Accy 411: SU 16 & 18
The shares actually held by shareholders are best described as
Outstanding shares.
A general partnership must
Have two or more partners.
Which of the following duties is owed by a principal to an agent?
Indemnification
A joint venture is
An association of persons engaged as co-owners in a single undertaking for profit.
Meen Co. has 40 full-time employees and 20 full-time-equivalent employees. Meed does not offer its employees affordable essential health insurance coverage. Furthermore, its employees received tax credits to buy coverage for this fiscal year. According to the Affordable Care Act (ACA), what amount must Meen pay as an annual penalty?
$69,600
An employer having an experience-based unemployment tax rate of 3.2% in a state having a standard unemployment tax rate of 5.4% may take a credit against a 6.0% federal unemployment tax rate of
5.4%
Which of the following corporate actions is subject to shareholder approval?
Removal of directors.
A corporation formed by a political unit to achieve a governmental purpose is best described as
Public
Which of the following statements is true regarding sole proprietorships?
A sole proprietorship located and registered in Florida also may operate in Nevada and Michigan without having to register formally in those states.
Corporate shareholders are entitled to
Dissent from decisions on fundamental changes, demand dissenters' rights, and receive the value of their stock in cash.
Which of the following conditions must be met to form an agency?
The principal must possess contractual capacity.
An agency coupled with an interest will be created by a written agreement providing that
A borrower will pledge securities to a lender and authorize the lender to sell the securities and apply the proceeds to the loan in the event of default.
Acorn Corp. wants to acquire the entire business of Trend Corp. Which of the following methods of business combination will best satisfy Acorn's objectives without requiring the approval of the shareholders of either corporation?
A cash tender offer, whereby Acorn acquires at least 90% of Trend's shares, followed by a short-form merger of Trend into Acorn.
Which of the following statements is true with respect to the general structure of a corporation?
A corporation is governed by shareholders who elect a board of directors and approve fundamental changes in its structure.
Under the Revised Model Business Corporation Act (RMBCA), which of the following statements is true regarding corporate officers of a public corporation?
A corporation may be authorized to indemnify its officers for liability incurred in a suit by shareholders.
Which of the following statements is true with respect to a limited partnership?
A general partner may be a secured creditor of the limited partnership.
Absent any contrary provisions in the agreement, under which of the following circumstances will a limited partnership be dissolved?
A general partner retires and all the remaining general partners do not consent to continue.
What business entity can be voluntarily dissolved and terminated without filing a dissolution document with the state of organization?
A general partnership.
What type of business organization may generally be formed without filing an organizational document or certificate with a state government agency or office?
A general partnership.
The most significant distinction between a general partner and a join venturer is that
A joint venturer has less apparent authority.
In general, which of the following statements is true with respect to a limited partnership?
A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership.
In which of the following situations will a limited partner most likely lose limited liability status?
A limited partner participates in control of the partnership by serving as its agent.
Under the Revised Model Business Corporation Act (RMBCA), following what type of corporate acquisition does the acquiring corporation automatically become liable for all obligations of the acquired corporation?
A merger.
What term is used to describe a partnership without a specified duration?
A partnership at will.
A general partner will NOT be personally liable for which of the following acts or transactions?
A personal mortgage loan obtained by one of the other partners on his or her residence to which that partner, without authority, signed the partnership name on the note.
Under agency law, which of the following statements best describes ratification?
A principal's affirmation of an agent's unauthorized act.
Traditional concepts applicable to large publicly held corporations often do not meet the needs of closely held ones. Accordingly, the RMBCA addresses these needs. Under the RMBCA,
A shareholder may have power to dissolve a close corporation that is similar to a partner's
Golden Enterprises, Inc., entered into a contract with Hidalgo Corporation for the sale of its mineral holdings. The transaction proved to be ultra vires doctrine and why?
A shareholder of Golden Enterprises to enjoin the sale.
Which of the following statements is correct regarding the declaration of a stock dividend by a corporation having only one class of par value stock?
A stock dividend is a corporation's ratable distribution of additional shares of stock to its stockholders.
Unemployment tax payable under the Federal Unemployment Tax Act (FUTA) is
A tax-deductible employer's expense.
ABC Construction decides to use an independent contractor to complete the roof of one of its construction projects. All of the following are true regarding use of the independent contractor EXCEPT
ABC can avoid strict liability by engaging a contractor to ensure a safe workplace.
Alice Able, on behalf of Pix Corp., entered into a contract with Sky Corp. by which Sky agreed to sell computer equipment to Pix. Able disclosed to Sky that she was acting on behalf of Pix. However, Able had exceeded her actual authority by entering into the contract with Sky. If Pix does NOT want to honor the contract, it will nonetheless be held liable if Sky can prove that
Able had apparent authority to bind Pix.
In a general partnership, which of the following acts must be approved by all the partners?
Admission of a partner.
When an agent acts for an undisclosed principal, the principal will NOT be liable to third parties if the
Agent acts outside the grant of actual authority.
Under the Restatement (Second) of the Law of Agency, an agency relationship generally is terminated by operation of law in all of the following situations EXCEPT the
Agent's renunciation of the agency.
Dowling is a promoter and has decided to use a limited partnership for conducting a securities investment venture. Which of the following is unnecessary to form a partnership?
All limited partners' capital contributions must be paid in cash.
The assignee of a partnership interest (limited or general) may become a limited partner if
All partners agree.
Which of the following partners of a limited liability partnership (LLP) may avoid personal liability when a partner commits a negligent act?
All the partners other than the negligent partner and his or her supervisor.
The Patient Protection and Affordable Care Act of 2010 (ACA) is intended to increase health insurance coverage by all of the following means EXCEPT
Allowing nondependent children up to age 21 to be covered by a parent's policy.
The Federal Unemployment Tax Act (FUTA)
Allows the employer to take a credit against the FUTA tax if contributions are made to a state unemployment fund.
Absent a specific provision in its articles of incorporation, a corporation's board of directors has the power to do all of the following except
Amend the articles of incorporation.
Work Corp. has decided to expand the scope of its business. In this connection, it contemplates engaging several agents. Which of the following agency relationships is within the statute of frauds and thus should be contained in a signed writing?
An agency for the forthcoming calendar year entered into in mid-December of the prior year.
Under the (Third) Restatement of the Law of Agency, which of the following does NOT terminate an agency relationship?
An agent's act of filing a bankruptcy petition.
Which act, if committed by an agent, will cause a principal to be liable to a third party?
An employee's failure to notify the employer of a dangerous condition that results in injury to a third party.
In general, which of the following statements is true with respect to unemployment compensation?
An individual who has been discharged from employment because of work-related misconduct is ineligible for unemployment compensation.
Under the Restatement of the Law Third, Agency,
Apparent authority may still exist after constructive notice of the termination.
A corporate shareholder is entitled to which of the following rights?
Approve dissolution.
Generally, officers of a corporation
Are agents and fiduciaries of the corporation, having actual and apparent authority to manage the business.
Unless prohibited by the documents creating the organization, a shareholder in a publicly held corporation or the owner of a limited partnership interest has the right to
Assign his or her interest in the business.
A partner's interest in specific partnership property is
Assignable to the Partner's individual Creditors = No Subject to Attachment by the Partner's Individual Creditors = No
The Larkin Corporation is contemplating a two-for-one stock split of its common stock. Its $4 par value common stock will be reduced to $2 after the split. It has two million shares issued and outstanding out of a total of three million authorized. The distribution of the additional shares to the shareholders requires
Both authorization by the board of directors and approval by the shareholders.
Forming an agency relationship requires that
Both the principal and agent consent to the agency.
The rights of the general and limited partners regarding the assignment of their partnership interests are
Basically the same with respect to both types of partners.
Blue, a used car dealer, appointed Gage as an agent to sell Blue's cars. Gage was authorized by Blue to appoint subagents to assist in the sale of the cars. Vond was appointed as subagent. To whom does Vond owe a fiduciary duty?
Both Blue and Gage.
An LLC may be formed when I. One person files articles of organization with the appropriate secretary of state. II. Two or more persons file articles of organization with the appropriate secretary of state.
Both I and II.
Under modern statutes, the two general prerequisites of a dividend are I. Corporate solvency. II. A resolution by the directors to declare a dividend.
Both I and II.
Under the Revised Model Business Corporation Act (RMBCA), which of the following actions by a corporation would entitles a shareholder to dissent from the action and obtain payment of the fair value of his or her shares? I. An amendment to the articles of incorporation that materially and adversely affects rights in respect of a dissenter's shares because it alters or abolishes a preferential right of the shares. II. Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan.
Both I and II.
Under the Revised Uniform Partnership Act (RUPA), which of the following statements concerning the powers and duties of partners in a general partnership is(are) true? I. Each partner is an agent of every other partner and acts as both a principal and an agent in any business transaction within the scope of the partnership agreement. II. Each partner is subject to joint and several liability on partnership debts and contracts.
Both I and II.
Which of the following provisions must a for-profit corporation include in its articles of incorporation to obtain a corporate charter? I. Provisions for the issuance of voting stock II. Name of the corporation
Both I and II.
Which of the following statements is (are) true regarding the relationship between an agent and an undisclosed principal? I. The principal is required to indemnify the agent for any contract entered into by the agent within the scope of the agency agreement. II. The agent has the same actual authority as if the principal had been disclosed.
Both I and II.
Which of the following statements, if any, is (are) true regarding the methods a target corporation may use to ward off a takeover attempt? I. The target corporation may make an offer ("self-tender") to acquire stock from its own shareholders. II. The target corporation may seek an injunction against the acquiring corporation on the grounds that the attempted takeover violates federal antitrust law.
Both I and II.
Which of the following statements, if any, represent a principal's duty to an agent who works on a commission basis? I. The principal is required to maintain pertinent records and pay the agent according to the terms of their agreement. II. The principal is required to reimburse the agent for all authorized expenses incurred unless the agreement calls for the agent expenses out of the commission.
Both I and II.
Blanche was vice president of the Jupiter Corporation, a major weapons dealer. She used corporate funds to bribe government official of a small European country. Blanche also caused advertisements to be published in the U.S. press that defamed Jupiter's chief competitor. What is the legal effect of Blanche's actions?
Both Jupiter and Blanche are liable in tort and guilty of a crime.
The principle that protects corporate directors from personal liability for acts performed in good faith on behalf of the corporation is known as the
Business judgment rule.
The president of a company has signed a $10 million contract with a construction company to build a new corporate office. Which of the following corporate documents sets forth the scope of authority under which this transaction is governed?
Bylaws.
Which of the following documents would most likely contain specific rules for the management of a business corporation?
Bylaws.
An agency relationship
Can be created by estoppel, i.e., implied as a matter of law.
Marshall formed a limited partnership for the purpose of engaging in the export-import business. Marshal obtained additional working capital from Franklin and Lee by selling them each a limited partnership interest. Under these circumstances, the limited partnership
Can exist as such only if it is formed under the authority of a state statute.
Donald Walker is a dissident shareholder of the Meaker Corporation, which is listed on a national stock exchange. Walker is seeking to oust the existing board of directors and has notified the directors that he intends to sue them for negligence. Under the circumstances, Walker
Can insist that the corporation mail out his proxy materials as long as he pays the cost.
Fox, Harrison, and Dodge are the general partners of a limited partnership. If the limited partnership certificate is silent on these matters, the general partners
Cannot admit additional limited partners absent unanimous written consent or ratification by the limited partners.
Other than the net investment income (NII) tax, which of the following types income is subject to taxation under the provisions of the Federal Insurance Contributions Act (FICA)?
Car received as a productivity award.
Which of the following statements is correct regarding both debt and common shares of a corporation?
Common shares represent an ownership interest in the corporation, but debt holders do not have an ownership interest.
What is a possible disadvantage of forming a limited liability partnership (LLP) as opposed to remaining a general partnership?
Creation and continuation require compliance with statutory provisions.
Which of the following statements is correct regarding the taxes payable under the Federal Unemployment Tax Act (FUTA)?
Credits for this tax are allowed to employers for certain state unemployment taxes paid by the employer.
Dawn was properly admitted as a partner in the ABC Partnership after purchasing Jim's partnership interest. Jim immediately withdrew. The partnership agreement states that the partnership will continue on the withdrawal of a partner. Unless the partners otherwise agree,
Dawn's personal liability for existing partnership debts will be limited to Dawn's interest in partnership property.
Which of the following states a disadvantage of debt financing for a corporation?
Debt must be repaid at fixed times even if the entity is not profitable.
Syl Corp. does not withhold FICA taxes from its employees' compensation. Syl voluntarily pays the entire FICA tax for its share and the amounts that it could have withheld from the employees. The employees' share of FICA taxes paid by Syl to the IRS is
Deductible by Syl as additional compensation that is includible in the employees' taxable income.
Taxes payable under the Federal Unemployment Tax Act (FUTA) are
Deductible by the employer as a business expense for federal income tax purposes.
An agent will usually be liable under a contract made with a third party when the agent is acting behalf of a
Disclosed Principal = No Undisclosed Principal = Yes
Which of the following is LEAST likely to dissolve an LLC?
Dissociation by any member.
Under the RUPA, if Frey died before the partnership terminated,
Downs and Vick, as a majority of the partners, would have been able to continue the partnership.
Kate, an agent of Gator Supplies, Inc., is responsible for performance of a specified task. However, the instructions are unclear, and Kate must act in a reasonable manner considering the circumstances. This is an example of an exception to which duty owed to the principal?
Duty of obedience.
Which of the following statements is FALSE regarding the formation of a principal-agent relationship?
Each element of a contract must be present for the relationship to exist.
Which of the following statements is true concerning the similarities between a limited partnership and a corporation?
Each is created under a statute and must file a copy of its organizational document with the proper state authorities.
Which of the following statements is true concerning liability when a partner in general partnership commits a tort engaged in partnership business?
Each partner is jointly and separate liable.
Eller, Fort, and Owens do business as Venture Associates, a general partnership. Trent Corp. brought a breach of contract suit against Venture and Eller individually. Trent won the suit and filed a judgment against both Venture and Eller. Venture then entered bankruptcy. Under the RUPA, Trent will generally be able to collect the judgment in full from
Eller's personal assets.
Which of the following terms best describes the relationship between a corporation and the CPA it hires to audit corporate books?
Employer and Independent Contractor.
The Affordable Care Act (ACA) sets 60% minimum value for an eligible employer plan. All of the following statements are true except that
Employer contributions to health-savings accounts may decrease the minimum actuarial value.
All of the following are powers that a corporation possesses except the right to
Engage in activities beyond its implied powers.
Which of the following statements is true regarding the division of profits in a general partnership when the written partnership agreement only provides that losses be divided equally among the partners? Profits are to be divided
Equally among the partners.
Under the Federal Insurance Contributions Act (FICA), which of the following acts will cause an employer to be liable for penalties?
Failure to Supply Taxpayer Identification Numbers = Yes Failure to Make Timely FICA Deposits = Yes
Chester Michaels appointed Regina Fairfax as his agent. The appointed was in writing and clearly indicated the scope of Regina Fairfax's authority and also that Fairfax was not to disclose that she was acting as an agent for Michaels. Under the circumstances,
Fairfax has implied authority of an agent but not apparent authority.
James Fine is doing business as Fine's Apparels, a sole proprietorship. In the past year Fine had regularly joined with Charles Walters in the marketing of bathing suits and beach accessories. Which of the following factors is the mosts important in ascertaining whether Fine and Walters have created a partnership relationship?
Fine and Walters divide the net profits equally on a quarterly basis.
Donald Fisk is a limited partner of Sparta Oil Development. He paid $10,000 for his limited-partnership interest. In addition, he lent Sparta $7,500. Sparta failed to find oil and is in financial difficulty. Upon dissolution and liquidation,
Fisk and all outside general creditors will receive repayment of their loans prior to any other distributions.
Green entered into an oral agreement to purchase real estate on behalf of Smith. Subsequently, Green entered into a written contract to buy land from Davis without disclosing the relationship with Smith. Which of the following is Smith's best legal defense if Smith does NOT what the land?
Green failed to get the agency agreement in writing.
Grey and Carr entered into a written partnership agreement to operate a hardware store. Their agreement was silent as to the duration of the partnership. Grey wishes to dissolve the partnership. Which of the following is true?
Grey may dissociate from the partnership at any time.
Unless otherwise provided in the certificate of limited partnership, which of the following is true if Grey, one of the limited partners, dies?
Grey's personal representative will have all the rights of a limited partner for the purpose of setting the estate.
Opal Corp. declared a 9% stock dividend on its common stock. The dividend
Has no effect on Opal's earnings and profits for federal income tax purposes.
As a result of Fein's withdrawal and Gold's admission to the partnership, Gold
Has the right to participate in the management of ABC.
An employer who fails to withhold Federal Insurance Contributions Act (FICA) taxes from covered employees' wages, but who pay s both the employer and employee shares, will
Have a right to be reimbursed by the employees for the employees' share.
Many states require partnerships to file the partnership name under laws known as fictitious name statues. These statutes
Have little effect on the creation or operation of a partnership other than the imposition of a fine or other minor penalty for noncompliance.
The key characteristic of an employee is that
His or her physical conduct is controlled or subject to the right of control by the employer.
A major characteristic of the corporation is its statues as a separate legal entity. Thus, it must withstand attempts to pierce the corporate veil. The corporation that is least likely to withstand such attempts successfully is one that
Holds assets only to defraud creditors.
Seymore was recently invited to become a director of Buckley Industries, Inc. If Seymore accepts and becomes a director, Seymore, along with the other directors, will NOT be personally liable for
Honest errors of judgment.
An organization that is neither a de jure nor de facto corporation has attempted to exercise corporate powers. It may be treated as a corporation if I. The other party demonstrates fair and equitable conduct. II. Injustice can be avoided only by treating the business as a corporation. III. A good
I and II only.
An LLC must maintain which of the following contacts with the state where it was formed? I. An agent for service of process II. An attorney for representation in lawsuits III. An office
I and III only.
Under the Revised Model Business Corporation Act (RMBCA), which of the following statements regarding a corporation's bylaws is (are) true? I. A corporation's initial bylaws shall be adopted by either the incorporators or the board of directors. II. A corporation's bylaws are contained in the article of incorporation.
I only.
Which of the following circumstances may permit the piercing of the corporate veil of a closely held corporation and thus may cause its shareholders to be held personally liable? I. The corporation is thinly capitalized. II. The corporation borrows money from a shareholder without giving the shareholder a security interest in corporate assets.
I only.
Which of the following statement(s) is (are) usually true regarding general partners' liability? I. All general partners are jointly and severally liable partnership torts. II. All general partners are liable only for those partnership obligations they actually authorized.
I only.
Direct liability results if the principal does which of the following? I. Fails to supervise the agent II. Negligently selects an agent III. Fails to give proper orders
I, II, and III.
Which of the following is necessary content of the limited partnership certificate? I. The name of the limited partnership II. The address of its office III. The latest date upon which the limited partnership is to dissolve.
I, II, and III.
Cobb, Inc., a partner in TLC Partnership, assignes interest to Bean, who is not made a partner. After the assignment, Bean assert the rights to I. Participation in the management of the TLC II. Cobb's share of TLC's partnership profits.
II only.
Johns owns 400 shares of Abco Corp. cumulative preferred stock. In the absence of any specific contrary provisions in Abco's articles of incorporation, which of the following statements is true?
If Abco declares a cash dividend on its preferred stock, Johns becomes an unsecured creditor of Abco.
Stanley is a well-known retired movie personality who purchased a limited partnership interest in Terrific Movie Productions upon its initial syndication. Which of the following is true?
If Stanley permits his name to be used in connection with the business and is held out as a participant in the management of the venture, he will be liable as a general partner.
Smith was an officer of CCC Corp. As an officer, the business judgment rule applied to Smith in which of the following ways?
If smith makes, in good faith, a serious but honest mistake in judgment, Smith is generally not liable to CCC for damages caused.
Eric Farber, a principal, engaged Ethel Waters for 6 months as his exclusive agent to sell specific antiques.
If the principal sells the antiques through another agent, he will not be liable to Waters for damages.
In the absence of a specific provision in a general partnership agreement, partnership losses will be allocated
In the same manner as partnership profits.
Under the Revised Uniform Partnership Act (RUPA), which of the following have the right to inspect partnership books and records?
Inactive partners.
An LLC's articles of organization most likely do NOT
Include all names of future members.
Frost's accountant and business manager has the authority to
Insure Frost's property against fire loss.
A limited liability partnership (LLP)
Is typically adopted by providers of professional services.
Which of the following statements is correct regarding a limited liability company's operating agreement?
It is designed to forestall and resolve disputes among the owners.
Wichita Properties is a limited partnership created in accordance with the provisions of the Uniform lImited Partnership Act. The partners have voted to dissolve and settle the partnership's accounts. Which of the following will be the last to be paid?
Limited and general partners in respect to their undistributed profits.
Which of the following is a true statement about an LLC's operating agreement?
It may address matters such as profit sharing, voting rights, and dissolution.
Noll gives Carr a written power of attorney. Which of the following statements is true regarding this power of attorney?
It may limit Carr's authority to specific transactions.
Which of the following is NOT an essential element of an agency relationship?
It must be created by contract.
Which of the following statements about the form of a general partnership agreement is true?
It must be in writing if the partnership is to last for longer than 1 year.
Leslie, Kelly, and Blair wanted to form a business. Which of the following business entities does NOT require the filing of organization documents with the state?
Joint venture.
Which of the following is a legal entity separate from its owners?
LLP, LLC, and Limited Partnership. (All of the above)
Stanton exceeded her actual authority when she concluded an agreement with Nilworth Corp. on behalf of Lax Corp. If Lax wishes to ratify the contract with Nilworth, which of the following statements is true?
Lax must have knowledge of all material facts relating to the contract at the time it is ratified.
Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and NOT an independent contractor?
Lee is paid weekly by Sew.
General partnerships and LLPs vary in terms of
Liability.
The following are nontax-related characteristics of certain business entities: 1. Unless provided otherwise, all owners have management rights. 2. All owners have limited liability. 3. Formation requires a public filing. 4. A transferee of an owner's financial interest does not become an owner. The entities with the foregoing characteristics are
Limited liability partnerships are limited liability companies.
Lobo Manufacturing, Inc., is incorporated under the laws of New Mexico. Its principal place of business is in California, and it has permanent sales offices in several other states. Under the circumstances, which of the following is true?
Lobo must obtain a certificate of authority to transact business in California and the other states in which it does business.
Baker sold an automobile to Bob's Old Autos, where Fuller is a manager. Fuller too $100 from Baker for encouraging the sale. What duty to Bob's Old Autos did Fuller violate?
Loyalty.
Jim Wallace, an agent for Lux, made a contract with Doolittle that exceeded Wallace's authority. If Lux wishes to hold Doolittle to the contract, Lux must prove that
Lux ratified the contract before withdrawal from the contract by Doolittle.
Case Corp. is incorporated in State A. Under the Revised Model Business Corporation Act, which of the following activities engaged in by Case requires that Case obtain a certificate of authority to do business in State B?
Maintaining an office in State B to conduct intrastate business.
The business judgment rule is a rule that immunizes corporate
Management from liability for actions that result in a corporate losses or damages if the actions are undertaken in good faith and are within both the power of the corporation and the authority of management to make.
Which of the following statements is true regarding the apparent authority of a partner to bind the partnership in dealings with third partners? Under the RUPA, the apparent authority.
May allow a partner to bind the partnership to representations made in connection with the sale of goods.
One form of business organization is the limited liability company (LLC). In accordance with many state statutes, an LLC
May have a tax status similar to that of a partnership.
A valid limited partnership
May have an unlimited number of partners.
Anker wishes to give Mix power of attorney. In general, the power of attorney
May limit Mix's authority to specific transactions.
General partners have a fiduciary relationship with each other. Accordingly, a general partner
May not earn a secret profit in dealings with the partnership or partners.
A limited partner
May not withdraw his or her capital contribution absent sufficient limiter-partnership property to pay all general creditors.
A principal and agent relationship requires a
Meeting of the minds and consent to act.
Which of the following parties generally has the most management rights?
Member of a limited liability company.
The CPA was preparing the financial statement for a limited liability company. To which of the following would the CPA's report be addressed?
Member.
The owners of a limited liability company are known as which of the following?
Members.
James Quick was a partner in the Fast, Sure, and Quick Factors partnership. He subsequently died. His will left everything to his wife including a one-third interest in the land and building owned by Fast, Sure, and Quick. Which of the following statements is true?
Mrs. Quick has the right to receive a settlement for her husband's interest in the partnership.
Bonanza Real Estate Ventures was formed under a state's version of the Revised Uniform Limited Partnership Act. It has three general partners and 1,100 limited partners. The limited partnership interests were offered to the general public at $5,000 per interest. Julie Kay purchased a limited-partnership interest. As such, she
Must include her share of partnership profits in her taxable income even if she withdraws nothing.
Under the Revised Model Business Corporation Act, which of the following items of information must be included in a corporation's articles of incorporation (charter)?
Name and address of the corporation's incorporator.
Vicki Trent was retained in writing to act as Post's agent for the sale of Post's memorabilia collection. Which of the following statements is true? I. To be an agent, Trent must be at least 21 years of age. II. Post would be liable to Trent if the collection was destroyed before Trent found a purchaser.
Neither I nor II.
Which of the following statements regarding a limited partner is(are) usually true? I. The limited partner is subject to personal liability for partnership debts. II. The limited partner has the right to take part in the control of the partnership.
Neither I nor II.
Which of the following will result in a dissolution of a partnership under the RUPA?
Notice to a partnership at will of a partner's express will to withdraw.
Following the formation of a corporation, which of the following terms best describes the process by which the promoter is released from, and the corporation is made liable for, preincorporation contractual obligations?
Novation.
If no provisions are made in an agreement, a general partnership allocates profits and losses based on the
Number of partners.
In general, which of the following must be contained in articles of incorporation?
Number of shares of stock authorized to be issued by the corporation.
A shareholder's fundamental right to inspect books and records of a corporation will be properly denied if the purpose of the inspection is to
Obtain shareholder names for a rental mailing list.
Limited liability of shareholders is one of the advantages of incorporation. Generally, a shareholder is personally liable.
Only for his or her investment in the corporation.
Park and Graham entered into a written partnership agreement to operate a retail store. Their agreement was silent as to the duration of the partnership or its purposes. Which of the following statements is true?
Park may dissociate from the partnership at any time.
Which of the following is an advantage of forming an LLP instead of a general partnership?
Partners are subject to a broad personal liability shield.
Unless the partnership agreement prohibits it, a partner in a general partnership may validly assign rights to
Partnership Property = No Partnership Distributions = Yes
Joe Perone was a member of Caddy, Shack, & Perone, a general trading partnership. He died and the partnership is being liquidated in a bankruptcy proceeding, but Perone's estate is substantial. The creditors of the partnership are seeking to collect on their claims from Perone's estate. Which of the following statements is true insofar as their claims are concerned?
Partnership creditors and Perone's personal creditors are on an equal footing regarding the assets of Perone's estate.
Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal?
Performance of the contract by the agent.
Hughes and Brody start a business as a close corporation. Hughes owns 51 of the 100 shares of stock issued by the firm and Brody owns 49. One year later, the corporation decides to sell another 200 shares. Which of the following types of rights would give Hughes and Brody a preference over other purchasers to buy shares to maintain control of the firm?
Preemptive rights.
According to the (Second) Restatement of the Law of Agency, the apparent authority of a general agent for a disclosed principal will terminate without notice to third parties when the
Principal or agent dies.
Ace engages Butler to manage Ace's retail business. Butler has NO implied authority to
Sell Ace's business fixture.
Which of the following actions may a corporation take without its shareholders' consent?
Purchase 55% of another corporation's stock.
Simpson, Ogden Corp.'s agent, most likely needs a written agency agreement to
Purchase an interest in undeveloped land for Ogden.
An owner of common stock will not have any liability beyond actual investment if the owner
Purchased treasury shares for less than par value.
Which of the following actions requires an agent for a corporation to have a written agency agreement?
Purchasing an interest in undeveloped land for the principal.
Which of the following actions may be taken by a corporation's board of directors without shareholder approval?
Purchasing substantially all of the assets of another corporation.
Generally, a corporation's articles of incorporation must include all of the following EXCEPT the
Quorum requirements.
Under the Revised Model Business Corporation Act (RMBCA), a merger of two public corporations usually requires all of the following except
Receipt of voting stock all shareholders of the original corporations.
A consolidation of two corporations usually requires all of the following EXCEPT
Receipt of voting stock by all shareholders of the original corporations.
Under the Federal Insurance Contributions Act (FICA), all of the following are considered wages except
Reimbursed travel expenses.
Davis, a director of Active Corp., is entitled to
Rely on information provided by a corporate officer.
After serving as an active director of Lee Corp. for 20 years, Ryan was appointed an honorary director with the obligation to attend directors' meetings with no voting power. In the current year, Ryan received an honorary director's fee of $5,000. This fee is
Reportable by Ryan as self-employment income subject to Social Security self-employment tax.
The formation of a sole proprietorship
Requires a formal "doing business as" filing under state law if the proprietor plans to do business under a fictitious name.
Under the law of agency, the ratification doctrine.
Requires the principal to ratify the entire act of the agent, and the ratification is retractive.
What is the doctrine under which a corporation is made liable for the torts of its employees, committed within the scope of their employment?
Respondeat superior.
A limited partner's capital contribution to the limited partnership
Results in the limited partner having an intangible personal property right.
Which of the following statements describes the same characteristic for both an S corporation and a C corporation?
Shareholders can contribute property into a corporation without being taxed.
Sylvia Sims became an agent for Paul with the power to sell goods furnished by Paul but with the requirement that Sims would guarantee payment to pay for all credit sales made by Sims. Under the circumstances,
Sims is a surety with regard to credit sales she makes on Paul's behalf.
Which of the following is a FALSE statement about the taxation of an LLC?
Single-member LLCs must be taxed as corporations.
Which of the following is FALSE regarding the taxation of a sole proprietorship?
Sole proprietorship are subject to tax at both the business and individual level.
In a principal-agent relationship that is NOT contractual, which of the following remedies is NOT available to the agent whose principal is guilty of violating a duty owed the agent?
Specific performance.
The essential difference between a stock dividend and a stock split is that a
Stock dividend of newly issued shares will result in a decrease in retained earnings.
All of the following distributions to shareholders are considered asset or capital distributions except
Stock splits.
The board of directors of Wilcox, Inc., has noted a 7% drop in the market price of its preferred stock and decides to purchase 100,000 shares of the stock for an amount below the redemption price of the stock. Under these circumstances, which of the following is a true statement?
Such shares may be purchased by the corporation to the extent of unreserved and unrestricted retained earnings.
Which of the following remedies is available to a principal when an agent fraudulently breaches a fiduciary duty?
Termination of the Agency = Yes Constructive Trust = Yes
Generally, a merger of two corporations requires
That a special meeting notice and a copy of the merger plan be given to all shareholders of both corporations.
When a valid contract is entered into by an agent on the principal's behalf in an undisclosed principal situation, which of the following statements concerning the principal's liability is true?
The Principal May be Held Liable Once Disclosed = Yes The Principal Must Ratify the Contract to Be Held Liable = No
Under the Revised Model Business Corporation Act (RMBCA), when a corporation's bylaws grant shareholder preemptive rights, which of the following rights is (are) included in that grant
The Right to Purchase a Proportionate Share of Newly Issued Stock = Yes The right to a Proportionate Share of Corporate Assets remaining on Corporate Dissolution = No
Edgar Winter is a sales agent for Magnum Enterprises. Winter has assumed on obligation to indemnify Magnum if any of Winter's customers fail to pay. Under these circumstances, which of the following is true?
The above facts describe a del credere agency relationship, and Winter will be liable in the event his customers fail to pay Magnum.
An agent who acts within the scope of actual or apparent authority most likely is contractually liable to a third party when
The agent guaranteed the principal's performance.
What fiduciary duty, if any, exists in an agency relationship?
The agent owes a fiduciary duty to the principal.
Which of the following statements best describes the effect of the assignment of an interest in a general partnership?
The assignment transfers the assignor's interest in partnership profits and losses and the right to distributions.
The owner of cumulative preferred stock has the right to
The carryover of fixed dividends to subsequent periods from years in which they were not paid.
Which of the following is NOT a characteristic of both a sole proprietorship and general partnership?
The death of an owner causes the termination of the business.
Under the Restatement (Second) of the Law of Agency, after which of the following situations would it usually NOT be necessary to notify third parties of the termination of an agency's existence?
The destruction of the subject matter of the agency.
Which of the following actions is required to ensure the validity of a contract between a corporation and a director of the corporation?
The director must disclose the interest to the independent members of the board and refrain from voting.
A corporate director commits a breach of duty if
The director's action, prompted by confidential information, results in an abuse of corporate opportunity.
Which statement is FALSE regarding the principal's duties to the agent?
The principal has a general duty of due care but is not liable for negligence to the agent.
The certificate of limited partnership filed in the public records must contain
The name of the partnership and the names of the general partners.
Under the Revised Model Business Corporation Act (RMBCA), which of the following must be contained in a corporation's articles of incorporation?
The number of shares the corporation is authorized to issue.
Which of the following will cause the dissolution of a limited partnership?
The occurrence of the time specified in the partners' agreement.
Which of the following statements best describes an advantage of the corporate form of doing business?
The operation of the business may continue indefinitely.
Under the RUPA, in which of the following situations will a partner in a limited liability partnership (LLP) most likely be personally liable?
The partner who personally incurs an obligation in the conduct of partnership business.
Which of the following is a prerequisite for the creation of an agency relationship?
The principal must have capacity.
An agent appoints a subagent. According to the law of agency,
The principal's intention to permit an agent to delegate authority may be indicated by the character of the business.
Jim entered into an oral agency agreement with Sally in which he authorized Sally to sell his interest in a parcel of real estate, Blueacre. Within 7 days, Sally sold Blueacre to Dan, signing the real estate contract on behalf of Jim. Dan failed to record the real estate contract within a reasonable time. Which of the following most likely is true?
The real estate contract is unenforceable against Jim because Sally's authority to sell Blueacre was oral.
To which of the following rights is a shareholder of a public corporation entitled?
The right to a reasonable inspection of corporate records.
Which of the following statements is a general requirement for the merger of two corporations?
The shareholders of both corporations must be given due notice of a special meeting, including a copy or summary of the merger plan.
Hobson, Jones, Carter, and Wolff are medical doctors who have worked together several years. Their attorney formed a typical professional corporation for them. Which of the following is true?
The state in which they incorporated must have enacted professional corporation statutes.
A parent corporation owned more than 90% of each class of the outstanding stock issued by a subsidiary corporation and decided to merge that subsidiary into itself. Under the Revised Model Business Corporation Act, which of the following actions must be taken?
The subsidiary corporation's dissenting shareholders must be given an appraisal remedy.
A parent and children currently own and operate a farm as equal partners. Under the Revised Uniform Partnership Act, what effect would the death of the parents have on the partnership?
The surviving partners could continue the partnership.
Which of the following rights would a limited partner NOT be entitled to assert?
To be elected as a general partner by a majority vote of the limited partners in number and amount.
Smith has been engaged as a general sales agent for the Victory Medical Supply Company. Victory, as Smith's principal, owes Smith several duties implied as a matter of law. Which of the following duties is owed by Victory to Smith?
To indemnify Smith for liability for acts done in good faith upon Victory's orders.
For what purpose will a shareholder of a publicly held corporation be permitted to file a shareholder derivative suit in the name of the corporation?
To recover damages from corporate management for an ultra vires management act.
In general, which of the following statements concerning treasury stock is true?
Treasury stock may be distributed as a stock dividend.
Which of the following statements about the directors of a corporation is true?
Under the Revised Model Business Corporation Act, a corporation may dispense with a board of directors in certain circumstances.
The limited liability of the shareholders of a closely held corporation will most likely be disregarded if the shareholders
Undercapitalized the corporation when it was formed.
Which of the following payments are deducted from an employee's salary?
Unemployment Compensation Insurance = No Workers' Compensation Insurance = No
A principal will NOT be liable to a third party for a tort committed by an agent
Unless the tort was committed within the scope of the agency relationship.
Generally, under the Revised Uniform Partnership Act, a partnership has which of the following characteristics?
Unlimited Duration = No Obligation for Payment of Federal Income Tax = No
Knox, president of Quick Corp., contracted with Tine Office Supplies, Inc., to supply Quick's stationery on customary terms and at a cost less than that charged by an other supplier. Knox later informed Quick's board of directors that Knox was a majority shareholder in Tine. Quick's contract with Tine is
Valid because the contract is fair to Quick.
A principal is most likely to be held criminally liable for the crime of an agent who
Violated a regulatory statute.
Peters owned 500 shares of common stock in Kidsmart, Inc. Accordingly, Peters had the right to
Vote for the election and removal of the board of directors.
All of the following are legal rights of shareholders in the U.S. publicly traded companies except the right to
Vote on major management changes.
Swing, Ltd., a limited partnership that supplies sheet music to educational institutions, did not have sufficient profits to make any distributions due to lack of public interest in musical instruments. Wally Worried, a limited partner, is concerned. Which of the following may Wally participation in without jeopardizing his limited partner status?
Voting for removal of the general partner.
A shareholder's right to inspect books and records of a corporation will be properly denied if the shareholder
Wants to use corporate shareholder records for a personal business.
John Watson entered into an agreement purchase 1,000 shares of the Marvel Corporation, a corporation to be organized. Watson has since had second thoughts. Applying the RMBCA, which of the following is true?
Watson may not revoke the agreement for a period of 6 months.
Able authorized Brown to enter contracts with third parties on Able's behalf. In which of the following situations must Able provide notice to these third parties to effectively terminate Brown's authority?
When Able has revoked Brown's authority.
William Gladstone has been engaged as sales agent for the Doremus Corporation. Under which of the following circumstances may Gladstone delegate his duties to another?
When an emergency arises and the delegation is necessary to meet the emergency.
Under which of the following circumstances would a promoter be relieved of personal liability on contracts entered into while engaged in forming a corporation formation?
When the third party, the corporation, and the promoter enter into an agreement to substitute the corporation for the promoter.
The apparent authority of a partner to bind the partnership in dealing with third parties
Will be effectively limited by the filing of a statement of partnership authority.
Young Corp. hired Joe Wilson as a sales representative for 6 months at a salary of $5,000 per month plus 6% of sales. Which of the following statements is true?
Wilson is obligated to act solely in Young's interest in matters concerning Young's business.
Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves, and Gage sought to enforce the contract. Gage will
Win, because Locke had apparent authority to bind the partnership.
Wind, who has been a partner in the PLW partnership for 4 years, decides to withdraw from the partnership despite a written partnership agreement that states, "No partner may withdraw for a period of 5 years." Under the Revised Uniform Partnership Act (RUPA), what is the result of Wind's withdrawal?
Wind's withdrawal causes dissociation from the partnership despite being in violation of the partnership agreement.
Under the Revised Uniform Limited Partnership Act and in the absence of a contrary agreement by the partners, which of the following events is most likely dissolved a limited partnership?
Withdrawal of the only general partner.
