Deck 4: Limited Liability Companies and Special Business Forms

Question 1

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

Answer 1

False

Question 2

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.

Answer 2

False

Question 3

Every limited liability company is a citizen of every state.

Answer 3

False

Question 4

A limited liability company can be taxed as a corporation.

Question 5

A limited liability company is a citizen of every state of which its members are citizens.

Question 6

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 7

Like the shareholders of a corporation, the owners of a limited liability company are liable for the obligations of the firm to the full limit.

Question 8

Unless a limited liability company indicates otherwise, the Internal Revenue Service automatically taxes it as a partnership.

Question 9

Foreign investors cannot participate in a limited liability company.

Question 10

For federal income tax purposes, one-member limited liability companies are not taxed.

Question 11

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

Question 12

A limited liability company can be held liable for any loss or injury caused by the wrongful acts or omissions of its members.

Question 13

Limited liability companies (LLCs) are governed by federal LLC statutes.

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

Limited liability companies are entities apart from their owners.

Question 21

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

Question 22

A joint venture is taxed like a corporation.

Question 23

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 24

A syndicate may be organized as a corporation or a partnership, or in some situations as no recognizable form of business organization.

Question 25

Unless otherwise agreed, joint venturers have an equal voice in controlling a venture-related project.

Question 26

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 27

A cooperative cannot be incorporated.

Question 28

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 29

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

Question 30

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 31

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 32

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 33

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

Question 34

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 35

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

Question 36

The members of a joint venture have less implied and apparent authority than the partners in a partnership.

Question 37

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

Question 38

Joint venturers do not have the authority as agents to enter into contracts for the business that will bind the joint venture.

Question 39

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

Question 40

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

Question 41

Dairy Products, Inc., and Eden Farms Corporation form a joint venture to make and test-market Frosty Ice Cream. A joint venture is usually formed for

A) ​an implied duration of not more than six months.
B) ​a single transaction or project.
C) ​a stated duration of not more than one year.
D) a perpetual existence.

Question 42

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 43

Oil Reserves, Inc., and Petro Corporation form a joint venture to design and test petroleum storage facilities and equipment. When a dispute arises, Oil Reserves files a suit against Petro. The court is most likely to apply the same principles to this joint venture as it applies to

A) ​sole proprietorships.
B) ​limited liability companies.
C) ​corporations.
D) ​partnerships.

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

Orly's Adventure Travel and Paquito's Wild River Tours form a joint venture. Orly can participate in the venture's management to

A) ​the extent that she assumes liability for the venture's debts.
B) ​the extent of her investment in the venture.
C) ​any extent.
D) ​no extent.

Question 46

Greenway Corporation and Happy Trails, Inc., combine their efforts to build a network of biking and hiking trails along an unused railroad spur. Their form of business organization is

A) ​a business trust.
B) ​a joint stock company.
C) ​a joint venture.
D) ​a syndicate.

Question 47

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 48

Rural Development Company and Suburban Real Estate Corporation form a joint stock company. A joint stock company can be formed for, at the most,

A) ​an implied duration of not more than six months.
B) ​a perpetual existence.
C) ​a single activity or transaction.
D) ​an express duration of not more than one year.

Question 49

Rogue Art Gallery and Sequoia Exhibitions form a joint venture. When a dispute arises, Rogue files a suit against Sequoia. The court is most likely to apply the same principles to this joint venture as it applies to

A) ​business trusts.
B) ​limited liability companies.
C) ​corporations.
D) ​partnerships.

Question 50

Leon, Michael, Nolan, and O'Neill join together to buy a professional basketball franchise. Their selected form of business organization is an investment group, which is also known as

A) ​a business trust.
B) ​a joint stock company.
C) ​a joint venture.
D) ​a syndicate.

Question 51

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 52

Lightning Corporation and Mind, Inc., two game creators, wish to combine their capabilities to make and market Nano, a special limited-edition game. The appropriate legal entity for this project is most likely

A) ​a business trust.
B) ​a joint stock company.
C) ​a joint venture.
D) ​a syndicate.

Question 53

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 54

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 55

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 in the United 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 56

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 57

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 58

GMO Grain Corporation and Hybrid Yields, Inc., form a joint stock company. The ownership of a joint stock company is represented by

A) ​partnership certificates.
B) ​shares of stock.
C) ​title documents.
D) ​trust certificates.

Question 59

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 60

Global Shipping Corporation and Harbor Warehouse Company transfer their property to Investment Managers, Inc., which manages the property and distributes the profits to the beneficiaries. This form of business organization is

A) ​a business trust.
B) ​a joint stock company.
C) ​a joint venture.
D) ​a syndicate.

Question 61

Gail is the beneficiary of a business trust. As a beneficiary, she is required to

A) ​distribute the trust's profits.
B) ​assume responsibility for the trust's debts.
C) ​draft a written trust agreement.
D) ​none of the choices.

Question 62

As the beneficiary of a business trust, Bob's liability for trust debts and obligations is

A) ​limited to his capital investment in the trust.
B) ​limited to his personal assets.
C) ​nothing.
D) ​unlimited.

Question 63

Valu Food Markets is an incorporated cooperative. Like other incorporated cooperatives, Valu Food distributes profits to its owners on the basis of

A) the amount of capital they contribute.
B) ​the degree to which they participate in management.
C) ​their transactions with the cooperative.
D) ​the requirements of the state in which it was incorporated.

Question 64

Floyd and other consumers form Grocers Mart Cooperative. This form of business organization makes it possible for these consumers to

A) ​avoid personal liability for the acts of the cooperative.
B) ​obtain an exemption from state laws governing corporations.
C) ​pay no taxes on their business income.
D) ​pool their resources to gain an advantage in the marketplace.

Question 65

Trans-Pacific Company and USA Export, Inc., form a business organization to engage in importing and exporting. Its property is held in the names of the members and its shareholders have personal liability. This organization is

A) ​a business trust.
B) ​a joint stock company.
C) ​a joint venture.
D) ​a syndicate.

Question 66

Lauren, Maria, and Nina form a syndicate to buy a professional soccer franchise. This syndicate could be set up as

A) ​a joint venture.
B) ​a corporation.
C) ​a sole proprietorship.
D) ​a limited liability company.

Question 67

Licensed fishing outfits in Bayou City form a business organization to provide, without profit, an economic service to its members. This is

A) ​a business trust.
B) ​a cooperative.
C) ​a corporation.
D) ​a joint stock company.

Question 68

Farm & Ranch is an unincorporated cooperative. Unincorporated cooperatives are often treated like

A) ​business trusts.
B) ​corporations.
C) ​limited liability companies.
D) ​partnerships.

Question 69

Dreem Land Corporation and Earthbound Investments Company transfer their property to Financial Managers, Inc., which manages the property and distributes the profits to Dreem and Earthbound. This form of a business organization is

A) ​a business trust.
B) ​a joint stock company.
C) ​a joint venture.
D) ​a syndicate.

Question 70

As the trustee of a business trust, Travis is required to

A) ​distribute the trust's profits.
B) ​assume responsibility for the trust's debts.
C) ​draft a written trust agreement.
D) ​none of the choices.

Question 71

Commerce & Trade Corporation and Distance Shipping & Transport, Inc., form a business trust. eCharge Auto Company and Fleet Electric Corporation form a joint stock company. Green AgriCorp and Harvest Farms, Inc., form an incorporated cooperative. What features do these combinations of business organization have in common?

Question 72

Business Media, a partnership, publishes periodicals, including Cycle Review. DangerZoners, also a partnership, publishes Extreem Sportz. Business Media and DangerZoners agree to pool their resources in a one-time deal to print and market a book, Future Runs. In contracting with Geo Cache, Inc., for supplies to print the book, Business Media commits fraud. In contracting with Host Articles Agency for materials to use in Extreem Sportz, DangerZoners commits fraud. Geo Cache and Host Articles file suits against Business Media and DangerZoners. What type of business organization has Business Media and DangerZoners formed? To whom, if anyone, is Business Media liable? To whom, if anyone, is DangerZoners liable?