BUL unit 10

Subchapter S corporations are limited to _________shareholders. 10 35 100 There is no limit to the number of shareholders in a Subchapter S corporation.

35*wrong*

Which of the following decisions would require a unanimous vote of the partners? Hiring an accountant to prepare the partnership information return for federal taxes. Buying materials from a new supplier. Having the parking lot repaved and installing new lights. Admitting a new partner into the partnership

Admitting a new partner into the partnership

Sharing in net profits is not prima facie evidence that a partnership exists if the profits were paid by the partnership As rent For wages As an annuity to the spouse of a deceased partner All of the above

All of the above

Which of the following is NOT a recognized advantage of doing business as a corporation? Investors have extremely limited liability for the debts of the corporation. A corporation can have perpetual existence. Usury laws do not apply to corporations. All of the above are advantages of doing business in corporate form.

All of the above are advantages of doing business in corporate form.

Subchapter S corporation will avoid double taxation only if which of the following applies? All the shareholders agree to be taxed as in a partnership. The corporation files Articles of Partnership in the state where it has its principal place of business. The corporation has no retained earnings All of the above are necessary to avoid double taxation.

All the shareholders agree to be taxed as in a partnership.

The formal document that represents the agreement of the parties to form a partnership is the ___________. Partnership charter Partnership certificate Articles of partnership Uniform Act of Partnership

Articles of partnership

Bill is a limited partner in K&L Limited Partnership. Which of the following statements about his partnership interests is false? Bill made a capital contribution to K&L Bill has a right to share in K&L profits. Bill must share in K&L losses up to his capital contribution. Bill has a right to make management decisions for K&L.

Bill has a right to make management decisions for K&L.

What is the form of business organization that is subject to the most regulation at the state and federal level? Corporation Partnership Limited Partnership Professional Association

Corporation

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 The complicity theory Vicarious liability Estoppel Respondeat superior

Estoppel

A doctor who practices as part of a professional association cannot be sued for malpractice. True False

False

A limited partnership has to have at least two general partners and at least one limited partner True False

False

A partnership is a taxable entity. True False

False

Partnerships are required to use the term "Company" in their names. True False

False

Vic and Thom bought an antique Corvette at auction with the intent of restoring it and selling it for a profit, which they will share equally. Vic and Thom have formed a professional association. True False

False

Which of the following issues do not require a unanimous vote of the partners? Admission of a new partner Confession of a judgment against the partnership Disposal of the good will of the business Hiring an office manager for 40 hours a week.

Hiring an office manager for 40 hours a week.

Which business entity has the following characteristics: an informal association of two or more persons that is formed to accomplish a single business transaction? Joint venture Limited partnership Professional association General partnership

Joint venture

Which of the following statements about the limited partner in a limited partnership is false? Limited partners may participate fully in the management of the partnership. There must be at least one limited partner. Limited partners must approve any changes to the partnership agreement. 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.

What is the equitable rule that 1 distributes assets of an insolvent partnership first to creditors of the partnership and 2 does not let partnership creditors reach the assets of individual partners until the partners' personal creditors are satisfied? Equitable distribution Comity of assets Marshaling of assets Partnership partition

Marshaling of assets

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? No, paying a surviving spouse an annuity out of net profits is not prima facie evidence of partnership. No, only management rights are prima facie evidence of a partnership Yes, sharing in net profits for whatever reason is prima facie evidence of a partnership. 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.

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? Yes, as an equal owner of the business Sid was entitled to equal notice. No, Sid did not receive the notice because of his own negligence in attending to partnership correspondence. No, the partnership is liable under the doctrine of respondeat superior 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.

Which of the following is not an advantage of a general partnership? Partners have limited liability for the debts of the partnership The costs to form a partnership are minimal. All partners have equal management rights. All of the above are advantages of a general partnership.

Partners have limited liability for the debts of the partnership

The business entity that consists in an association of two or more persons to carry on as co-owners a business for profit is an__________. Limited partnership Limited liability company Partnership Professional association

Partnership

When partners enter into a partnership without stating how long the partnership will last, they have formed an ____________________. Partnership for a term of years Implied partnership Partnership at will Partnership by the entireties

Partnership at will

Which of the following statements about the taxation of corporations is false? Premiums paid for employee health insurance plans are fully deductible. Profits retained by the corporation are normally taxable to the shareholders under the corporate pass through rule. Salaries paid to employees are deductible expenses for the corporation. Most states impose license fees or franchise taxes on corporations doing business in the state.

Profits retained by the corporation are normally taxable to the shareholders under the corporate pass through rule.

A partner who does not participate in the management of the partnership is a ________partner. Silent Dormant Secret Junior

Silent

Another name for a tax option corporation is a Limited liability Company Professional corporation Subchapter S corporation Joint venture

Subchapter S corporation

What is another name for a Subchapter S Corporation? Hybrid Limited Partnership Tax option corporation Limited Liability Company Professional Corporation

Tax option corporation

A partnership need not give public notice of its dissolution if the dissolution was caused by The bankruptcy of a partner The death of a partner The wrongful withdrawal of a partner The expiration of the partnership's term of years.

The bankruptcy of a partner

Which of the following is not a right of a partner? The right to participate in the management of the business. The right to draw yearly interest on his or her capital contribution The right to inspect the partnership books and records. The right to sue for an accounting if another partner has taken a secret profit.

The right to draw yearly interest on his or her capital contribution

A partnership whose primary purpose is to manufacture things or to provide services is a ____________partnership. Professional Entrepreneurial Trading Non-trading

Trading*wrong*

A buy and sell agreement normally specifies the terms under which a withdrawing or deceased partner's interest will be bought out. True False

True

A corporation must qualify to do business in each state where it conducts business activities. True False

True

A dormant partner is one who does not participate in the management of the business and whose identity is not known to third parties. True False

True

A partnership maybe created by an express agreement between the parties or it may be implied from their conduct. True False

True

A person may become a partner without making a capital contribution. True False

True

Absent a contrary provision in the partnership agreement, all partners have equal rights in the management of the business. True False

True

If the partnership agreement does not state how long the partnership is to last, a partnership- at- will is created. True False

True

In a Limited Liability Company, the losses and profits pass through to the shareholders. True False

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. True False

True

Partner A defrauded a client of the partnership. Partners B and C are jointly and severally liable with A to the client, even though they were unaware of the fraud. True False

True

Partners have unlimited personal liability for the debts incurred by the partnership. True False

True

Partnership books must be kept in the firm's place of business and be accessible to all partners True False

True

Professional corporations are business entities organized under state law. True False

True

Shareholders of a corporation may also be employees of that corporation. True False

True

Shareholders of corporations pay taxes on the dividends distributed to them by the corporation. True False

True

Subchapter S corporations may have a maximum of 100 shareholders. True False

True

The Tax Code does not allow corporations to deduct as expenses excessive or unreasonable compensation to officers and employees. True False

True

The capital contribution of each partner is a liability to the partnership and must be returned to the partner when the partnership ends. True False

True

Unless agreed to otherwise, all partners have an equal vote in the management decisions of the partnerships. True False

True

Unless agreed to otherwise, partners are not entitled to compensation for work done to further the interests of the partnership. True False

True

Which of the following statements about the rights and duties of doctors who practice medicine in a professional corporation is true? Doctors have no personal liability for medical malpractice suits. Because they are also owners of the corporation, doctors have no protection from discrimination based on age. The professional corporation can have no more than 10 owner-employee doctors. are eligible to participate in tax advantaged pension plans.

are eligible to participate in tax advantaged pension plans.

By statute, a limited partnership must have a minimum of ___________general partners. one two four five

one