Test 3 CH14-18
A corporation is
an artificial legal person
Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char are entitled to
complete access
Carl starts up, and assumes the financial risk of, DataWorks, a new marketing enterprise. As a sole proprietorship, the enterprise must meet legal requirements relating to
intellectual property laws licensing & registration
Auto Company's liabilities exceed its assets. The firm hires Bass, an accountant, to prepare a balance sheet. Through negligent omissions, the sheet shows a net worth. Credit Bank relies on the document to make a loan to Auto. When the firm defaults, the bank files a suit against Bass. Bass is most likely
liable if the accountant knew the bank would rely on the balance sheet.
Accounting LLC is a member-managed limited liability company. Unless the members have agreed otherwise, all decisions with respect to the firm's business are made by
majority vote
Roy is a director of Sales Inc. Sales enters into a contract with TeleCenter Corporation in which Roy has a personal interest. Roy must
make a full disclosure of the conflict of interest
A corporate officer
manages day-to-day operations of the corporation
Data Analytics LLC is a limited liability company. Unless the firm's articles of organization specify otherwise, it will most likely be assumed that the firm is
member-managed
Ben is an accountant whose clients include Capital Inc. Under the Ultramares rule, if Ben is negligent in his work for Capital, he could be liable to the client and
no third party with whom the accountant is not in privity or "near privity."
Bayard organized, and owns and operates, Cypress Tours in the simplest form of business organization. This is
none of these choices
An S corporation avoids taxes at
the corporate level
Daisy is a director of Excavation Corporation. She opposes an offer to merge Excavation with Fill Inc. because she would lose her board position. Daisy is most likely liable for breach of
the duty of loyalty
In most situations, with respect to a limited liability company's debts, the firm's members are shielded from
the loss of their capital investment in the firm
The day-to-day operations of a corporation are overseen by
the officers
With respect to a corporation, a director is
a fiduciary
Most states provide that the minimum number of directors that must be present before the board may transact business is
a majority of the number authorized in the articles or bylaws
A limited liability company that wants to distribute profits to its members could avoid "double taxation" by electing to be taxed as
a partnership
Eton owns Fast Freight Company. He uses the firm's funds to pay his personal expenses, creates Go Trucking Inc. to engage in the same business, transfers Fast Freight's assets to Go Trucking, and petitions Fast Freight into bankruptcy. This most likely warrants
a pierce of the corporate veil
Carmen and Diego are shareholders of Espresso Inc. Carmen's written authorization to Diego to vote her shares at a shareholders' meeting is
a proxy
Bayside Restaurant LLC is a limited liability company. Its sole member is Conrad. For federal income tax purposes, unless the firm indicates otherwise, it will automatically be taxed as
a sole proprietorship
Olivia is a partner in Pacific Trade. In the majority of states, with respect to any partnership obligations that Olivia does not participate in, know about, or ratify, she would be liable for
all of the obligations, jointly & severally
Cal, Dex, and Erin agree to be partners in Fajitas, a food cart outfit, splitting the profits equally. Cal contributes 65 percent of the capital. When Fajitas is dissolved, its liabilities are greater than its assets. The losses are paid by
all of the partners in proportion to their shares of the profits
Limited liability business forms, such as LLCs, LPs, and LLPs, offer tax advantages that are similar to those offered by
an S corporation
"A reasonably competent general practitioner of ordinary skill, experience, and capacity" is the normal standard of performance expected of
an attorney
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
Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for
any partnership obligation
The number of directors that serve on a corporate board is determined by its
articles of incorporation
Ensure Care LLC's owners are Fez and Guan. As a limited liability company, Ensure Care enters into contracts
as a legal entity apart from its owners
Betsy is a director of ChemCo Inc. Because of this position, she becomes involved in litigation. With respect to the costs, fees, and damages involved, she has a right to
be reimbursed, or indemnified
Global Capital S.A. is a foreign investor. With respect to the operations of a limited liability company in the United States, Global can
become a member
Initiating and negotiating the sale and lease of corporate assets outside the regular course of business is a responsibility of the corporation's
board of directors
Kay and Leo form Metro Delivery Inc. Responsibility for all policymaking decisions related to corporate affairs lies with Metro's
board of directors
Ling owns and operates Metro Delivery Service as a sole proprietorship. When she dies, the business will automatically
dissolve
Start-Up 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
divided equally among the members
Kathy is a director of Line Production Inc. As a director, with respect to the corporation, Kathy is expected to subordinate
her personal interests to the corporation's welfare
Gwen and Hera do business as G&H Civil Engineers, a partnership. The Uniform Partnership Act governs the firm
in the absence of an express agreement
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
Ford is the sole proprietor of Go, a game subscription service. As a sole proprietor, on the business's profits, Ford pays
only personal income taxes
Development LP is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals, including Ethan. Ethan loses his limited liability if he
participates in the firm's management
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
Rex forms Shell Company to assume debts that he does not wish to pay. The firm is not intended to make a profit, and Rex does not provide it with sufficient capital. This most likely warrants
piercing Shell's corporate veil
Most likely to appear in the articles of incorporation are the names of the company's initial
registered office and agent
The first step in the incorporation of a business firm is to
select the state of incorporation
Dhani, Ezra, and Finn are the first directors on the board of Global Shipping Corporation. Subsequent directors will be elected by a majority vote of Global's
shareholders
Among the states, the law governing limited liability companies is far from uniform because
state limited liability company statues vary from state to state
An attorney's conduct is governed by rules of professional conduct established by the state in which he or she is licensed, and the Model Rules of Professional Conduct of
the American Bar Association
The primary document needed to incorporate a business is
the articles of incorporation
Guy is a director of Healthcare Corporation. Guy attempts to use his best judgment in guiding corporate management but makes a few honest mistakes. He may be protected from liability for these mistakes by
the business judgement rule
Brad and Carol are partners in Doctors for Children, a medical clinic. Brad's dissociation from the firm results in
the partnership's buyout of Brad's interest in the firm
Bee is an accountant whose clients include Concessions Inc. If Bee is negligent in her work for Concessions, most courts would hold her liable to the client and
third parties who are foreseen users of the work
Dain is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Dain is liable for the debts
to extent of his capital contribution to the firm
Del owns Everlast Painting, a sole proprietorship. Del's liability is
unlimited