BUL exam4
If the formalities of creating a limited partnership are not met, a partnership will be treated by courts as a general partnership.
True
If the partnership agreement does not state how long the partnership is to last, a partnership- at- will is created.
True
If the principal does not default, the surety never becomes liable to the creditor
True
In most states corporations can have perpetual existence T/F
True
Investors favor using Limited Partnerships to invest in commercial real estate because they can use the depreciation of the property as a tax loss. T/F
True
Members of professional associations and professional corporations are eligible under the Tax Code to participate in pension and profit-sharing plans.
True
Modification of the creditor-principal agreement generally discharges the surety.
True
Most states consider a shareholder attempt to oust management to be a proper purpose for allowing the shareholders access to corporation books and papers.
True
Once a cash dividend is declared, it becomes a debt of the corporation. T/F
True
One recognized advantage to a general partnership is that it allows partners to share in management and profits of the partnership.
True
Partners have unlimited personal liability for the debts incurred by the partnership.
True
Contractors have a longer period in which to file mechanic's liens that subcontractors or suppliers have.
True
The general contractor is eligible for a mechanic's lien on the real property, but the subcontractors on the project are not.
False
A partnership will not terminate by operation of law if? A partner dies A partner files for bankruptcy A partner becomes insolvent The purpose of the partnership becomes illegal
A partner becomes insolvent
You are a promoter for a corporation to be formed. Among other activities, you hire an attorney to draft the incorporation papers, you rent office space, and you contract for printing services. What is a promoter? A. A promoter promotes the corporation and assists in bringing it into existence. B. A promoter is the president of the corporation. C. A promoter is the corporation's CEO. D. A promoter is responsible for buying the corporation.
A promoter promotes the corporation and assists in bringing it into existence.
The majority of states have not yet enacted Limited Liability Partnership enabling statutes.
False
The "weighted average method" refers to? A, a way of voting for directors that protects the rights of minority shareholders. B. A way of distributing dividends in closely held corporations C. A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger. D A way of resolving antitrust issues when competitor corporations merge.
A way of determining the fair value of a shareholder's stock when the shareholder dissents from a merger.
Phil has a 1/4 partnership interest in Green & Sons. He has been denied access to the partnership books and records for over a year and he suspects that one of the partners has been engaging in secret business transactions using partnership funds. Phil wants to know the status of the business. Phil's remedy in this situation is to go to a court of equity for an A. Charging order B. Marshalling order C. Accounting D. Decree of insolvency
Accounting
Stock that a corporation buys back from its shareholders is treasury. Most state corporation statutes require that the money to repurchase shares come from Accumulated profits or surplus A special stock subscription A new issue of preferred shares A new issue of debt instruments
Accumulated profits or surplus
Which of the following decisions would require a unanimous vote of the partners? A Hiring an accountant to prepare the partnership information return for federal taxes. B Buying materials from a new supplier. C Having the parking lot repaved and installing new lights. D Admitting a new partner into the partnership
Admitting a new partner into the partnership
Bedford and Eckhart formed a partnership and built a shopping center. Three years later, Bedford, the managing partner, informed Eckhart that the business was in deep financial trouble and that he had tried to sell the complex but had failed. Bedford said that the best thing to do would be for one to buy the other out and that their equity in the business was not worth more than $3 million. Eckhart sold his half interest in the partnership to Bedford for $1.5 million. Later he discovered that their equity in the business amounted to over $10 million and that Bedford had received several offers to purchase the business. What did Eckhart sue Bedford for?
All of the above
Which of the following is NOT a recognized advantage of doing business as a corporation?
All of the above are advantages of doing business in corporate form.
Jay, who is a partner in an accounting firm, is being sued for malpractice by a client. If the jury finds for the client, which of the following parties will have liability on the judgment?
All of the above have liability on the judgement
Which of the following is considered a disadvantage of doing business as a general partnership? A. A general partnership is not a taxable entity under IRS rules. B. Income in a general partnership flows directly to the partners. C. All partners can participate in management of the partnership. D. All partners are/may be held liable for partnership debts.
All partners are/may be held liable for partnership debts.
Smith's Inc. is a closely held corporation in which Joe Smith is the President and owns 80% of the corporation's stock. The corporation was undercapitalized when it was formed, and for the past seven years Joe has regularly taken funds from the corporate account to pay his own personal expenses and debts. Should Smith's Inc. not have sufficient funds to pay a creditor, the creditor may hold Joe personally liable for the corporation's debt under the _____________theory Ultra vires Alter ego Oppressive conduct Investment trust
Alter ego
In a manager-managed LLC A. No one member of the LLC has authority to make business decisions on behalf of the LLC. B. An individual or small group has the authority to control and make decisions for the LLC. C. All members of the LLC participate equally in business decisions. D. The authority of the members of the LLC to make decisions is directly proportionate to the amount their capital contribution.
An individual or small group has the authority to control and make decisions for the LLC.
Corporate bond holders Have an equity interest in the corporation. Are entitled to receive dividends when dividends are declared. Participate in the distribution of corporate assets when the corporation dissolves. Are entitled to be paid a specified rate of interest for a set period of time.
Are entitled to be paid a specified rate of interest for a set period of time.
Mel, who owns a car repair shop, replaced the clutch in Ellen's car. Until Ellen pays for the repairs, Mel has a ______lien on the car. Artisan's Mechanic's Judicial Guarantor's
Artisan's
A security interest in personal property in favor of one who has performed services on the personal property is an Mechanic's lien. Artisan's lien. Color of title. Security Deposit.
Artisan's lien.
Jason has filed suit against Luke claiming $50,000 in damages. While the claim is being litigated, Jason can ask the court for a writ to seize property belonging to Luke which could be used to satisfy a judgment. The seizure prevents Luke from selling or otherwise disposing of the property during the proceedings. The writ Jason will ask for is a writ of Attachment Attainder Execution Garnishment
Attachment
A shareholder who dissents from a merger is entitled to Be paid the fair value of her stock Revoke her dissent within 10 days of the stock appraisal Sue the board of the surviving corporation in a derivative suit. All of the above are shareholder rights.
Be paid the fair value of her stock
Bill is a limited partner in K&L Limited Partnership. Which of the following statements about his partnership interests is false? A. Bill made a capital contribution to K&L B.Bill has a right to share in K&L profits. C.Bill must share in K&L losses up to his capital contribution. D.Bill has a right to make management decisions for K&L
Bill has a right to make management decisions for K&L.
State statutes that govern the sale of investment securities within the state are known as ___________laws. Blue sky Red herring Asset protection Investment trust
Blue sky
To protect instate investors, most states have statutes regulating the sale of stocks and other securities within the state. These state statutes are referred to as ________________laws Blue sky Asset protection Investment trust White knight
Blue sky
A director would incur personal liability if A The corporation failed to withhold taxes from the wages of employees B The board declared an illegal dividend C The shares of the corporation lost more than 20 of their market value. D Both a and b
Both a and b
Which of the following statements is correct about shareholders' voting rights? A. Shareholders are entitled to notice when a special meeting is called. B. A quorum of shareholders must be present to conduct business. C. A shareholder's vote will be counted only if the shareholder is personally, physically present at the meeting when the vote is take. D. Both a and b are correct.
Both a and b are correct.
The rules that govern the corporation, including the number of directors it will have, the method of electing directors, the time and place of shareholder meetings, etc., are found in the corporation's By laws Articles of incorporation Charter State incorporation code
By laws
John, a partner in KLM Partners, had a personal loan from First Bank for 35,000. First Bank got a judgment against John after he defaulted on the loan. First Bank can reach John's interest in KLM Partners and require that a receiver be appointed to take John's share of the partnership profits to satisfy the judgment. The court order that will do this is an? A. Marshalling order B. Accounting order C. Charging order D. Attachment order
Charging Order
The merger of two corporations who are neither competitors nor related as customer and supplier is a _______ merger Conglomerate Market extension Horizontal Vertical
Conglomerate
The combination of two corporations that results in the dissolution of both corporations and the emergence of a new corporation is a(n) Merger Consolidation Purchase of assets Bulk transfer
Consolidation
Bob is a co-surety with Sue on a loan that was made to Sue's business. If the business defaults on the loan and Bob is required to pay the full amount, Bob has the right of ____________ against Sue. Reimbursement Indemnification Contribution Subrogation.
Contribution
Which of the following best describes the "double taxation" on corporate profits? A.The profits of a corporation are taxed at twice the rate of the highest individual tax rate. B. The income an individual gets from dividends is taxed at twice the rate of the income he gets from wages. C. The IRS is twice as likely to audit returns with dividend income as it is to audit returns with income from wages only. D. Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends as personal income.
Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends as personal income.
The method of voting that gives minority shareholders the best chance of electing someone to the board of directors is ______________ voting Cumulative Consolidated Proxy Supermajority
Cumulative????
A surety is liable to the creditor as soon as the principal Enters into the contract. Makes an initial payment. Files for bankruptcy Defaults.
Defaults
The suit that a shareholder would bring against the officers of a corporation to enjoin ultra vires acts or acts that impair corporate assets is a __________suit. Direct Derivative Proxy Peremptory
Derivative
Any change in the identity of the partners, whether through death, withdrawal, or the adding of a new partner, results in the ________________of the old partnership. Termination Winding up Dissolution Disengagement
Dissolution
Frank is in the business of selling imported pottery. To induce a new wholesaler to sell him goods on credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the business. In fact, Ed had no partnership interest and Frank was a sole proprietor. Ed now has liability to the wholesaler based on? A. The complicity theory B. Vicarious liability C. Estoppel D. Respondeat superior
Estoppel
A creditor in possession of collateral given to him or her by the principal may return it to the principal without the consent of the surety.
False
A creditor must exhaust his or her judicial remedies against the principal before seeking to recover from the surety.
False
A disadvantage of the Limited Liability Company is that profits are taxed both as income to the corporation and as dividends to the members.
False
A lien for the value of materials and labor used in the construction or improvement of real property is an artisan's lien.
False
A promoter is an agent of the corporation. T/F
False
A shareholder's desire to discover why a dividend was not paid is not a "proper purpose" for allowing the shareholder access to the corporation's records. T/F
False
A shareholder's right to dissent from a proposed merger and have his shares purchased by the corporation is the right of preemption. T/F
False
Absent an agreement otherwise, each partner is entitled to compensation for his or her services in managing the business.
False
An incoming partner has unlimited personal liability for the already existing debts of the partnership. T/F
False
Any profits which a surety makes when called upon to perform the principal's duties belong to the surety.
False
Directors have no personal liability for illegally declared dividends. T/F
False
Directors must be compensated for their services. T/F
False
In a Limited Liability Company, the unanimous consent of the members is required to hire a new employee.
False
In a closely held corporation, the shareholders will be personally liable for torts committed by employees of the corporation if committed while carrying out their employee duties. T/F
False
In a merger, two or more existing corporations A and B combine so that a third corporation C results T/F
False
In a partnership for a term of years, each partner has both the power and the right to withdraw from the partnership at any time. T/F
False
Individual members of the LLC can never bind the LLC in a valid and enforceable contract.
False
Lack of capacity and discharge in bankruptcy are two common defenses that are available to a surety that may be asserted against a creditor.
False
Limited partnerships must have one general partner for every seven limited partners.
False
One of the disadvantages of a Limited Liability Partnership is double taxation.
False
Partnerships are required to give notice to creditors when they dissolve, but corporations are not required to give notice of their dissolution
False
Pre-incorporation stock subscriptions are merely offers to purchase stock and are not normally binding on the purchaser. T/F
False
State laws regulating the sale of securities within the state are called red herring laws. T/F
False
Stock warrants are not transferable and cannot be sold on any stock exchange. T/F
False
The articles of incorporation are drawn up at the first organizational meeting of the corporation. T/F
False
A "certificate of limited partnership" is a document that is A. Filed with the state Secretary of State by the limited partnership as part of its application process. B. Issued by the IRS to acknowledge a limited partnership's tax status. C. Issued by the limited partners jointly to the general partner. D. Issued by the general partner to the limited partners.
Filed with the state Secretary of State by the limited partnership as part of its application process.
In a limited partnership LP, what are the partners who have unlimited personal liability for the debts of the LP? General partners Joint partners Limited partners Silent partners
General Partners
In which of the following business forms are profits taxed at both the entity level and the owner level? General corporation Limited Partnership LLC LLP
General corporation
Which business entity has the following characteristics: liability of the owners is limited to their investments; ownership interest is easily transferrable and there are no legal limits to the number of owners; owners elect the managers of the business who operate under duties of loyalty and due care; the entity is organized under state law and may have perpetual existence; profits are subject to double taxation? General partnership General corporation Limited liability corporation Limited partnership
General corporation
A __________ is a party whose promise is not limited to a single transaction or to a single creditor. General guarantor. Special guarantor. Creditor. Obligee.
General guarantor.
Which of the following issues do not require a unanimous vote of the partners? A. Admission of a new partner B. Confession of a judgment against the partnership C. Disposal of the good will of the business D. Hiring an office manager for 40 hours a week
Hiring an office manager for 40 hours a week
The merger that creates the greatest number of antitrust issues is a _____________merger. Conglomerate Horizontal Market extension Vertical
Horizontal
Three major U. S. banks have launched a service to process online electronic payments, creating in the process a major competitor of PayPal's. If the banks were to buy out PayPal in the future, this would constitute a ______________________merger. Horizontal Vertical Market product extension Conglomerate
Horizontal
Which of the following statements about a joint venture is true? A. It can be the plaintiff in a lawsuit without involving the individuals who form the joint venture. B. It can be the defendant in a lawsuit without subjecting the individuals who form the joint venture to liability. C. It is limited by statute to thirty-five members. D. Individuals form it to conduct a single, or very limited, business activity.
Individuals form it to conduct a single, or very limited, business activity.
You are a promoter for a corporation to be formed. Among other activities, you hire an attorney to draft the incorporation papers, you rent office space, and you contract for printing services. Which of the following will not prevent the promoter from having personal liability on these transactions?' A. Informing the other party that he/she does not intend to be liable and is acting in the name of, and solely on the creit of, a corporation that yet to be formed. B. All contracts signed by the promoter should be worded to relive him/her of personal liablity. C. Create a separate corporation for the sole purpose of being the promoter of the corporation they are forming. D. Informing the other party that he/she does not intend to be liable and is acting in the name of, and solely on the creit of, a corporation.
Informing the other party that he/she does not intend to be liable and is acting in the name of, and solely on the creit of, a corporation.
You serve as an outside director on the board of the All-at-Once Corporation. During a board meeting, the president of All-at-Once makes a fifteen-minute presentation on the benefits and detriments of merging All-at-Once with Take-Your-Time, Inc. After this presentation, the president asks for a vote of the directors approving the merger. Which of the following is not a power or responsibility of a member of the board of director? A. Issue orders to an employee of the corporation. B. Attend board of director meetings. C. Exercise judgment on propositions brought before the board. D. Take action necessary for conducting the ordinary business activities of the company.
Issue orders to an employee of the corporation.
Nelson and Jack are both avid sailors. When a sailing acquaintance put his older, but still highly desirable, boat up for sale, Nelson and Jack agreed to pool their resources to buy and fix up the boat, then sell it and split the profits. This is an example of an A. General partnership B. Limited partnership C. Joint venture D, Proprietorship
Joint venture
Which of the following is an informal association of two or more persons who agree to engage as co-owners in a single business transaction? A. Joint venture B. General partnership C. Trading group D. Limited partnership
Joint venture
John Thompson and Richard Allenby wish to enter the camping equipment manufacturing business. If the following facts exist, which type of business organization would be most advantageous? Sales will be nationwide.
Limited Liability Company/Corporation
John Thompson and Richard Allenby wish to enter the camping equipment manufacturing business. If the following facts exist, which type of business organization would be most advantageous? Some phases of production are rather dangerous, and a relatively large number of tort judgments may be anticipated.
Limited Liability Company/Corporation
John Thompson and Richard Allenby wish to enter the camping equipment manufacturing business. If the following facts exist, which type of business organization would be most advantageous? Thompson is an expert in the field of camping gear production and sales but has no funds. Allenby knows nothing about such production but is willing to contribute all necessary capital.
Limited Liability Company/Corporation
John Thompson and Richard Allenby wish to enter the camping equipment manufacturing business. If the following facts exist, which type of business organization would be most advantageous? Camping gear production requires large amounts of capital, much more than Thompson and Allenby can raise personally or together; however, they wish to control the business. Limited Liability Company/Corporation with Bylaws and Operating Agreement providing John and Allenby with control of the business. General Partnership Limited Partnership Tax Free Corporation
Limited Liability Company/Corporation with Bylaws and Operating Agreement providing John and Allenby with control of the business.
In which of the following business organizations does an owner risk losing his or her limited liability by actively and publicly managing the business? Limited Partnership Limited Liability Partnership General corporation Limited liability corporation
Limited Partnership
The method of voting for directors in which each shareholder casts as many votes as he or she has shares is the _______________method Straight Cumulative Derivative Absolute
Straight
Which of the following statements about the limited partner in a limited partnership is false? A. Limited partners may participate fully in the management of the partnership. B. There must be at least one limited partner. C. Limited partners must approve any changes to the partnership agreement. D. Limited partnerships that invest in real estate are typically good tax shelters for the limited partners.
Limited partners may participate fully in the management of the partnership.
You are a promoter for a corporation to be formed. Among other activities, you hire an attorney to draft the incorporation papers, you rent office space, and you contract for printing services. As a promoter you may be involved in all of the following except: A. Making application for the corporate charter. B. Hold the first meeting of shareholders. C. Enter into pre-incorporation subscription agreements. D. Purchasing property and selling it to the corporation for a profit.
Making application for the corporate charter.
An LLC in which non-owners are hired to run the day to day activities of the firm is a ______LLC. Member-managed Manager-managed Proprietary Subchapter S
Manager-managed
An LLC where a single person or select group has the power to manage is a ____________________LLC Manager-managed Member-managed Proprietary Subchapter S
Manager-managed
The merger of two corporations that results in the surviving corporation expanding its products or markets is a _____________merger. Conglomerate Market extension Horizontal Vertical
Market extension
Megan has joined Alliance Partners, making a 50,000 capital contribution. Alliance has been in business for 10 years and Megan is worried about her liability for pre-existing debts. Which statement best describes her liability for the debts Alliance had when she joined the partnership? A. Megan has unlimited personal liability and her entire capital contribution may be used to satisfy the debts. B. Megan has unlimited personal liability, but her capital contribution cannot be used because it is new money. C. Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them. D. Megan has no personal liability for the debts and her capital contribution cannot be used to satisfy old debts.
Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them.
Which of the following is a quality that an LLC shares with a corporation? A. Members are only personally liable for debts to the extent of the money they put into the business. B. Members of an LLC usually have little to no control in major business decisions. C. An LLC and a corporation are treated identically for tax purposes. D. Both an LLC and a corporation require complex and costly procedures and filings before they can legally do business.
Members are only personally liable for debts to the extent of the money they put into the business.
The combination of two corporations that results in the absorption of one corporation into another is a(n) Merger Consolidation Purchase of assets Bulk transfer
Merger
The board of ABC Corporation approved a new issue of Class B voting stock. The stock has no stated value. This stock is an example of __________________stock Watered No par Par value Preferred
No par
Stock which has no stated value when it is sold is ___________stock. Watered No par value Par value Restricted
No par value
Peter, Paul and John, who were licensed pharmacists, formed a partnership to purchase and run a small drugstore chain. Each held a 13 interest in the partnership. When Paul died his wife Ellen began receiving annuity payments equal to 13 of the partnership's net profits. The payments were to last for 3 years. Ellen is also a licensed pharmacist and perfectly capable of performing all the duties that Peter, Paul and John performed. She claims that under partnership law both her right to receive a share of net profits and her expertise in the field are prima facie evidence that she is a partner in the firm. Is Ellen correct? A. No, paying a surviving spouse an annuity out of net profits is not prima facie evidence of partnership. B. No, only management rights are prima facie evidence of a partnership C. Yes, sharing in net profits for whatever reason is prima facie evidence of a partnership. D, Yes, sharing in net profits and having the same business qualifications as the other partners together create prima facie evidence of a partnership.
No, paying a surviving spouse an annuity out of net profits is not prima facie evidence of partnership.
You serve as an outside director on the board of the All-at-Once Corporation. During a board meeting, the president of All-at-Once makes a fifteen-minute presentation on the benefits and detriments of merging All-at-Once with Take-Your-Time, Inc. After this presentation, the president asks for a vote of the directors approving the merger. Should you vote on this merger? A. Yes, the board directors may approve a merger, or bring about consolidation with other corporations. B. Yes, if this power is spelled out in the corporate handbook. C. No, if there was not proper notice regarding the vote. D. No, the board of directors does not have the power to approve a merger.
No, the board of directors does not have the power to approve a merger.
Jim and Sid are partners in Widget Manufacturing. Jim read a letter from one of Widget's buyers asking for adequate assurances that Widget would be able to meet an upcoming contractual obligation. The demand was proper and, under Article 2, the buyer could treat the contract as breached if Widget did not respond to the demand within 3 months. Jim forgot to tell Sid about the demand and did not respond to it himself. Widget is now being sued by Buyer for 4,000 in damages for breach of contract. Sid contends that the partnership is not liable because only one partner was aware of the demand. Is Sid correct? A.Yes, as an equal owner of the business Sid was entitled to equal notice. B. No, Sid did not receive the notice because of his own negligence in attending to partnership correspondence. C. No, the partnership is liable under the doctrine of respondeat superior D. No, the partnership is liable because notice to one partner is legally notice to all the partners and the partnership.
No, the partnership is liable because notice to one partner is legally notice to all the partners and the partnership.
Preferred stock that is entitled to receive only the stated preferred dividend and no other is _______________ preferred stock. Participating Non-participating Cumulative Non-cumulative
Non-participating
By statute, a limited partnership must have a minimum of ____________limited partners. one two four five
One
Which of the following is the order in which partnership assets will be distributed upon termination of the partnership? A. Outside-creditors, partner-creditors, undistributed profits, capital contributions. B. Capital contributions, outside-creditors, partner-creditors, undistributed profits. C. Partner-creditors, outside-creditors, undistributed profits, capital contributions D. Outside-creditors, partner-creditors, capital contributions, undistributed profits.
Outside-creditors, partner-creditors, capital contributions, undistributed profits.
When ABC Corporation was formed, the directors authorized an issue of 1,250,000 shares at $1,000 a share. These shares are classified as _______________stock. Treasury Watered Par value No par value
Par value
Shares that are issued with a face value are Par value shares No par shares Treasury shares Non-certificated
Par value shares
What is the provision of the tax rule that makes income taxable only for the individuals who receive it, and not for the business entity that produces it? Double taxation Pass through Dividend retention Income averaging
Pass through
erfect Painters submitted a bid to paint the dorm rooms at State University during the summer. State Law requires that all bidders for state contracts post a bond protecting the state against loss if the bidder fails to perform within the contract time. The kind of bond Perfect Painters will post is a _______________bond. Fidelity Mechanic's Performance Artisan's
Performance
Pat agreed to purchase 250 shares of Pamco Company five months before the corporation came into existence. This agreement is an Shareholders trust Shareholders proxy Pre-incorporation subscription Preemptive preference
Pre-incorporation subscription
Pat agreed to purchase 250 shares of Pamco Company five months before the corporation came into existence. This agreement is an Shareholders trust Shareholders proxy Pre-incorporation subscription Preemptive preference
Pre-incorporation subscription
A shareholder who cannot attend a shareholder meeting may give another person the right to vote her shares in that election. This temporary grant of authority is an Warrant Proxy Assignment Delegation
Proxy
States have the power to cancel or revoke the charters of corporations that engage in illegal activities. These forfeiture hearings are called ______________proceedings. Divestiture Quo warranto Ultra vires Appraisal
Quo warranto
Which of the following statements about the rights and duties of shareholders is false? A. Shareholders have virtually unrestricted access to corporate books and records B. Majority shareholders may have fiduciary duties to minority shareholders in closely held corporations. C. Shareholders must approve changes to the corporate charter. D. Shareholders are entitled to notice of the annual meeting and all special meetings.
Shareholders have virtually unrestricted access to corporate books and records
A ________ is a party who limits his or her promise to a single transaction or to a single creditor. General guarantor. Special guarantor. Creditor. Obligee.
Special guarantor.
Allison is going to create a lawn service business. Allison would like to limit her liability by creating a subchapter "S" corporation. She does not know if the state she lives in allows for a single shareholder corporation. Where should Allison look to find the answer to her question? State statutes Federal statutes US Code of Federal Regulations Local ordinances
State Statutes
What is another name for a Subchapter S Corporation? Hybrid Limited Partnership Tax option corporation Limited Liability Company Professional Corporation
Tax option corporation
Partners hold title to partnership property as? Joint tenants Tenants in common Tenants in partnership Tenants by the entireties
Tenants in partnership??
A partnership need not give public notice of its dissolution if the dissolution was caused by? A. The bankruptcy of a partner B. The death of a partner C. The wrongful withdrawal of a partner D. The expiration of the partnership's term of years
The bankruptcy of a partner
In a successful derivative suit, any money awarded in the judgment will go to The corporation The plaintiff shareholder The plaintiff shareholder and the corporation will share the money equally. There can be no award of money because only equitable remedies are available in derivative suits.
The corporation
Bedford and Eckhart formed a partnership and built a shopping center. Three years later, Bedford, the managing partner, informed Eckhart that the business was in deep financial trouble and that he had tried to sell the complex but had failed. Bedford said that the best thing to do would be for one to buy the other out and that their equity in the business was not worth more than $3 million. Eckhart sold his half interest in the partnership to Bedford for $1.5 million. Later he discovered that their equity in the business amounted to over $10 million and that Bedford had received several offers to purchase the business. What might the court order?
The court could order any pending sale to be rescinded, have the partnerhsip dissolved, and for Eckhart to receive an accounting from Bedford.
Which of the following best describes the role of a general partner in a limited partnership? A. The general partner usually has an insignificant role in the overall business decisions of the limited partnership. B. The general partner defers to the business decisions of the limited partners of the limited partnership, unless those decisions seem economically unreasonable. C. The general partner may participate in the business decisions of the limited partnership, but he or she will never be held personally liable for the debts of the business. D. The general partner manages the partnership and remains responsible for partnership liabilities.
The general partner manages the partnership and remains responsible for partnership liabilities.
Which of the following is false about the name of a corporation? A The name must include words like "company" or "corporation" to indicate that the entity has limited liability. B The name cannot be deceptively similar to any other corporation incorporated in that state. C The name can never be changed once it is registered with the state. D States allow corporations to reserve a name for a limited time while the corporation is being formed.
The name can never be changed once it is registered with the state
Which of the following statements about proprietorships is true? A. Proprietorships are taxable entities apart from the owners. B. A business can have up to thirty-five owners and still be a proprietorship. C. A proprietorship cannot generate more than 10 million in proceeds per tax year. D. The owner of a proprietorship is personally liable for all the debts of the proprietorship.
The owner of a proprietorship is personally liable for all the debts of the proprietorship.
Courts have great discretion in deciding whether to order the dissolution of a corporation when the shareholders or directors are deadlocked
True
When considering whether a partner has breached his or her fiduciary duties to the partnership, courts are likely to consider all of the following, except Specific language of the Partnership Agreement. Applicable state partnership statutes. Prior court decisions. The partner's personal net worth.
The partner's personal net worth
In a suretyship, security for the creditor is provided by A. Granting the creditor an interest in the debtor's real property B. A statutory lien on the debtor's personal property. C. The promise of a third party to perform if the debtor does not perform. D. A pledge by the debtor of personal property.
The promise of a third party to perform if the debtor does not perform.
All of the following are rights held by an individual member of an LLC, except: A. The right to request that the LLC be dissolved. B. Access to the LLC's books and records. C. The right to vote against an amendment to the LLC's operating agreement. D. The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.
The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC.
Which of the following statements about treasury stock is false? A. Treasury stock can be resold only at par value. B. It is stock that the corporation acquired by gift or by purchasing from shareholders. C. Most states require that corporations purchase treasury shares only with accumulated profits or surpluses. D. Creditors of the corporation or the state itself may block the purchase of treasury stock.
Treasury stock can be resold only at par value.
A Subchapter S corporation is taxed in the same way a partnership is taxed. T/F
True
A corporation must qualify to do business in each state where it conducts business activities. T/F
True
A creditor who succeeds in holding a shareholder liable for the debts of an existing corporation is said to have "pierced the corporate veil." T/F
True
A limited partner normally has no liability beyond his or her contribution
True
A limited partnership must have at least one general partner and one limited partner. T/F
True
A partner in a trading partnership has the implied power to make warranties on goods sold by the partnership. T/F
True
A person may become a partner without making a capital contribution. T/F
True
A principal who is discharged in bankruptcy is released from his duty to reimburse the surety.
True
A shareholder who has not fully paid the corporation for an original issue of stock may become liable to a creditor of the corporation for the unpaid balance. T/F
True
A shareholder who holds watered stock is potentially liable to the creditors of the corporation should the corporation become insolvent and unable to meet its obligations.
True
A surety who only guarantees collection is entitled to notice.
True
A surety's obligation is a generally promise to do what the principal agreed to do.
True
An advantage to doing business as a corporation is that ownership interests can be transferred without impact on day-to-day business operations.
True
Because the LLC is a relatively new type of business entity, there are often fewer published court opinions addressing LLC issues.
True
Both contractors and subcontractors are entitled to a mechanic's lien against the owner for nonpayment of their accounts.
True
California and New York allow only professional services firms to do business as Limited Liability Partnerships
True
Co-sureties share joint and several liability to the creditor
True
Partnerships typically buy life insurance policies on each partner in order to fund the required purchase of the partner's interest in the partnership when the partner dies. T/F
True
Premiums paid by corporations for the health insurance it provides employees are tax-deductible expense. T/F
True
Restatement of Security treats contracts of suretyship as interchangeable with guarantor contracts.
True
Shareholders may vote on matters in which they have a personal interest. T/F
True
Shareholders of a corporation may also be employees of that corporation. T/F
True
State courts have the power to order that real property be sold to satisfy a mechanic's lien.
True
The Tax Code does not allow corporations to deduct as expenses excessive or unreasonable compensation to officers and employees.
True
The Tax Code does not allow corporations to deduct as expenses excessive or unreasonable compensation to officers and employees. T/F
True
The agreement to purchase stock in a future corporation is a pre-incorporation subscription. T/F
True
The capital contribution of each partner is a liability to the partnership and must be returned to the partner when the partnership ends. T/F
True
The manager of a manager-managed Limited Liability Company may be a non-member.
True
The surviving partner is entitled to compensation for winding up the affairs of the partnership. T/F
True
To create a Limited Liability Corporation, articles of organization must be filed with the state's Secretary of State's office.
True
Unless agreed to otherwise, all partners have an equal vote in the management decisions of the partnerships.
True
Usury laws do not apply to corporations when they borrow money. T/F
True
Voluntary surrender of personal property subject to an artisan's lien generally terminates the lien.
True
PaperCo makes paper products from recycled materials. If PaperCo acquires the recycling plant from which it buys most of its raw materials, the acquisition would be a ______________merger Horizontal Vertical Conglomerate Market product extension
Vertical
A _________ is the voluntary relinquishment of the right to a mechanic's lien before a notice of lien is filed. Satisfaction and accord. Waiver. Collection proceeding. Confessed judgment.
Waiver???
Bedford and Eckhart formed a partnership and built a shopping center. Three years later, Bedford, the managing partner, informed Eckhart that the business was in deep financial trouble and that he had tried to sell the complex but had failed. Bedford said that the best thing to do would be for one to buy the other out and that their equity in the business was not worth more than $3 million. Eckhart sold his half interest in the partnership to Bedford for $1.5 million. Later he discovered that their equity in the business amounted to over $10 million and that Bedford had received several offers to purchase the business. Will Exkhart succeed in his lawsuit?
Yes, Bedfort breached the fiduciary duty of loyalty and acted in bad faith.
Bob and Sue, who are both attorneys, agreed to share office space and other overhead expenses in order to save money. They did not agree to form a partnership. They do not share profits or losses and neither has a say in the management of the other's business. The sign outside their door, and on their common letterhead, reads: "Bob Smith and Sue Jones, Attorneys at Law." Using this stationary, Bob purchased office equipment from Smart Buy. Sue at no time used the equipment and did not enter into the contract with Smart Buy. Bob did not pay for the equipment and Smart Buy wants to hold Sue liable. Is Sue liable as a partner for this purchase? A. Yes, allowing her name to be used with Bob's in the same letterhead created an express partnership. B. Yes, allowing her name to be used with Bob's in the same letterhead created an implied partnership C. Yes, allowing her name to be used with Bob's in the same letterhead created a partnership by estoppel D. No, there was no sharing of profits or losses or management rights so there was no partnership.
Yes, allowing her name to be used with Bob's in the same letterhead created a partnership by estoppel
You serve as an outside director on the board of the All-at-Once Corporation. During a board meeting, the president of All-at-Once makes a fifteen-minute presentation on the benefits and detriments of merging All-at-Once with Take-Your-Time, Inc. After this presentation, the president asks for a vote of the directors approving the merger. If you are elected to the board of directors you are required to either own or purchase what percentage of stock in the corporation? A. 1 share. B. 1% of the total shares. C. 1 share of preferred stock. D.You are not required to own any shares of stock.
You are not required to own any shares of stock.
A surety will remain liable when the creditor-principal agreement is modified if the surety consents to the modification Before the modification takes place. At the time the modification takes place. After the modification takes place. All of the above
all of the above
The merger of two businesses in the same field that reduces the number of competitors is a _________________merger Conglomerate Vertical Horizontal Consolidation
horizontal