Deck 17: Limited Liability Business Forms

Question 1

Foreign investors cannot participate in a limited liability company.

Answer 1

False

Question 2

Members of a limited liability company can stipulate in their operating agreement how voting rights will be apportioned.

Answer 2

True

Question 3

The alter-ego theory cannot be applied to a limited liability company.

Answer 3

False

Question 4

Limited liability companies cannot enter into contracts or hold title to property.

Question 5

The owners of a limited liability company are liable for the obligations of the firm to the full limit.

Question 6

Members of a limited liability company (LLC)can stipulate in their operating agreement how managers will be chosen or removed.

Question 7

The members of a limited liability company have unlimited liability for any loss or injury caused by the wrongful acts or omissions of the firm.

Question 8

A limited liability company is a citizen of every state.

Question 9

Every limited liability company is a citizen of every state.

Question 10

Typically,the articles of organization of a limited liability company (LLC)include information on how the LLC will be managed.

Question 11

If a dispute arises and the applicable limited liability company statute does not cover the issue,a court will most likely dismiss the case.

Question 12

In many states,an operating agreement is required for a limited liability company to exist.

Question 13

Most states apply to a limited liability company (LLC)formed in another state the law of the state where the LLC currently does business.

Question 14

In most states,a limited liability company must have at least two members.

Question 15

To form a limited liability company,articles of organization must be filed with the federal Small Business Administration.

Question 16

A limited liability company can be taxed as a corporation.

Question 17

Limited liability company operating agreements can provide whether formal members' meetings will be held.

Question 18

Under most limited liability company statutes,if the members do not specify how profits will be split,they are divided in proportion to the members' capital investment.

Question 19

In most states,a limited liability company can have only a limited number of members.

Question 20

In a limited liability company,the management may consist of members or nonmembers,but not both.

Question 21

In a limited partnership,every partner has full responsibility for the partnership and for all its debts.

Question 22

A limited partnership can be dissolved by court decree.

Question 23

Bee Hive Honey,LLC's members include Charlie and Donna.For purposes of suing and being sued,Bee Hive Honey is​

A)an aggregate of its members.
B)a non-entity
C)a legal entity apart from its members.
D)a non-participating third party.

Question 24

Dan is a member of eLearning Courses LLC.As a member,Dan is​

A)a client.
B)a promoter.
C)an owner.
D)a user.

Question 25

Beth and Carol want to form a limited liability company to manage their business,DoReMi Music.Their state has adopted the Uniform Limited Liability Company Act,which has been adopted in​

A)all states.
B)no state.
C)less than one-fifth of the states.
D)about half of the states.

Question 26

Generally,each state limits the liability of partners in a limited liability partnership in some way.

Question 27

In a limited liability limited partnership,a general partner has the same liability as a limited partner in a limited partnership.

Question 28

A limited liability limited partnership is a type of limited partnership.

Question 29

Generally,if a member dissociates form a limited liability company (LLC),the other members cannot continue to carry on the LLC's business.

Question 30

The death of a limited partner dissolves a limited partnership.

Question 31

Some states have passed laws prohibiting the withdrawal of limited partners from a limited partnership.

Question 32

In a limited partnership,a general partner's dissociation from the firm normally will lead to dissolution unless all partners agree to continue the business.

Question 33

Normally,a member who dissociates from a limited liability company (LLC)has the right to force the LLC to dissolve.

Question 34

In a limited partnership,limited partners do not have the same rights as general partners to participate in management.

Question 35

Generally,there are no restrictions on the dissociation by any partner from a limited partnership.

Question 36

A limited liability partnership must be formed in compliance with state statutes.

Question 37

Home Healthcare,LLC's owners are Inez and Jan.For purposes of entering into contracts,Home Healthcare is​

A)an aggregate of its owners.
B)a non-entity
C)a legal entity apart from its owners.
D)a non-participating third party.

Question 38

Generally,a dissociated member of a limited liability company (LLC)has the right to buy his or her interest in the LLC from the other members.

Question 39

When a limited liability company is dissolved,any member,including those who wrongfully dissociated,may participate in the winding up process.

Question 40

Jess and Keri are members of Livewire LLC,a limited liability company.In most situations,with respect to Livewire's debts,Jess and Keri are shielded from​

A)all liability.
B)no liability.
C)personal liability.
D)"corporate veil" liability.

Question 41

Nick and Orlando are limited partners in Port City Exports,a limited partnership.To avoid personal liability for the firm's obligations,they must not​

A)acquire an interest in the firm.
B)contribute property to the firm.
C)engage in activities independent of the firm's business.
D)participate in the firm's management.

Question 42

Hillside Vineyards is a family limited liability partnership.All of the partners must be

A)natural persons only.
B)natural persons or persons acting as fiduciaries for natural persons.
C)persons acting as fiduciaries for natural persons only.
D)related.

Question 43

Delany and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting.In most states,a limited partnership will be created when Delaney and Efron​

A)file a certificate of limited partnership.
B)execute a partnership agreement.
C)accept their first client.
D)make their capital contributions.

Question 44

Phone Apps,LLC,is a limited liability company.Among its members,a dispute arises that the operating agreement does not cover.The dispute is governed by​

A)the applicable state LLC statute.
B)the Uniform Limited Liability Company Act.
C)the principles of partnership law.
D)the federal LLC statutes.

Question 45

Dana is a member of Earthground Coffee,LLC,a limited liability company.Dana is liable for Earthground's debts​

A)in proportion to the total number of members.
B)to the extent of her investment in the firm.
C)in proportion to her profit derived from the firm.
D)to the full extent.

Question 46

Data Analytics,LLC,is a limited liability company.Unless the articles of organization specify otherwise,it will most likely be assumed that the firm is​

A)member-managed.
B)manager-managed.
C)an aggregate of member and non-member managers.
D)run by an outside professional management group.

Question 47

Roma and Swain are partners in Roma & Swain Attorneys,LLP,a limited liability partnership.Roma supervises their firm's associate Taylor,who negligently fails to appear in court on behalf of Umberto,a client.Liability to Umberto rests only with​

A)Roma and Taylor.
B)Roma.
C)Taylor.
D)Roma and Swain.

Question 48

Michel is a citizen of France.With respect to a limited liability company in the United States,Michel can​

A)act as a creditor,but cannot otherwise invest or participate.
B)become a member.
C)not become a member,but can participate in its operations.
D)not become a member or otherwise participate in its operations.

Question 49

Custom Auto,LLC,is a limited liability company.Its members include Dennis and Emma.Like other LLCs with more than one member,unless indicated otherwise,the firm will automatically be taxed as​

A)a person.
B)a corporation.
C)a sole proprietorship.
D)a partnership.

Question 50

Start-Ups,LLC,is a limited liability company without a written operating agreement.Among the members,a dispute arises concerning the division of profits.Under most LLC statutes,the profits will be​

A)distributed according to members' proportionate ownership in the firm.
B)divided equally among the members.
C)forfeited to the state.
D)reinvested in the business until the dispute is resolved.

Question 51

Tax Accounting,LLC,is a member-managed limited liability company.If the law in Tax Accounting's state is like the law in most states,unless the members have agreed otherwise,voting rights are apportioned according to​

A)capital contributions.
B)participation in management.
C)the number of members.
D)members' seniority.

Question 52

Rollo is a member of Smooth Operators LLC,a limousine service.Rollo's relationship to Smooth Operators ends,but the firm continues to do business.This is​

A)dissociation.
B)dissolution.
C)a violation of the law.
D)unethical but not a violation of the law.

Question 53

Nell is considering forms of business organization for Optic Center,a medical eye clinic.An advantage of a limited liability partnership is that,depending on the applicable state statute,partners can avoid personal liability for​

A)their own wrongful acts.
B)any partnership obligation.
C)their own and other partners' wrongful acts.
D)none of the choices.

Question 54

Cliff is a member of Dental Clinic,LLC.Cliff can participate in the firm's management to​

A)the extent that he assumes liability for the firm's debts.
B)the extent of his investment in the firm.
C)any extent.
D)no extent.

Question 55

Otto is considering forms of business organization for Pro Tree Service,his landscaping firm.Like most states,Otto's state requires that to form a limited liability company,he must file with a central state agency​

A)articles of certification.
B)articles of formation.
C)articles of organization.
D)no specific documents.

Question 56

Brent and Char are limited partners in Dental Center,a limited partnership.In terms of the firm's books and information regarding partnership business,Brent and Char are entitled to​

A)access in proportion to their participation in management of the firm.
B)access to the parts that directly relate to their capital contributions.
C)no access.
D)complete access.

Question 57

Commercial Credit & Finance is a limited partner-ship.Derry,Eleni,and Frey are the general partners.Derry dies.The partnership can​

A)continue only after a distribution of its assets.
B)continue only as a general partnership.
C)continue only if Eleni and Frey consent.
D)not continue because Derry's death dissolves the firm.

Question 58

Western Rodeo LLC is a limited liability company (LLC).Like other LLCs,for federal jurisdictional purposes,Western Rodeo is most likely a citizen of​

A)all states.
B)every state of which its members are citizens.
C)any state in which it does business.
D)no state-an LLC is not a "citizen."

Question 59

Smith & Jones,Accountants,is a limited liability partnership (LLP).The major features of an LLP are that it limits the personal liability of the partners and​

A)it allows the partnership to continue as a pass-through tax entity.
B)LLP statutes do not vary from state to state.
C)it can only do business in the state in which it was formed.
D)only a few states have enacted LLP statutes.

Question 60

Jim is considering forms of business organization,including the limited liability company (LLC),for his business-Kettle Popt-Korn.Most states require that an LLC have​

A)a corporate veil,but no minimum number of participants.
B)at least one member.
C)at least two members.
D)at least one non-member manager.

Question 61

Cherry Creek Development,LP,is a limited partnership that invests in residential real estate projects.Its limited partners include more than 150 sophisticated investors and investment professionals.A Cherry Creek limited partner loses his or her limited liability if he or she​

A)participates in the firm's management.
B)does not participate in the firm's management.
C)invests in a project that Cherry Creek has declined.
D)votes to sell or dissolve the firm.

Question 62

Gas,LP,is a limited partnership to which its partners have contributed capital.Gas's creditors include Piping,Inc.On Gas's dissolution,its assets will be distributed to pay​

A)the partners and Piping proportionately.
B)the partners before Piping.
C)Piping before the partners.
D)neither Piping nor the partners.

Question 63

Fact Pattern 17-1
Brad is a general partner,and Carlos and Dora are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
Refer to Fact Pattern 17-1.Brad's dissociation from the firm results in​

A)nothing with respect to Eastside's existence.
B)the maturity of Eastside's debts.
C)the suspension of Eastside's business.
D)the termination of Eastside's legal existence.

Question 64

Nature's Power,L.P. ,is a limited partnership dedicated to the research and development of renewable sources of energy.Nature's Power has $100,000 in declared but unpaid profits.Its creditors include Omni Credit Corporation for $5,000 and Pinto,one of Nature's Power's limited partners,also for $5,000.When Quint,one of Nature's Power's general partners,decides to retire,the other general partners vote to liquidate and dissolve the firm.The limited partners,who are not asked their opinions,want Nature's Power to continue in business and file a suit against the general partners to compel this result.Can the court order the firm to continue? If not,what is the priority of the distribution of its assets on dissolution?

Question 65

Gizelle,Haya,and Ivy do business as Janitorial Services,Limited Partnership.After Gizelle's relationship to the firm ends,Haya and Ivy agree not to continue the business.This is​

A)dissociation.
B)dissolution.
C)gross negligence.
D)simple misconduct.

Question 66

Darin is a limited partner in Eco Baits,a pest control service organized as a limited partnership,which cannot pay its debts.Darin is liable for the debts​

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of her capital contribution to the firm.
D)to the full extent.

Question 67

Fact Pattern 17-1
Brad is a general partner,and Carlos and Dora are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
Refer to Fact Pattern 17-1.Eastside is dissolved and its assets are collected,liquidated,and distributed.This results in​

A)nothing with respect to Eastside's existence.
B)the maturity of Eastside's debts.
C)the suspension of Eastside's business.
D)the termination of Eastside's legal existence.

Question 68

Orlando is a limited partner in Port of Call Exports,a limited partnership.By participating in the firm's management,Orlando is liable for its obligations

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution to the firm.
D)to the full extent.

Question 69

Ben is a general partner in Cut-Rate Shipping,LLLP,a limited liability limited partnership,which cannot pay its debts.Ben is personally liable for the debts​

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution.
D)to the full extent.

Question 70

Marie.Nicole,and Olga want to form Pharma Sales,LLC (limited liability company).What should they provide in their operating agreement? If they fail to include some important operating details,what determines these details?​

Question 71

Hugh is a limited partner and Ida is a general partner in HI Volume,a limited partnership.Joy is one of HI Volume's creditors.On HI Volume's dissolution,the party whose rights have the first priority to the firm's assets is​

A)Hugh and Ida.
B)Hugh only.
C)Ida only.
D)Joy only.

Question 72

Fact Pattern 17-1
Brad is a general partner,and Carlos and Dora are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
Refer to Fact Pattern 17-1.Carlos's assignment of his interest in Eastside to Good Credit Corporation results in​

A)nothing with respect to Eastside's existence.
B)the maturity of Eastside's debts.
C)the suspension of Eastside's business.
D)the termination of Eastside's legal existence.