Deck 16: Governance and Structure: the Law of Business Associations

Question 1

An S corporation is created as an LLC.

Answer 1

False

Question 2

The sole proprietor's personal assets are subject to business creditor attachment.

Answer 2

True

Question 3

In a limited partnership, there must be a least one general partner.

Answer 3

True

Question 4

The sale of the goodwill of a partnership requires unanimous consent.

Question 5

The statutory agent is the party who will be served with lawsuits against the corporation.

Question 6

Sharing of profits is prima facie evidence that a partnership exists.

Question 7

Dissolution of a partnership is termination of a partnership.

Question 8

A partnership must file a separate tax return and pay taxes on its income.

Question 9

"d/b/a" means "domestic business association" and is suggested for partnership use for clarity.

Question 10

Limited partners can take a management role and remain limited partners.

Question 11

The articles of incorporation must include the capital stock structure of the corporation.

Question 12

The income of the sole proprietor's business is reported as a separate entity's income.

Question 13

There are no formal requirements for forming a sole proprietorship.

Question 14

Only the general partner in a limited partnership has personal liability.

Question 15

A partnership can only be formed voluntarily.

Question 16

Limited partnerships are taxed the same way as general partnerships.

Question 17

A tenancy in partnership does not carry rights of survivorship.

Question 18

A partner's interest in a partnership is not transferable.

Question 19

A corporation is only a domestic corporation in its state of incorporation.

Question 20

Limited partners have liability limited to the amount of their contribution to the partnership.

Question 21

Members of limited liability companies have no right to vote on who should manage their companies.

Question 22

A merger requires a board resolution and shareholder approval.

Question 23

Close corporations have less formality in their operational requirements.

Question 24

Limited partners can consult and advise with the general partner and still retain limited liability.

Question 25

Bylaws provide the requirements for meetings and voting.

Question 26

Appraisal rights are given only to dissenting shareholders.

Question 27

Watered shares are shares for which the purchaser did pay more than par but less than full market value.

Question 28

The corporate opportunity doctrine requires directors to first present related business opportunities to the corporation.

Question 29

Incorporators are not liable for contracts entered into before incorporation.

Question 30

Cumulative preferred stock carries a guarantee of a dividend.

Question 31

While the UPA was adopted in almost all states, the RUPA has been adopted by all states since 2006.

Question 32

Any shareholder can demand access to the corporate books and records.

Question 33

Stock transfer restrictions are void.

Question 34

An inadequately capitalized corporation can have its corporate veil pierced.

Question 35

Subchapter S or S Corporation shareholders have personal liability for corporate debts.

Question 36

A copy of the voting trust must be on file in the corporate records.

Question 37

An assignment of a limited partner's interest terminates the limited partnership.

Question 38

The corporate veil can be pierced for inadequate capitalization.

Question 39

Directors are personally liable for errors in business judgment.

Question 40

Upon termination of both limited and general partnerships, outside creditors have first priority in terms of asset distribution.

Question 41

Piercing the corporate veil has been used for purposes of imposing CERCLA liability.

Question 42

In states that allow LLPs, if the filing procedures are not followed, the business form defaults to a general partnership.

Question 43

New members are admitted to an LLC only with approval by a majority of existing members.

Question 44

Parent corporations can never be held liable for the environmental clean-up costs of subsidiaries.

Question 45

All owners in an LLP have limited liability.

Question 46

Most states allow LLCs to exist for about 30 to 40 years.

Question 47

Under Sarbanes-Oxley, codes of ethics must cover financial reporting standards.

Question 48

Limited liability companies, limited liability partnerships, limited partnerships, general partnerships, sole proprietorships and S corporations all have flow-through income and loss provisions for tax purposes.

Question 49

Owners of limited liability companies enjoy flow-through treatment of income and losses.

Question 50

Under Sarbanes-Oxley, the majority of members of the audit committee must be independent directors.

Question 51

Under the RUPA, partners are jointly and severally liable for all obligations.

Question 52

LLCs have existed in Europe and South America prior to their existence in the U.S.

Question 53

Lawyers for corporations are required to report misconduct by the corporation to the SEC after they have exhausted all means for an internal correction.

Question 54

A C corporation is the same as an S corporation for tax purposes.

Question 55

A limited liability company can be created informally.

Question 56

The corporate veil liability theory has been applied in situations that involve environmental clean-up issues.

Question 57

Limited partnership interests are generally not transferable.

Question 58

Corporations pay double taxes, on income and shareholders on dividends.

Question 59

Under Sarbanes-Oxley, loans to corporate officers are prohibited.

Question 60

Under Sarbanes-Oxley, current employees are not considered independent for purposes of board structure.

Question 61

Limited partners:

A)can use their name in the partnership name.
B)can contribute management services to the partnership.
C)cannot advise the general partner.
D)None of the above

Question 62

A, B, and C are partners in a real estate firm. B has just died. B's widow:

A)owns one-third of all the partnership land.
B)is a tenant in partnership with A and C.
C)can force the sale of the partnership property.
D)None of the above

Question 63

Dissolution:

A)is the same as termination.
B)can result from a limited partner leaving the partnership.
C)can result from the death of a partner.
D)All of the above

Question 64

Which of the following is not required for the certificate of limited partnership (under RULPA)?

A)Names of the limited partners
B)Capital contributions of the partners
C)The profit-sharing arrangement
D)None of the above are required.

Question 65

A limited partnership:

A)requires at least one general partner.
B)can be created by implication.
C)must be run by the limited partners.
D)All of the above

Question 66

Transfer of a partner's interest:

A)is void.
B)results in dissolution of the partnership.
C)relieves the partner of liability.
D)makes the transferee a partner.
E)None of the above

Question 67

Evidence of sharing profits is prima facie evidence of partnership existence unless the profits are:

A)wages or rent.
B)not shared equally.
C)income.
D)All of the above

Question 68

Only the capital (property, cash or services contributed to the partnership)is at risk in a partnership.

Question 69

The assignment of limited partnership interests:

A)is prohibited by the ULPA.
B)may be a sale of securities subject to federal regulation.
C)is liberally permitted under the Internal Revenue Code.
D)None of the above

Question 70

A partner owes the partnership and other partners the same fiduciary duty that an agent owes to a principal.

Question 71

For income tax purposes, a partnership:

A)files a return and pays taxes.
B)is an entity.
C)has no taxes.
D)None of the above

Question 72

A partnership by estoppel:

A)is the same as a partnership by implication.
B)results when third parties are led to believe a partnership exists.
C)is the same as a joint venture.
D)None of the above

Question 73

Unanimous consent of the partners is required for:

A)confession of a judgment.
B)borrowing money in a trading partnership.
C)signing checks.
D)None of the above

Question 74

In Germany, public companies have:

A)the same structure as U.S. corporations.
B)no board of directors, but do have a shareholder advisory committee.
C)no shareholder advisory committee, but do have a board of directors.
D)both a board of directors and a shareholder advisory committee.

Question 75

Limited partners have liability:

A)for the full amount of partnership debts if their name is in the partnership name.
B)only for the amount of their contribution.
C)for the negligent acts of the general partner.
D)for their contributions and any distributions made to them.

Question 76

The corporate veil can be pierced under the alter ego theory when:

A)there were insufficient assets put into the corporation at its creation.
B)the corporation was formed to avoid personal liability.
C)personal and corporate assets or debts are mixed.
D)too many meetings have occurred.

Question 77

Which of the following is true of a sole proprietorship?

A)A separate tax return must be filed.
B)It is not a business entity.
C)There is no personal liability for the owner.
D)None of the above

Question 78

Partnership property:

A)is always personal property.
B)is owned by the partners as tenants in partnership.
C)can be pledged to a partner's personal creditor.
D)All of the above

Question 79

Which of the following is not a method for forming a partnership?

A)By agreement
B)By estoppel
C)By implication
D)By transfer

Question 80

Partners' personal assets:

A)cannot be reached by partnership creditors.
B)cannot be reached by partnership creditors unless partnership assets are exhausted.
C)can only be reached by personal creditors.
D)None of the above