Deck 18: Governance and Structure: Forms of Doing Business

Question 1

An S corporation is created as an LLC.

Answer 1

False

Question 2

Oil company executives are the highest paid CEOs annually.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

Partners are not liable for each others' torts committed in the scope of business.

Question 6

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

Question 7

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

Question 8

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

Question 9

Dissolution of a partnership is termination of a partnership.

Question 10

A partnership by estoppel arises when actions lead a third party to believe a partnership exists.

Question 11

A partnership can only be formed voluntarily.

Question 12

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

Question 13

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

Question 14

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

Question 15

There are no formal requirements for forming a sole proprietorship.

Question 16

Partners are mutual principals and agents.

Question 17

Partners' personal assets can be reached by partnership creditors.

Question 18

Limited partnerships are taxed the same way as general partnerships.

Question 19

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

Question 20

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

Question 21

A merger requires a board resolution and shareholder approval.

Question 22

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

Question 23

Limited partners who act as guarantors for partnership notes lose their limited partner status.

Question 24

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

Question 25

Incorporators are not liable for contracts entered into before incorporation.

Question 26

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

Question 27

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

Question 28

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

Question 29

An inadequately capitalized corporation can have its corporate veil pierced.

Question 30

Partners are only jointly liable for torts of other partners committed in the scope of the partnership business.

Question 31

A proxy is valid only for 11 months.

Question 32

The corporate veil can be pierced for inadequate capitalization.

Question 33

Limited partners' profits and losses are allocated equally.

Question 34

Close corporations have less formality in their operational requirements.

Question 35

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

Question 36

Boards cannot rely on outside experts in decision making.

Question 37

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

Question 38

In 2012, the highest paid CEO was paid slightly more than $96 million in compensation.

Question 39

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

Question 40

Bylaws provide the requirements for meetings and voting.

Question 41

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

Question 42

A limited liability company can be created informally.

Question 43

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

Question 44

"Say­to­pay" gets its name from stakeholders getting to vote on executive compensation.

Question 45

Limited partnership interests are generally not transferable.

Question 46

A LLP can be created by implication.

Question 47

It is fraud to form a corporation to avoid personal liability.

Question 48

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

Question 49

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

Question 50

All owners in an LLP have limited liability.

Question 51

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

Question 52

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

Question 53

A limited liability company can be created informally.

Question 54

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 55

Limited liability companies are peculiar to the United States.

Question 56

Pooling agreements are the same as voting trusts.

Question 57

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

Question 58

Limited liability partnerships are favored by accounting firms because they limit the liability of partners for the acts of the other partners.

Question 59

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

Question 60

Shareholders generally elect the officers of the corporation.

Question 61

In 2012, the CEO with the highest compensation was:

A) Lawrence Ellison
B) Mark Hurd
C) John Donahoe
D) none of the above

Question 62

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

Question 63

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 64

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 65

Enron's off­the­book financings consisted mostly of LLCs and LLPs.

Question 66

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 67

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 68

Close corporations are generally publicly traded.

Question 69

If members of a limited liability company exercise management authority, they lose their limited liability.

Question 70

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 71

A partner's interest:

A) is the same as the partnership property.
B) cannot be attached by creditors.
C) cannot be transferred.
D) none of the above.

Question 72

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 73

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

Question 74

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

Question 75

Lawyers for corporations are not required to reveal investigations of misconduct in the corporation to the CEO.

Question 76

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

Question 77

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 78

AIG was not involved in the subprime mortgage debacle.

Question 79

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 80

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