Law Exam 4 (Ch. 16, 17 & 18)

entrepreneurs setting out to start a business should consider the following four factors when deciding what form of business to organize:

(1) ease and expense of creation, (2) liability of the owner(s) for obligations of the entity, (3) tax considerations, and (4) the need and ability to raise capital.

The legal effects of dissociation of a member of a limited liability company (LLC) include: (Choose 2 answers.)

- the dissociated member's duty of loyalty to the LLC terminates. - the dissociated member loses the right to participate in management.

Which of the following are rights of common shareholders? Choose 3 answers.

- voting on matters such as election of directors and proposals for mergers or liquidation - transferable ownership

limited partnership liabilities

A limited partner who does not participate in management is only liable for his capital contribution.

Under UPA/RUPA what is a general partnership considered?

A separate legal entity

Corporation

Bylaws

Foreign and alien corporations do not automatically have the right to do business in a state other than the one in which they are incorporated. They may be required to obtain a

Certificate of Authority

Partnership & LLC tax

Form 1065

C Corp tax

Form 8832

Limited Partnership

Limited Partnership Agreement

Which statement is true about creating a sole proprietorship?

No documentation is required to create a sole proprietorship.

Partnership XYZ owns nothing but real property. Partner X owns a 20% ownership interest in the Partnership. What interest does Partner X own in the real property of the Partnership.

None

Limited Liability Company

Operating Agreement

Partnership

Partnership Agreement

Entrepreneur:

Someone who initiates and assumes the financial risk of a new enterprise.

In a distributorship:

a manufacturer licenses a dealer to sell its product.

The term "double taxation" is associated with a. "C" corporations. b. "S" corporations. c. general partnerships. d. limited partnerships.

a. "C" corporations.

In North Carolina, it is possible for a to have only one individual owner. I corporation. II sole proprietorship. III partnership. IV limited liability company.

a. I, II and IV only.

In small closely held corporations, general partnerships, limited partnerships and limited liability companies, this type of agreement is often used to restrict transfer of interests in the company or entity? a. buy-sell agreement. b. assumed name certificate. c. articles of organization. d. privilege license.

a. buy-sell agreement.

The maximum number of shareholders that an S corporation may have is currently a. 35. b. 50. c. 100. d. 75. e. 125.

c. 100.

A shareholder of an "S" corporation cannot be I an estate. II a "C" corporation. III a partnership. IV a resident alien.

c. II and III only.

In North Carolina the document filed in the Office of the Register of Deeds in each county where a business does business under some name other than its own name is called a. some form of articles, certificate or charter. b. bylaws. c. certificate of assumed name (assumed name certificate). d. certificate of partnership.

c. certificate of assumed name (assumed name certificate).

Who signs and files Articles of Incorporation with the Secretary of State? a. the director. b. the registered agent. c. the incorporator. d. the president. e. the shareholder.

c. the incorporator.

Retained earnings are taxable to all owners of all business entities EXCEPT a. a limited partnership. b. an LLC. c. a partnership. d. a "C" corporation. e. an "S" corporation.

d. a "C" corporation.

A corporation that is incorporated in one state, but is doing business in another, is referred to in the second state as a. a domestic corporation. b. an extraterrestrial corporation. c. an alien corporation. d. a foreign corporation.

d. a foreign corporation.

A limited liability company is owned by its a. stockholders. b. shareholders. c. partners. d. limited partners. e. members.

e. members.

In a general partnership where all partners are natural persons, who has limited personal liability? a. all general partners. b. all shareholders. c. all members. d. all limited partners. e. no one does.

e. no one does.

if a general partnership, limited partnership, LLC or Sub-S corporation retains its income and does not distribute any of it

each individual owners of that entity receives their K-1 anyway and has to pay income taxes individually no matter what.

A partnership in which the liability is shared between all of the partners together or one or more individually is called:

joint and several liability.

When a new partner joins a previously existing partnership, the new partner is personally liable for:

only obligations after becoming partner.

Which of the following rights may a member of a limited liability company (LLC) transfer to a non-member?

sharing the company's financial profits

an operating agreement for a limited liability company:

typically includes provisions about choosing the LLC's management.

Which of the following is a requirement for the formation of a limited liability company (LLC)?

articles (or certificate) of organization

One of the first steps in creating a North Carolina corporation is the filing of ___________ _____ ____________ with the North Carolina Secretary of State.

b. articles of incorporation

Most corporations have a. only one shareholder. b. perpetual life/duration. c. no officers. d. no purpose.

b. perpetual life/duration.

A sole proprietorship a. is owned and controlled by one person and cannot have any employees. b. imposes unlimited personal liability on its owner-proprietor. c. separates ownership from management control. d. has the disadvantage of double taxation.

b. imposes unlimited personal liability on its owner-proprietor.

Who is liable for contracts entered into on behalf of the corporation before the corporation is formed?

the promoter

Which of the following are the advantages of operating as a partnership? Choose 2 answers. a. Any partner may add a new partner at any time to help decrease the workload and liability and to bring in more capital. b. The partners are not personally liable for business debts if the partnership is registered with the state. c. Forming a partnership is simple and relatively inexpensive. d. Partnerships are not taxed.

c. Forming a partnership is simple and relatively inexpensive. d. Partnerships are not taxed.

All non-profit corporations are a. tax exempt. b. charities. c. domestic corporations. d. foreign corporations. e. none of the above.

e. none of the above.