Series 66 - Unit 18

preferable business form(s) for raising capital

A limited liability company (LLC) & C corp

Which of the following types of business organizations do not protect owners' personal assets from losses incurred by the business? General partnership Sole proprietorship S corporation C corporation

General partnership Sole proprietorship

joint tenants mean

JTWROS

tenants in common

a deceased tenant's fractional interest in the acount is retained by that tenants estate and is not passed to the surviving tenant(s) - unequal

it is generally easier to form (and dissolve)

a partnership.

the type of trust created by a will that becomes operative at death is

a testamentary trust As in "last will and testament."

simple trust

all income earned must be distributed during the year it is received

when sold,

all tenants must sign that certificate

totten trust

allowed for transfer of ownership of a bank account to a beneficiary after the owner's death

trading activity may be initiated

at the request of any one of the parties

Under trust law, the grantor of a trust, sometimes referred to as the settlor, may also be the

beneficiary and the trustee.

JTWROS

decreased tenant's interest in the account passes to the surviving tenant

Among the advantages of operating as a general partnership are ease of dissolution ease of raising additional capital flow-through of income or loss limited liability

ease of dissolution flow-through of income or loss

the corporate form of business structure would be the

easiest for ultimate transfer of ownership

Customers do not have to complete (sign) the options agreement prior to

entering an order; under current rules, the agreement must be signed and returned by the customer within 15 days of account approval.

in a fiduciary account, the individual granted fiduciary responsibility

enters trades for the account, makes all of the investment, mgmt, and distribution decisions and must manage the owners best interest

trustee's duties are like those an

executor

Unlike a C corporation, operating income or losses of a general partnership

flow through directly to the partners

An S corporation is characterized by

flow-through tax treatment

The person who funds the trust is the

grantor or settlor.

if a security is purchased and a cert is issued,

it must be in the name of all of the tenants

complex trust

may accumulate inc, permitted deductions for distributions of net income or principal

per stirpes

means that the deceased intended that a beneficiary's share of inheritance is to go to an hier

LLC owners are

members (not shareholders) and are not personally liable for the debts of the LLC

A PO Box is

never acceptable without a physical address.

account forms require

signatures of all owners

durable power of attorney

survives the physical or mental incompetence of the grantor but not the death of either party - this means that orders entered after the time of death of the grantor are not accepted

A trustee must follow the

terms of the trust.

The 4 primary requirements of the CIP are

the individual client's name, physical address, DOB, and SSN. customer identification program (CIP)

living will

the individuals instructions for end-of-life situations, such as withholding medical care or organ donation - express end of life wishes

testamentary trust

the settlor retains control over assets until death

A form of business structure that exposes all personal assets of the owner to creditors is

the sole proprietorship

One of the situations that investment adviser representatives may encounter is the death of a client. When that happens, orders may be accepted from

the trustee in intestacy.

One respect in which an LLC differs from an S corporation is that

there is no statutory limit on the number of investors in an LLC The tax treatment is the same, and both can be formed with a single owner.

examples of fiduciaries

trustee executor administrator guardin custodian receiver

Under industry rules, customers who wish to trade options must receive a copy of the options disclosure document (ODD)

at or before account approval

Shareholders of an S corporation have

limited liability, are limited to no more than 100 shareholders, and receive flow-through tax treatment.

Limited partnerships and any corporate form of ownership offer

limited liability.

living trust

Inter vivos trust; established during lifetime of trustor/beneficiary to hold title to real property and/or other assets and, on death of trustor, to pass title to contingent beneficiary without need for probate

Which of the following are governed by the prudent investor rule? Trustee Executor Custodian Agent who has been granted discretionary authority

Trustee Executor Custodian Agent who has been granted discretionary authority The prudent investor rule applies to fiduciary accounts, or accounts in which someone is acting on someone else's behalf. In these accounts, the fiduciary must act prudently. An agent who has been granted discretionary authority is acting in a fiduciary capacity.

When the deceased has not written a will, he is considered to have

died intestate.

checks or distributions must be made payable in the account name and

endorsed by all parties

Corporations, whether organized as C or S corporations, afford their owners

limited liability, which is the protection of their personal assets from losses incurred by the businesses

undivided interest

no tenant has a designated interest in any specific asset in the account

joint account

owned by 2 or more ppl

settlor

person who supplies the property for the trust - aka principal or corpus, maker, grantor, trustor, donor

general partnerships and sole proprietorships subject their owners to

personal liability for losses of the business.

The distributable net income (DNI) of a simple trust would not include A) dividends received. B) interest received on municipal bonds. C) realized capital gains. D) interest received on corporate bonds.

realized capital gains. It is capital gains that are reinvested in the corpus (body) of a simple trust which are not part of DNI. Although the interest on municipal bonds in not taxable, it is still included as part of the DNI.

TIC does not

avoid probate

LLC

business structure that combines benefits of incorporation with the tax advantage of a partnership

trustee

individual or other party holding legal title to property held for the benefit of another person

suitability for individual account

- both fed and state requires that any inv recommendation be suitable based upon the clients needs, objectives, and financial considerations

Tenancy by the Entirety (TBE)

- each cotenant has an undivided interest in the account - can only be created by married persons - the consent of the other tenant is required before the other tenant can sell or give away his interest in the property

individual account

- may be for a natural person, a trust, or a deceased person through an estate account - one beneficial owner

C COrp

- expects to need significant capital

sole proprietorship

- simplest form of business - treated like an individual account - all income (or loss) is that of the individual

S Corp

- taxed like a partnership, offers investors the limited liability associated with corps in general - may not have more than 100 shareholders

general partnership

- unincorporated association consisting of two or more individuals - operations