Deck 42: LPs, LLCs, and LLPs

Question 1

While most states have adopted limited liability company statutes,few states have created statutes allowing the formation of limited liability partnerships.

Answer 1

False

Question 2

The names of limited partners and investors must be included on the certificate of limited partnership.

Answer 2

False

Question 3

It is impossible to form a business in a manner that allows for single taxation and limited liability.

Answer 3

False

Question 4

The rules for dissolution of a limited partnership are the same as those of a general partnership.

Question 5

Limited partners may sue their partnership's general partner to protect the limited partners' interest.

Question 6

If a limited partnership certificate is never filed,all partners are treated as general partners.

Question 7

An LLC is a separate legal entity that pays federal income tax.

Question 8

If an owner discloses he is an agent of an LLC,he will not be personally liable for the debts and obligations of the entity.

Question 9

Limited partners may contribute only cash as their capital contributions.

Question 10

A limited partner can never lose money.

Question 11

Courts tend to resolve ambiguities in limited partnership agreements against the general partners.

Question 12

Limited partners are personally liable for debts of the business.

Question 13

Every limited partnership must have at least one general partner.

Question 14

In a limited partnership,limited partners are not responsible for the debts of the firm if they engage in management activities.

Question 15

Limited liability is not a feature of general partnership law.

Question 16

A limited partner may bring a derivative claim against the limited partnership.

Question 17

Both general partnerships and limited partnerships are created only through the process of executing a certificate.

Question 18

A limited partner loses his limited liability when she becomes a contractor for the limited partnership,or the general partner.

Question 19

Under the RULPA,limited partners may engage in certain "safe harbor" activities without losing their protection from liability.

Question 20

The general partner of a limited partnership may be a corporation.

Question 21

An LLC may be formed without filing formal articles of organization with the secretary of state.

Question 22

The spread of LLC's resulted from:

A) a United States Supreme Court decision.
B) an Internal Revenue Service ruling.
C) a Wyoming Supreme Court decision.
D) a Securities and Exchange Commission ruling.

Question 23

Management of an LLC is vested in its:

A) members
B) partners
C) shareholders
D) managers

Question 24

LLP statutes are designed to permit the conversion of existing general partnerships into limited liability partnerships.

Question 25

A limited partnership can be formed by one (1)or more __________ partners and one (1)or more __________ partners.

A) unreserved; reserved
B) active; silent
C) licensed; unlicensed
D) general; limited

Question 26

An protects partners from liability for the wrongful acts of those whom they directly supervise and control.

Question 27

Owners of an LLC are known as shareholders.

Question 28

Under the RULPA,a limited partner may contribute: ______.

A) cash only.
B) property only.
C) services only.
D) cash, property, and services.

Question 29

When no LP certificate is filed,what is the result?

A) Only limited partners are fully liable.
B) Only general partners are fully liable.
C) Limited partners retain their limited liability.
D) Both general and limited partners are fully liable.

Question 30

Under the RULPA,a limited partner probably will not lose his limited liability in any of the following circumstances unless: ______.

A) the limited partner becomes a contractor for, or an agent or employee of, the limited partnership or of a general partner.
B) the limited partner consults with and advises a general partner regarding the partnership business.
C) the limited partner votes on partnership matters, such as dissolving and winding up the limited partnership or removing a general partner.
D) the partners fail to file a limited partnership certificate.

Question 31

The partners who manage the limited partnership and are personally liable for the firm debts are called the __________ partners.

A) general
B) active
C) licensed
D) unreserved

Question 32

Managers of an LLC have the same fiduciary duties to the entity as corporate officers have to a corporation.

Question 33

An LLC may be managed directly by its owners.

Question 34

The dissolution and winding up of a limited partnership is governed by the same principles applicable to a: __________.

A) "subchapter S" corporation.
B) limited liability company.
C) general partnership.
D) limited liability partnership.

Question 35

An LLC is a separate legal entity and may own property in its own name.

Question 36

All of the following statements regarding LP's are not true,except: _______.

A) The words limited partnership or simply LP must appear in the firm's name.
B) General partners cannot avoid personal liability by incorporating.
C) Limited partners can lose their liability limitation if they participate in the control of the business.
D) If sued, limited partners can lose more than their capital investment.

Question 37

An LLC is a legal entity with the authority to conduct business in its own name.

Question 38

Each limited partner in a limited partnership has all of the following rights and benefits,except:

A) A share of the profits.
B) The right to sue the general partner to protect the limited partners' interest.
C) The right to manage the limited partnership.
D) The right to vote on dissolution of the limited partnership.

Question 39

LLC promoters can 'shake hands' and form an LLC.

Question 40

An LLC is essentially identical to a suChapter S corporation.

Question 41

Like a general partnership,LLC's are dissolved by all of the following situations except: _______.

A) by the consent of the members.
B) upon the death of a member.
C) upon the expulsion of a member.
D) when a derivative suit is filed.

Question 42

You are asked to provide two friends who are in business together with advice regarding what they need to do to legally in order to form a limited liability company.Although your friends like the general notion of limited liability in the operation of their business,they are totally unfamiliar with the legal processes for forming a LLC,so you need to provide them with the basic requirements for LLC creation.What specific advice would you give them?

Question 43

The owners of a limited liability company are known as: ______.

A) members.
B) partners.
C) contributors.
D) electors.

Question 44

All of the following statements concerning LLC's are incorrect except: ______.

A) Federal income tax is due on its income as an entity.
B) Income flows through to the members based on their proportionate interests in the company.
C) No filing is necessary to form a limited liability company.
D) All members enjoy unlimited liability.

Question 45

A creditor's right against a member's interest in an LLC is limited to a(n)_______ order,and the creditor with such an order has only the rights of an assignee of an interest in an LLC.

A) dissolution
B) compliance
C) assignment
D) charging

Question 46

A court can disregard the LLC entity to hold one or more members personally liable in any of the following situations,except: _______.

A) when members fail to follow formalities.
B) when members commingle company and personal funds.
C) when members ignore the articles of organization.
D) when members vote to make substantive changes to the operating agreement.

Question 47

In every state,LLP partners remain ______ liable for their own negligence with ______ liability for the wrongful acts of those whom they directly supervise and control.

A) personally, partial
B) fully, partial
C) fully, unlimited
D) contributorily, unlimited

Question 48

Which form of business entity was created primarily to professionals from malpractice liability generated by other owners in the firm?

A) the limited partnership
B) the limited liability partnership
C) the limited liability company
D) the general partnership

Question 49

Alice,Betty,and Cathy are interested in forming a business venture.Alice is quite wealthy and is ready to contribute money to the venture.Betty has a degree in business from an excellent university,worked for five years as a manager in a major corporation,and currently is a leadership/management consultant.Cathy is a scientist who has developed a process that will,according to her,"revolutionize cancer treatment throughout the world." Alice,Betty,and Cathy believe it is in their best interest to form a general partnership.Do you agree? Is there a more appropriate form of business you might recommend?

Question 50

A limited liability company may be classified as a partnership for tax purposes if:

A) such an election is made by "checking the box" for partnership tax treatment on the appropriate Internal Revenue Service form.
B) such an election is made in the operating agreement.
C) such an election is made in the articles of incorporation.
D) a majority of its members petition the Internal Revenue Service for partnership tax treatment.

Question 51

A limited liability company: ______.

A) is the same type of business entity as a "Subchapter S" corporation.
B) has no restriction on the number of owners.
C) is taxed in a manner similar to that of a corporation.
D) has unlimited life regardless of what happens with any individual member.

Question 52

Members of a limited liability company share profits:

A) according to their status (general or limited)in the firm.
B) in proportion to their contribution of services.
C) in proportion to their capital contribution.
D) according to the terms of the operating agreement.