Business Law Ch 30,31,32
Which of the following characteristics of an LLC is similar to that of limited partnerships and S corporations? A) An LLC has flow-through taxation B) An LLC does not have to file a form with the IRS to obtain flow-though taxation C) An LLC can have more than one class of stock, thereby permitting a more complete capital structure D) An LLC may not own more than 80% of another corporation
A) An LLC ahs flow-through taxation
Which of the following is true of an LLC formation? A) Doctors and lawyers cannot operate practices at LLCs B) An LLC has to be organized in every state that it operates C) "Inc" and "Ltd" can both be used to denote an LLC D) An LLC can conduct business only in the state where it is organized
A) Doctors and lawyers cannot operate practices as LLCs
Which of the following is true of a member-managed LLC?
A) Each member has equal rights in the management of the business of the LLC
Which of the following federal agencies is empowered to enforce federal franchising rules?
A) Federal Trade Commission (FTC)
In a member-managed LLC, ___ can bind the LLC to contracts
A) all members
A(n) ___ refers to a document that evidences a member's ownership interest in an LLC A) certificate of interest B) article of organization C) states of interest D) articles of amendment
A) certificates of interest
In a(n) ___ franchise, the franchisor licenses the franchisee to make and sell its products or services to the public from a retail outlet serving an exclusive geographical territory
A) chain-style
An LLC that was organized in Alabama and is operation in Texas with no operations outside the United States is considered a ___ in Texas. A) foreign limited liability B) limited liability C) domestic limited liability company D) general partnership
A) foreign limited liability
A term LLC can be continued after the expiration of its term if a(n) ___. A) majority of the members of the LLC vote to continue the LLC as an at-will LLC B) majority of the members of the LLC vote prior to the expiration date to continue the LLC for additional specified term C) amendment to the articles of organization is filed with the US Secretary of Labor D) amendment to the operating agreement is filed with the secretary of state
A) majority of the members of the LLC vote to continue the LLC as an at-will LLC
Which of the following is true of liabilities of LLCs?
A) members of the LLC are liable to the extent of their capital contributions
The conversion of an existing business to an LLC takes affect when ___. A) the articles of organization are filed with the secretary of state B) an agreement of amendment is filed with the secretary of state C) written operating agreement is prepared by the members D) the first certificate of interest is issued
A) the articles of organization are filed with the secretary of state
Which of the following best defines the duty of care a member of a member-managed LLC must adhere to?
A) the duty of not engaging in a known violation of law
Which of the following is true of a franchise?
A) the franchisor and franchisee are established as separate legal entities
Which of the following is true of operating an LLC? A) An LLC has to file a form with IRS to obtain flow-through taxation B) An LLC can have any number of member owners C) An LLC cannot have shareholders other than estates, certain trusts, and individuals D) An LLC cannot have nonresident alien member owners.
B) An LLC can have any number of member owners
Which of the following is true of an LLC? A) An LLC is a creature of the federal law B) An LLC is regarded a separate legal entity C) An LLC cannot gold title to or transfer property D) The owners of an LLC are called general partners or specific partners
B) An LLC is regarded a separate legal entity
___ are the documents that are filed with the secretary of state to wind up an LLC as of the date of filing or upon a later executive date specified in the articles
B) Articles of termination
Which of the following does the FTC franchise rule require from franchisors?
B) Full presale disclosures to prospective franchisees nationwide
Which of the following is true of the ULLCA? A) It fails to cover problems that arise in the formation and operation of LLCs B) It provides uniform laws for the dissolution of LLCs C) It has been adopted by all the states as their LLC laws D) It governs the operation of proprietorships and LLPs
B) It provides uniform laws for the dissolution of LLCs
A member of a manger-managed LLC is appointed by ___.
B) a vote of majority of the members
Which of the following actions require voting all the members of a manager-managed LLC?
B) admitting new members
A member's ownership interest in an LLC is called a ___. A) certificate of interest B) distributional interest C) collateral interest D) creditor's interest
B) distributional interest
In a(n) ___ franchise, the franchisor manufactures a product and licenses a retail dealer to sell the product to the public
B) distributorship
An LLC is a ___ in the state in which it is organized. A) sole proprietorship B) domestic LLC C) foreign LLC D) general partnership
B) domestic LLC
A(n) ___ is established when one party licenses another party to use the first party's trade name, trademarks, commercial symbols, patents, copyrights, or other property in the distribution and selling of good and services
B) franchise
In states where an LLC may be organized by only one member, ___ can obtain the benefit of the limited liability shield of an LLC A) LLPs B) sole proprietors C) S corporation D) C corporation
B) sole proprietors
A(n) ___ is a document filed with the secretary of state that gives construction notice that a member has withdraw from an LLC A) statement of purpose B) statement of disassociation C) article of amendment D) article of termination
B) statement of disassociation
The certificate of interest acts the same as a(n) ___ issued by a corporation A) promissory note B) stock certificate C) deposit note D) initial public offer
B) stock certificate
Who among the following is committing wrongful disassociation? A) A member continues to operate a term LLC even after the expiration of the term B) A member withdraws from a term LLC and disassociates himself from his duty of loyalty and duty of care after the expiration of the term C) A member withdraws from an at-will LLC even though the operating agreement eliminates a member's power to withdraw D) A member disassociates himself from his duty o f loyalty and duty of care to an at-will LLC
C) A member withdraw from an at-will LLC even though the operating agreement eliminates a member's power to withdraw
___ refer to the formal documents that must be filed at the secretary of state's office of the state of organization of an LLC to form an LLC. A) Operating agreements B) Certificates of interest C) Articles of organization D) Article of amendment
C) Article of organization
___ includes the duty not to usurp an LLC's opportunities, make profits, secretly deal with the LLC, secretly compete with the LLC, or represent any interest adverse to those of the LLC.
C) Duty of loyalty
Sam Muller and Toby Richardson organize an LLC in the state of Delaware. In the articles of organization, they specify the duration of the LLC as "25 years from the date of filing the articles of organization." Which of the following is true in this context?
C) Muller and Richardson have organized a valid term LLC
The ___ is a model act that provides comprehensive and uniform law for the formation, operation, and dissolution of LLCs. A) Williams Act B) Securities and Exchange Act C) ULLCA D) ULPA
C) ULLCA
Which of the following is true of the management of an LLC?
C) a nonmember can become a manager of an LLC
In a(n) ___ franchise, the franchisor authorizes the franchisee to negotiate and sell franchises on behalf of the franchisor
C) area
An LLC differs from a sole proprietorship in that it ___. A) gives nonmanager members rights to manage a manager-managed LLC's business affairs B) is less complex and costly to form than a sole proprietorship C) can be owned by one owner in most states and can thus obtain limited liability D) requires at least one member who is personally liable for the obligations of the partnership
C) can be owned by one owner in most states and can thus obtain limited liability
An LLP must register as a(n) ___ in any state in which it wants to conduct its business.
C) foreign LLP
In a member-managed LLC, who among the following has the authority to bind the LLC to contracts?
C) managers
A(n) ___ refers to an agreement entered into among members that governs the affairs and business of the LLC and the relations among members, managers, and the LLC. A) certificate of interest B) articles of organization C) operating agreement D) articles of amendment
C) operating agreement
A member's distributional interest in an LLC is ___ and may be transferred in whole or in part. A) state property B) the LLC's property C) personal property D) federal property
C) personal property
The area franchisee is also called a ___.
C) subfranchisor
Which of the following refers to a limited liability company that has a specified term of duration? A) S corporation B) C corporation C) term LLC D) at-will LLC
C) term LLC
Which of the following data must a franchisor disclose if the franchisor makes sales or earnings projections for a potential franchise location that are based on the actual sales, income, or profit figures of an existing franchise?
C) the number and percentage of its actual franchises that have obtained such results
Which of the following is true of LLPs? A) LLPs are creatures of federal law B) The state legislature does not have the authority to amend LLP statutes C) Articles of limited liability partnership are statutes that regulate the operation and dissolution of LLPs D) Nonprofessionals cannot use the LLP form of partnership
D) Nonprofessionals cannot use the LL for of partnership
Sandra, Ben, and Farah for an LLC. They designate the LLC as a manager-managed LLC, and name Ben and friend Lily manager. Sandra enters into a contract to lease equipment on behalf of the LLC. Which of the following is true of the given scenario?
D) The LLC is not bound to the contract entered into by Sandra
Which of the following best defines the term distributional interest? A) the ratio in which profit is distributed among members of an LLC B) the process of distributing profits or losses according to the capital investment of the member C) the constitution of management of the LLC based on the extent of each member's financial investment D) a member's ownership interest in an LLC that entitles the member to receive money and property from the LLC
D) a member's ownership interest in an LLC that entitles the member to receive money and property from the LLC
If a limited liability partnership fails, ___.
D) all partners are liable for debts that amount to their capital contribution
Which of the following refers to a limited liability company that has no specified term of duration? A) S corporation B) C corporation C) term LLC D) at-will LLC
D) at-will LLC
Rio-Werner Corporation owns Rio's Sandwiches, a fast-food restaurant in NJ. It wants to operate in five cities on the west coast by means of franchisees which make and sell all menu items from Rio's Sandwiches. Which of the following would best suit the Rio-Werner Corporation's franchise plan?
D) chain-style
Hybrid Motor Company manufactures automobiles and franchises independently owned automobiles dealers (franchisee) to sell them to the public. This is a form of ___ franchise.
D) distributorship
The owner of an LLC is called a ___. A) general partner B) limited partner C) proprietor D) member
D) member
A ___ of a manager-managed LLC owes no fiduciary duty of loyalty or care to the LLC or its other members and is treated equally to a shareholder in a corporation
D) nonmanager member
In which of the following types of franchise does a franchisor provide a secret formula or process to the franchisee?
D) processing plant franchise
A ___ is a person who intentionally or unintentionally causes injury or death to another person
D) tortfeasor
Which of the following is true of capital contribution to an LLC? A) Capital contribution can only be in the form of money or tangible property B) Promissory notes are not considered capital contribution C) A member's obligation to contribute capital is not excused by the member's disability or other inability to perform D) A member's obligation to contribute capital is not excused by the member's death
D) A member's obligation to contribute capital is not excused by the member's death
Which of the following is true of the profits and losses of an LLC whose operating agreement does not contain profit or loss sharing clauses? A) A member who invests 10% capital must bear 10% of the losses B) A member who invests 30% of the capital receives 15% of the profit C) A member who invests 20% of the capital receives 40% of the profit D) All members receive equal shares in profits regardless of capital contributed
D) All members receive equal shares in profit regardless of capital contributed
Which of the following is true of LLC taxation? A) An LLC is taxed as a corporation in all general cases B) An LLC can be taxed only as a partnership C) Members of an LLC are subject to double taxation D) An LLC is not taxed at the entity level
D) An LLC is not taxed at the entity level
Which of the following is an instance of an area franchise?
D) Ashbury King wants to start operating in Rolland and hires a Rolland subfranchisor to sell the franchise on behalf of Ashbury King
Chan, Yuvi, Betty, and Bob form a member-managed LLC that sells antique commodities online. Betty secretly starts a competing business and makes secret profit through the business. Which of the following is true?
D) Betty is liable for breaching her duty of loyalty to the LLC
___ is a duty owed by a member of a member-managed LLC and a manager of a manager-managed LLC not to engage in a known violation of law, intentional conduct, reckless conduct, or grossly negligent conduct that injures the LLC
D) Duty of care
Which of the following is true of compensation offered by an LLC?
D) Nonmanager members are not entitled to remuneration for services towards the LLC
