ownership control through the power of their votes. Which class of stockholders has a right to vote? Bond holders Common stockholders Stock warrant holders Preferred stockholders

Common stockholders Shareholders exercise ownership control through the power of their votes. Each common stock shareholder normally is entitled to one vote per share.

What must an owner retain in order to operate as a sole proprietorship? Equity Agency relationships Full liability Bylaws

Full liability

PA41. Partners 1, 2, and 3 execute a partnership agreement, contributing 51%, 39%, and 10%, respectively. The agreement is silent on voting between the partners. Under the Uniform Partnership Act (UPA), how will these partners' votes be counted? Partner 1's vote will count five times as much as Partner 3. Partner 3 will not be able to vote because he lacks a 25% interest. Partners 2 and 3 cannot outvote Partner 1 because their cumulative interests are less than 50%. Partners 1, 2, and 3 will have only one vote.

Partners 1, 2, and 3 will have only one vote

On which tax return does a sole proprietor report business income? Partnership tax return Personal tax return Corporation tax return S corporation tax return

Personal tax return

Unless elected otherwise, which kind of entity is a single-member limited liability company (LLC) treated for federal income tax purposes? Corporation Either a partnership or corporation Partnership Sole proprietorship

Sole proprietorship

PA44. Which type of law primarily governs limited liability companies? Common law Federal law State law Both state and federal law

State law

Partners 1 and 2 decide to form a partnership, drafting and executing an agreement that memorializes their intents. What is the result if the Uniform Partnership Act (UPA) contradicts Partners 1 and 2's partnership agreement? The UPA will govern. The parties will not be governed by either the UPA or the agreement. The parties may choose between the UPA and the agreement. The agreement will control.

The agreement will control Partners 1 and 2's agreement will control because it is said to memorialize their intents

D8. A corporation that meets certain qualifying requirements specified in Subchapter S of the Internal Revenue Code can choose to operate as an S corporation. What is one of the qualifying requirements to operate as an S corporation? The corporation must have only one class of stock. The corporation may have nonresident alien shareholders. The corporation must be a member of an affiliated group. The corporation must have more than 100 shareholders.

The corporation must have only one class of stock

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by issuing stock. bringing in partners. a Small Business Administration Loan. selling the business.

a Small Business Administration Loan

All of a certain corporation's small number of shareholders agree that the firm can operate without directors, bylaws, shareholder meetings, stock certificates, and formal records of shareholders' decisions. This firm is most likely a de jure corporation a close corporation. a corporation by estoppel. a de facto corporation.

a close corporation Usually, the members of the small group constituting the shareholders of a close corporation are personally known to each other. Because the number of shareholders is so small, there is no trading market for the shares. In practice, a close corporation is often operated like a partnership. The formal structure of a corporation is dispensed with in many cases.

Sweetwater Corporation is incorporated in Texas. Outside that state, within the United States, the firm is an alien corporation. a corporation by estoppel. a domestic corporation. a foreign corporation.

a foreign corporation It is very counter intuitive we would expect that foreign and domestic refer to the country, not the state. But a corporation is referred to as a domestic corporation by its home state (the state in which it incorporates). A corporation formed in one state but doing business in another is referred to in the second state as a foreign corporation. A corporation does not have an automatic right to do business in a state other than its state of incorporation. But, as point of interest, most corporations in the USA are incorporated in Delaware because of its business friendly incorporation laws.

To open and operate Boo! City, a Halloween costume and paraphernalia shop, Dwayne and Erica form a business organization that combines the limited liability aspects of a corporation with the tax advantages of a partnership. Their form of business organization is a limited partnership. a limited liability company. a limited liability partnership. a limited liability limited partnership.

a limited liability company A limited liability company (LLC) is a hybrid that combines the limited liability aspects of a corporation and the tax advantages of a partnership. The LLC has been available for only a few decades, but it has become the preferred structure for many small businesses. LLCs are governed by state statutes, which vary from state to state. To create more uniformity, the National Conference of Commissioners on Uniform State Laws issued the Uniform Limited Liability Company Act (ULLCA). Less than one-fifth of the states have adopted it, however. Thus, the law governing LLCs remains far from uniform.

Resort Gift Shop is operated as a partnership, with five partners. Shan has a one-third interest in the firm. Each of the other partners has a one-sixth interest. Thieu is the senior partner. With respect to management decisions unanimous consent is required. a majority of the partners must agree. Shan rules. Thieu decides.

a majority of the partners must agree With respect to management decisions a majority of the partners must agree. Unless the partners agree otherwise, each partner has one vote in management matters regardless of the proportional size of his or her interest in the firm. In a large partnership, partners often agree to delegate daily management responsibilities to a management committee made up of one or more of the partners. A majority vote controls decisions on ordinary matters connected with partnership business, unless otherwise specified in the agreement.

A limited liability company that wants to distribute profits to its members could avoid "double taxation" by electing to be taxed as a partnership. corporation. a person. a sole proprietorship.

a partnership An LLC can avoid double taxation by electing to be taxed as a partnership. Partnerships are considered "pass-through" entities and profits are not taxed at the entity level.

Lazlo owns and operates Market Place, a venue for growers, crafters, and others to sell their goods, without creating a separate business organization. He receives all the profits from the vendors' fees and concession sales. This is most likely a franchise. an LLC. a sole proprietorship. a partnership.

a sole proprietorship

Without creating a separate business organization, Rey starts up Street Cruisers, a pre-owned auto sales enterprise. This enterprise is a partnership. a pass-thru-entity. a sole proprietorship. a franchise.

a sole proprietorship

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Olaf. This is a transfer of the ownership of the business. the creation of a partnership. the establishment of a franchise. the dissolution of the business.

a transfer of the ownership of the business The sole proprietor is free to make any decision she or he wishes concerning the business—including what kind of business to pursue, whom to hire, and when to take a vacation. The sole proprietor can sell or transfer all or part of the business to another party at any time without seeking approval from anyone else.

Bhat and Cho do business as Data Security, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as an independent entity. an aggregate. a proprietorship. a combination of individuals.

an independent entity Today, in contrast, a majority of the states follow the UPA and treat a partnership as an entity for most purposes. For instance, a partnership usually can sue or be sued, collect judgments, and have all accounting performed in the name of the partnership entity.

Masonry Inc.'s stated purpose is to perform the stonework on buildings and other structures. Masonry contracts with New Contracting to pour the pilings for a bridge's foundation despite lacking the skill and license to do the work. This is most likely an ultra vires act. allowable and proper as an act to profit corporate shareholders. within the corporation's implied powers. within the corporation's express powers.

an ultra vires act The term ultra vires means "beyond the power." In corporate law, acts of a corporation that are beyond its express or implied powers are ultra vires acts. In the past, most cases dealing with ultra vires acts involved contracts made for unauthorized purposes. Now, because the articles of incorporation of most private corporations do not state a specific purpose, the ultra vires doctrine has declined in importance. Nevertheless, cases involving ultra vires acts are some-times brought against nonprofit corporations or municipal (public) corporations.

D2. Sarah Smith and Tara Thomas formed a general partnership to run a shoe store. Sarah went on vacation one year, and while she was gone, Tara purchased $50,000 in shoes on credit from Glamour Shoes. Sarah was furious when she got home, saying this was a mistake. It was. These shoes did not sell very well, and the store had a hard time paying back the money. Glamour sues both Sarah and Tara. Tara dies during the lawsuit, and her estate has very little money. Glamour must drop the claim against Sarah. can recover the full amount owed from Sarah. can recover half of the amount owed from Sarah. can recover up to the amount Sarah invested in the partnership.

can recover the full amount owed from Sarah

Deb and Eve are partners in Foundations, a construction outfit. Deb manages the business. For this service, unless the partnership agreement states otherwise, she is entitled to pay in proportion to her effort. position on the board of directors. effect on the business. capital contribution.

capital contribution See example 13.7, "The partnership agreement between Rick and Brett provides for capital contributions of $60,000 from Rick and $40,000 from Brett. If the agreement is silent as to how Rick and Brett will share profits or losses, they will share both profits and losses equally. In contrast, if the agreement provides for profits to be shared in the same ratio as capital contributions, 60 percent of the profits will go to Rick, and 40 percent will go to Brett. Unless the agreement provides otherwise, losses will be shared in the same ratio as profits."

Ling owns and operates Metro Delivery Service as a sole proprietorship. When she dies, the business will automatically reform with its employees as the owners. dissolve. transfer to its creditors. transfer to Ling's heirs.

dissolve

D11. Jim, Sally and Jerri are considering forming a corporation. What is a disadvantage of that choice? perpetual existence. unlimited liability for each shareholder. double taxation. increased fiduciary duties to each other as compared to a partnership.

double taxation

With respect to taxes imposed on limited liability companies, most states offer a hybrid tax regime. exempt the firms from federal taxes. permit the firms to choose whether to follow the federal rules. follow the federal rules.

follow the federal rules

Instead of issuing securities, Artificial Intelligence Inc. pursues other sources of funds. To obtain venture capital financing, the firm will most likely borrow funds to be returned on a designated maturity date. give up a share of its ownership. pay periodic dividends. pool funds to invest in a business venture.

give up a share of its ownership To obtain venture capital funding the firm will most likely give up a share of its ownership.

Vera is one of three partners in Waffles Food Truck. Concerning all aspects of the partnership business, Vera is entitled to information only related to the partner's capital contribution. on a complete basis. only for a reasonable purpose. only on an "as needed" basis.

on a complete basis Partnership books and records must be kept accessible to all partners. Each partner has the right to receive full and complete information concerning the conduct of all aspects of partnership business [UPA 403]. Partners have a duty to provide the information to the firm, which has a duty to preserve it and to keep accurate records.

To gain an advantage in a business deal, Masonry LLC engages in fraud. Nicole, a member of Masonry, significantly contributes to the firm's misconduct. For any resulting damages, a court is most likely to hold Nicole personally liable. liable but only to the extent of any amount that the firm cannot pay. liable but only to the extent of the member's investment in the firm. personally absolved.

personally liable When a member significantly contributes to the firm's misconduct, in this case, gaining an advantage by fraud. This is the primary circumstance where a court would "pierce the corporate veil" and hold an individual member liable.

A corporation's authority to act and its liability for those actions is, with respect to the firm's owners, one and the same. proportional. joint and several. separate and apart.

separate and apart A corporation's authority to act and its liability for those actions is, with respect to the firm's owners, separate and apart.

Among the states, the law governing limited liability companies is far from uniform because state limited liability company statutes vary from state to state. the federal government has not enforced the law uniformly. there is no Uniform Limited Liability Company Act. a limited liability company is a hybrid form of business organization.

state limited liability company statutes vary from state to state

Ahmad starts up, and assumes the financial risk of, Data Works, a new marketing enterprise. As a sole proprietorship, the enterprise must meet legal requirements relating to franchises. the Uniform Partnership Act. taxes. stock sales.

taxes A sole proprietor pays only personal income taxes (including Social Security and Medicare taxes) on the business's profits. The profits are reported as personal income on the proprietor's personal income tax return. In other words, the business itself need not file an income tax return.

D5. Jim, Sally and Jerri formed a limited liability company, called JSJ, LLC. Some time later, Jerri died. They had made no provisions in their operating agreement about a member's death. Upon Jerri's death: her membership interest passed to her heirs. her membership passes to Jim and Sally, who now each are 50% owners. the LLC must dissolve. the LLC continues, with Jim and Sally the sole members, but Jerri's heirs are entitled to a buyout.

the LLC continues, with Jim and Sally the sole members, but Jerri's heirs are entitled to a buyout

D7. Rambo Oil, Inc. forms a limited partnership to drill for oil in Grady County, Oklahoma called "Grady Rambo L.P." Rambo Oil is the general partner and limited partnerships can be purchased for $15,000 apiece. Grady Rambo L.P. accidentally pollutes the water table and a court orders that it must pay for the cleanup, which is extremely costly. The liability for the cost: is entirely Rambo Oil's responsibility. is shared equally by Rambo Oil and all the limited partners. the limited partners are liable for up to $15,000 apiece, but Rambo Oil is liable for the full amount of its investment in the project. the limited partners may lose their entire investment, but Rambo Oil has unlimited liability.

the limited partners may lose their entire investment, but Rambo Oil has unlimited liability

Singh, a member of Trucking LLC, ceases to be associated in the carrying on of the business of the firm. Despite the dissociation the member does not lose the right to act as an agent for the firm. the member's duty of care continues with respect to prior events. the member does not lose the right to participate in management. the member's duty of loyalty continues until the firm dissolves.

the member's duty of care continues with respect to prior events Despite the dissociation, the member's duty of care continues with respect to prior events. Recall that in a partnership, dissociation occurs when a partner ceases to be associated in the carrying on of the partnership business. The same concept applies to LLCs.

Olin is a partner in Precision Plumbing. When the partners decide to dissolve the firm, Olin collects and distributes the assets. This results in the continuation of the firm's business. the termination of the firm's legal existence. transfer of partnership interest to Olin. the temporary suspension of the firm's business.

the termination of the firm's legal existence The partners have met and agreed to dissolve the partnership. Olin has been charged with collecting and distributing the assets of the firm (after debts are paid). This will be done in proportion to each partner's capital contribution and the business is legally terminated.

Van starts Wind Systems to make and sell turbines. Later, Van contracts with Xi to invest additional capital in the firm in exchange for 25% of the profits. Van and Xi are not partners in Wind Systems because their agreement does not provide for a change in the name of the business to include Xi. Van started the firm before Xi agreed to invest additional capital. they do not share the profits equally. they do not have joint control over the business.

they do not have joint control over the business To determine whether a partnership exists, courts usually look for the following three essential elements, which are implicit in the UPA (Uniform Partnership Act)'s definition: 1. A sharing of profits or losses. 2. A joint ownership of the business. 3. An equal right to be involved in the management of the business. In the case as described, Van has simply cut Xi in for a share of the profits. There is no indication that Xi has any other role.

Under the doctrine of respondeat superior, a corporation can be held liable for breaches of contract by its suppliers. acts perpetrated by its market competitors. breaches of contract by its customers. torts committed by its agents or officers.

torts committed by its agents or officers A corporation can be held liable for torts committed by its agents or officers. Respondeat superior is a doctrine under which a principal-employer is liable for any harm caused to a third party by an agent-employee in the course or scope of employment. One of the advantages of a corporation is that the owners (shareholders) are not liable for the acts of the employees or officers.

D3. Jake, Paula and Rebecca are partners in a restaurant, Eat'n Run. The restaurant is surrounded on three sides by pasture. Eat'n Run desperately needs more parking, so the partners agree that Jake will explore buying some of the surrounding property to expand the parking lot. Without telling Paula and Rebecca, Jake had seen this need coming and had already asked his cousin to buy about half an acre to the west side of Eat'n Run. Jake then reported to Paula and Rebecca that the best deal available is to buy that same half-acre from his cousin, who of course asked from more than he had paid for this investment in land. Jake's actions: were smart business practices. were unethical but not illegal. violated his duty of care to the partnership. violated his duty of loyalty to the partnership.

violated his duty of care to the partnership

D1. In a sole proprietorship, the owner has full liability for all business debts and obligations. has limited liability, only liable for up to the value of her investment. must buy insurance to cover all liabilities. is liable for all business debts and obligations up to the extent of all profits taken from the business.

has full liability for all business debts and obligations

PA49. A father and son want to formalize their family cattle ranching operations into a legal business entity. They want the business entity to offer liability protection and perpetual existence as well as have a flow-through status for tax purposes. Which business entity is appropriate for this situation? S corporation C corporation General partnership Sole proprietorship

S corporation

Which corporation avoids the imposition of income taxes at the corporate level? Nonprofit corporation S corporation C corporation Close corporation

S corporation A corporation that meets the qualifying requirements specified in Subchapter S of the Internal Revenue Code can choose to operate as an S corporation. If a corporation has S corporation status, it can avoid the imposition of income taxes at the corporate level while retaining many of the advantages of a corporation, particularly limited liability. An S corporation is treated differently than a regular corporation for tax purposes. An S corporation is taxed like a partnership, so the corporate income passes through to the shareholders, who pay personal income tax on it. This treatment enables the S corporation to avoid the double taxation imposed on regular corporations.

PA40. Which form of business organization should someone have if flexibility in decision-making is valued over asset protection? General partnership Sole proprietorship C corporation Joint liability

Sole proprietorship

Which type of law applies when partners are charged with knowledge of acts executed under the partnership relationship? Franchise law Agency law Registration law Limited liability law

Agency law As individual agents, or partners, they each are found to have knowledge and responsibility for acts under the partnership.

After dissociation with a limited liability company (LLC), which member duty continues with respect to events occurring before the dissociation? Duty of obedience Duty of care Duty of impartiality Duty of loyalty

Duty of care The duty of care applies for events that occurred before dissociation.

D10. Which form of business structure can issue stocks to the general public to obtain financing? C corporation. S corporation. limited liability company. limited partnerships.

C corporation

Which form of business structure can issue stocks to the general public to obtain financing? General partnership S corporation C corporation Sole proprietorship

C corporation A C corporation can issue stock offering to the general public to finance its operations and raise capital through public stock exchanges. Issuing stocks is another way for corporations to obtain financing. Stocks, or equity securities, represent the purchase of ownership in the business firm. The true ownership of a corporation is represented by common stock. Common stock provides an interest in the corporation with regard to (1) control, (2) earnings, and (3) net assets. A shareholder's interest is generally proportionate to the number of shares owned by the shareholder out of the total number of shares issued.

PA48. A corporation wants to conduct business in a state other than the state of its formation. Which filing gives the corporation the right to conduct business in a state other than the state of its formation? Certificate of authority Certificate of formation Articles of incorporation Articles of organization

Certificate of authority *LLC filing for state is Articles of organization

D9. The acquisition of a share of stock makes a person an owner and a shareholder in a corporation. Shareholders exercise ownership control through the power of their votes. Which class of stockholders has a right to vote? Bond holders Preferred stockholders Common stockholders "A" class stockholders.

Common stockholders

What is one of the disadvantages of a corporation form of business entity? Perpetual existence Ease of ownership transferability Limited liability Double taxation

Double taxation

PA42. Which fiduciary duty is exercised when a partner refrains from intentional misconduct? Duty of loyalty Duty of care Duty of obedience Duty of disclosure

Duty of care

What is the process in which a corporation adopts preincorporation contracts? Novation Pierce the corporate veil Dissociation Winding up

Novation

Partners A and B agree to share profits and losses as well as joint ownership of the business. To what else must they agree in order to form a partnership under the Uniform Partnership Act (UPA)? Sale of any potential goodwill to a qualified buyer Equal right to be involved in the business's management Limited liability for the other Dissociation from the other

Equal right to be involved in the business's management Partners A and B would agree to an equal right to be involved in their partnership's business matters and management as part of forming their partnership.

Glen is a partner in Home Builders, a construction firm. Glen's assignment of his interest in the partnership to Investment Consultants results in Glen's wrongful dissociation and liability for any damages. the automatic termination of Home Builders' legal existence. Glen's liability for all of Home Builders' debts. new ownership interest in Investment Consultants by Glen.

Glen's wrongful dissociation and liability for any damages A partner has the power to dissociate from a partnership at any time, but she or he may not have the right to do so. If the partner lacks the right to dissociate, then the dissociation is considered wrongful under the law [UPA 602]. When a partner's dissociation breaches a partnership agreement, for instance, it is wrongful. A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation. This liability is in addition to any other obligation of the partner to the partnership or to the other partners.

Which provision is typically included in the standard operating agreements for limited liability companies (LLCs)? How to change to a member-managed LLC What the value is for each member's interests In what states members can live How members' interests may be transferred

How members' interests may be transferred The potential processes and restriction of transfer of members' interest is typically included in the operating agreement.

Three people form a limited liability company (LLC). Two years later, one of them dies unexpectedly. Absent a specific provision in the operating agreement, what is the effect on the LLC? It passes in full to the deceased's heirs. It continues its operations. It dissolves immediately. It transfers to one of the remaining members.

It continues its operations LLC allows the remaining members to continue its operations after another member's death.

What is one of the characteristics of a corporation? It is a legal entity whose owners have unlimited liability. It is a legal entity created by agreement of the parties. It is a legal entity separate and distinct from its owners. It is a legal entity created at will by the owner.

It is a legal entity separate and distinct from its owners A corporation is a separate legal entity created and organized by the state law. A corporation is an artificial being distinct from its owner shareholders.

PA43. How is the liability determined for members of a limited liability company, absent a member's significant contribution to any tortious conduct? Limited to the extent of the applicable law Limited to a set percentage by the number of members Limited to the amount of the member's investment Limited by Uniform Limited Liability Company Act (ULLCA)

Limited to the amount of the member's investment

PA46. For which circumstance may an individual be personally liable for actions of a limited liability company (LLC)? Member personally guarantees a business loan Customer sues LLC for negligence Member manages daily activities of the LLC LLC is taxed as a C corporation

Member personally guarantees a business loan

U6_A_1: Partners A and B form a bakery as a valid partnership, contributing a mixer and a blender, respectively. Which actions may each take in connection with the baking equipment? Partner A may obtain a personal loan with the blender as collateral. Partner A may give the mixer to his spouse. Partner B may sell the mixer to pay her credit card bills. Partner B may use the mixer to prepare cakes for the partnership.

Partner B may use the mixer to prepare cakes for the partnership

A corporation that meets certain qualifying requirements specified in Subchapter S of the Internal Revenue Code can choose to operate as an S corporation. What is one of the qualifying requirements to operate as an S corporation? The corporation must have only one class of stock. The corporation may have nonresident alien shareholders. The corporation must have more than 100 shareholders. The corporation must be a member of an affiliated group.

The corporation must have only one class of stock. A close corporation that meets the qualifying requirements specified in Subchapter S of the Internal Revenue Code can choose to operate as an S corporation. Among the numerous requirements for S corporation status, one of the qualifying requirements is the corporation must have only one class of stock.

D4. Betty Brown and Caroline Carson form a partnership. Their partnership agreement does not follow the Uniform Partnership Act (UPA). In that case: The UPA supersedes their agreement. Their agreement controls. A court will later choose whether the UPA or the agreement is fairer. The parties may later choose which provisions, those of the UPA or of the agreement, to follow.

Their agreement controls

Bayard organized, and owns and operates, Cypress Tours in the simplest form of business organization. This is a franchise. an LLC. a sole proprietorship. a corporation.

a sole proprietorship

Darcia, the owner of Data Master, a sole proprietorship, wants to obtain additional business capital. This opportunity is most likely limited to borrowing funds. issuing stock. selling the business. bringing in partners.

borrowing funds

Nile is a holder of preferred stock in Oasis Hotels Inc. Nile has a proportionate interest in the corporation with regard to control. has no ownership interest in the corporation. follows common stockholders as to payment on the firm's termination. has priority over holders of common stock as to payment of dividends.

has priority over holders of common stock as to payment of dividends Preferred stock is a form of stock that carries a guaranteed dividend that is paid ahead of common stock dividends. If, in a given year, no dividend pool is declared, and then the following year one is declared, the preferred stockholder will received both the current and previous year's dividends before the common stockholders share what is leftover.

Kathy is a director of Line Production Inc. As a director, with respect to the corporation, Kathy is expected to subordinate her knowledge and training in the corporation's interest. her business judgment in the shareholders' interests. the corporation's welfare to her personal interests. her personal interests to the corporation's welfare.

her personal interests to the corporation's welfare Corporate directors, officers, and shareholders all play different roles within the corporate entity. Sometimes, actions that may benefit the corporation do not coincide with the separate interests of the individuals making up the corporation.

In most situations, with respect to a limited liability company's debts, the firm's members are shielded from liability in excess of their capital investment. all personal liability. liability for conduct that leads to a piercing of the "corporate veil." no personal liability.

liability in excess of their capital investment

Obie operates Pizza Palace. Obie hires Qua to take and fill customers' orders at an hourly wage of $15.00, plus tips. Obie and Qua are not partners, because Qua does not have an ownership interest or management rights in Pizza Palace. partners in a partnership. not partners, because the pay includes an hourly wage. not partners, because the pay includes tips.

not partners, because Qua does not have an ownership interest or management rights in Pizza Palace.

D6. JSJ, LLC is sued for $1,000,000. Jim, Sally and Jerri individually could be liable: jointly and severally for $1,000,000. only to the amount of their contribution to the limited liability company. personally for $333.333.33 (one-third of $1,000,000).

only to the amount of their contribution to the limited liability company