BUL3310 Unit 13 Chapter 28 & 29 Quiz

May is one of three limited partners in a limited partnership. Each limited partner made a capital contribution of $50,000. Assume there is a judgment against the partnership for $300,000 and that both the partnership and the general partner are insolvent. What is the maximum amount that May will have to pay on the judgment? 0: May is a limited partner so has no liability for the debts of the partnership under any circumstances. $50,000: May's capital contribution can be applied to the debt, but she is not personally liable beyond that. $100,000: May will be liable for up to 1/3 of the judgment since there are three limited partners. $300,000: As a limited partner May has joint and several liability for the debts of the partnership so she could be personally liable for the full amount.

$50,000: May's capital contribution can be applied to the debt, but she is not personally liable beyond that.

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.

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The AMJ Partnership has 3 partners: Amy, who made a 60,000 capital contribution; May, who made a 20,000 capital contribution; and June, whose capital contribution was 10,000. The partnership agreement is silent about how profits will be divided. If the partnership makes 90,000 in profits, how will it be distributed? 60,000 to Amy; 20,000 to May; 10,00 to June 30,000 each to Amy, May and June 45,000 to Amy; 30,000 to May; 15,000 to June The partners will have to determine the distribution by a 23 partnership vote.

30,000 each to Amy, May and June

Which of the following is NOT one of the recognized disadvantages of doing business as a corporation? A corporation must comply with a great number of state and federal regulations. Corporate profits are subject to double taxation. A corporation must qualify to do business in each state in which it engages in business activities. A corporation can be in existence for a maximum of 99 years.

A corporation can be in existence for a maximum of 99 years.

Which of the following is not required to create a partnership? A written agreement between the parties. Two or more persons An understanding to share profits and losses A common interest and intent to conduct business activities together.

A written agreement between the parties.

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 ______________. Charging order Marshalling order Accounting Decree of insolvency

Accounting

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

-A partnership that fails to comply with a state's assumed name statute Will be given a trade name by the attorney general Will not be able to use the courts of the state to sue its debtors May exposed the partners to criminal liability Both b and c

Both b and c

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

A corporation can be in existence for a maximum of ninety-nine years. True False

False

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 partner's capital contribution may consist in business experience or service to the firm. True False

False

Absent an agreement otherwise, each partner is entitled to compensation for his or her services in managing the business. True False

False

An incoming partner has unlimited personal liability for the already existing debts of the partnership. True False

False

If a personal creditor of Partner A wants to attach A's partnership interest in satisfaction of the debt, he would do so through a marshalling order. True False

False

Partners may use partnership property for both partnership and personal reasons. True False

False

Subchapter S corporations may have a maximum of 100 shareholders. A) True B) 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.

If a partnership agreement does not say how losses will be shared, they will be shared Equally among the partners Proportionately according to the capital contribution of each partner. In whatever way the profits are shared. Equally among those partners who have not made loans to the partnership

In whatever way the profits are shared.

Which of the following statements about a joint venture is true? It can be the plaintiff in a lawsuit without involving the individuals who form the joint venture. It can be the defendant in a lawsuit without subjecting the individuals who form the joint venture to liability. It is limited by statute to thirty-five members. Individuals form it to conduct a single, or very limited, business activity.

Individuals form it to conduct a single, or very limited, business activity.

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______ General partnership Limited partnership Joint venture Proprietorship

Joint venture

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 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

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? Joint venture General partnership Trading group Limited partnership

Joint venture

Partnership agreements often fund the purchase of a deceased partners' partnership interests with Life insurance policies Distributions of retained earnings Levies on partnership interests Partner advances

Life insurance policies

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.

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? Megan has unlimited personal liability and her entire capital contribution may be used to satisfy the debts. Megan has unlimited personal liability, but her capital contribution cannot be used because it is new money. Megan has no personal liability for the debts, but her entire capital contribution may be used to satisfy them. 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.

Allfam is a closely held family corporation, many of whose shareholders are employees of the corporation. In an attempt to reduce its taxes, Allfam paid its shareholder-employees enormous salaries and deducted the salaries as a corporate expense. Is Allfam permitted to do this? Yes, this is a legitimate way for closely held corporations to reduce their taxes. No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends. No, the shareholder-employees will have do return the excess portion of their salaries to the corporation. No, the IRS will disallow the deductions for this year, but will allow the corporation to treat them as carry-forward losses for next year.

No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends.

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

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 management and whose existence is not known by the public is a _____________ Silent partner Dormant partner Secret partner Phantom

Secret partner

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

Subchapter S corporation

Partners hold title to partnership property as Joint tenants Tenants in common Tenants in partnership Tenants by the entireties

Tenants in partnership

Bob, Sue and Jim were classmates in medical school who formed a professional corporation to practice medicine. Which of the following statements about their professional corporation is false? They will be protected from suits for medical malpractice. They will be eligible for a tax-advantaged pension plan. Their practice will have to include some designation of its status, such as "S.C." or "P.C." in its name. Bob, Sue and Jim may have special legal protections against discrimination as shareholder-employees of the professional corporation.

They will be protected from suits for medical malpractice.

A Subchapter S corporation is taxed in the same way a partnership is taxed. True False

True

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 new partner is liable only to the extent of his or her capital contribution for the already existing debts of the partnership. True False

True

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

True

A sole proprietorship is not a taxable entity; all profits or losses are reported and taxed as individual income. 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 net profits are retained in a Subchapter S corporation, income tax must be paid by shareholders on these earnings even though the earnings have not yet been received. 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

Legal capacity is the ability of an organization to sue and to own property. True False

True

One partner has the ability to veto the admission of a new partner into the business. 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 are agents of the partnership and of the other partners individually. True False

True

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

True

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

True

The admission of a new partner automatically dissolves the partnership. True False

True

Under RUPA, a partnership may take title to real property as a tenancy in partnership. 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

Usury laws do not apply to corporations when they borrow money. A) True B) False

True

When a partnership ceases to exist, the process of reducing the firm's assets to cash, paying off the creditors, returning the capital contributions of the partners, and distributing profits is called __________________. Dissolution Winding up Marshaling of assets Termination

Winding up

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.