Deck 42: Hybrid Business Forms

Question 1

If the certificate of limited partnership that is filed with the secretary of state is substantially defective, a general partnership is created.

Answer 1

True

Question 2

Sub-S corporations, limited liability partnerships, and limited liability limited partnerships are all entities.

Answer 2

True

Question 3

The third wave of the limited liability partnership (LLP) legislation offered full shield protection which meant no unlimited liability at all.

Answer 3

True

Question 4

Liability between two partners in a partnership is shared.

Question 5

California law does not allow for a limited liability limited partnership (LLLP) to be formed in California.

Question 6

In case of limited liability companies (LLCs), all the members are equally liable to third parties regardless of the owner's level of participation.

Question 7

Partnership law imposed personal liability on the partners because people tend to be more careful when they are personally liable for their own mistakes and bad judgment.

Question 8

Limited partners owe fiduciary duties to the limited partnership.

Question 9

Limited partners have no power to dissolve a firm, except on court orders.

Question 10

Creation of a limited partnership is as easily done as creating a general partnership.

Question 11

In case of limited liability limited partnerships (LLLPs), only the limited partners benefit from a full, status-based liability shield.

Question 12

Under ULPA-1985, a limited partner who became significantly involved in running the business lost her status as a limited partner and became a general partner.

Question 13

As in a partnership, the limited liability company (LLC) property is not specific to any member, but each has a personal property interest in general.

Question 14

A limited partner who is in competition with her limited partnership may not inspect the firm's books and records.

Question 15

A limited partner's ability to divest herself of her interest in the firm requires agreement among the other limited partners and the general partner.

Question 16

The control of the limited partnership is in the hands of the limited partners.

Question 17

Corporations are frequently the general partner in a limited partnership.

Question 18

The first step in the termination of the limited liability company (LLC) is dissolution.

Question 19

The owners of S corporation have limited liability.

Question 20

As per the Uniform Limited Partnership Act (ULPA)-1985, limited partners do not have the right to inspect the firm's books and records.

Question 21

As with general partnerships, the general partner in a limited partnership is not usually salaried.

Question 22

ULPA-2001 abolishes the "control rule" and allows full limited liability for limited partners even if they participate in the management of the LP.

Question 23

A limited partner can withdraw from the firm at any time, with proper notice.

Question 24

The great disadvantage of the LLC is that the managing person stands liable as a general partner.

Question 25

Limited liability companies are the entity of choice for people who know what they are doing.

Question 26

The LP is almost always a "mere conduit" for income to the owners so that it pays no income tax.

Question 27

It is not necessary to file with the state to achieve the limited liability of the LLC.

Question 28

The LLC is an entity.

Question 29

The law regarding LLCs is fairly uniform throughout the U.S.

Question 30

The LLC is a good vehicle to raise significant money from a public offering of its membership.

Question 31

When a member of the LLC dies or becomes bankrupt, the LLC necessarily dissolves.

Question 32

A benefit to the LLC is that no annual meetings are required and no minutes need to be kept.

Question 33

Limited partners may vote to terminate the LP.

Question 34

Only a handful of states have legal frameworks allowing LLCs.

Question 35

The LLC is always centrally managed, like a partnership.

Question 36

A "foreign" LLC means its registration was originally in a foreign country.

Question 37

The problem with early efforts to form LLCs was that they were not "corporate-like" enough.

Question 38

Able and Baker had a partnership and in that capacity incurred debt. If they convert to an LLC their old debt will be subject to the insulation from personal liability that characterizes the LLC.

Question 39

LLC members are not liable for contracts made or torts committed in the scope of business.

Question 40

Dissolution of the LP is necessarily followed by its winding up and termination.

Question 41

One of the real benefits of limited liability companies (LLCs) that is unavailable in corporations is:

A) that all members enjoy limited liability.
B) the presence of a centralized management.
C) that it has a limited period of existence.
D) free transferability of interest.
E) that no annual meetings are required.

Question 42

A limited liability company:

A) will necessarily have a continuity of life.
B) does not insulate the owners from conduit taxation.
C) has a decentralized management.
D) will necessarily offer free transferability of interests.
E) insulates its owners from pass-through taxation.

Question 43

A limited liability limited partnership (LLLP) is a limited partnership that affords insulation from personal liability to all members.

Question 44

A _____ is a corporation whose owners elect to have it treated as partnership for tax purposes.

A) scienter
B) S corporation
C) C corporation
D) tippee
E) escheat

Question 45

If a business entity is created to insulate its owners from person liability beyond their contributions, a court will "pierce the corporate veil" and hold these people personally liable for obligations to their creditors because what they have done is considered a fraud on creditors.

Question 46

When the limited liability company (LLC) is manager managed, _____.

A) all members have actual and apparent authority to bind the LLC to contracts on its behalf
B) all member votes have equal weights
C) non-manager members also have duty of care and fiduciary duty
D) only managers have the legal authority to bind the firm
E) firm decisions that are extraordinary can be taken only by its manager members

Question 47

The more the law affords business people insulation from personal liability, the more business risks they tend to take.

Question 48

Which is not true as to a limited partnership?

A) The general partner has only a duty of care to the firm, not a fiduciary duty.
B) Limited partners' names cannot usually be used in the firm name.
C) Limited partners need not contribute services to the firm.
D) Limited partners are generally insulated from person liability beyond their contributions.
E) The firm's name must indicate it is a limited partnership.

Question 49

Under the second wave of the partial shield statute, a partner of a limited liability partnership (LLP) would be unlimitedly liable for:

A) breaches of ordinary contract obligation.
B) negligent acts.
C) wrongful acts by employees.
D) wrongful acts of agents.
E) malpractice and misconduct of employees.

Question 50

According to the Uniform Limited Partnership Act (ULPA)-2001, in a _____, no partner-whether general or limited-is liable on account of partner status for the limited partnership's obligations.

A) S corporation
B) C corporation
C) general partnership
D) limited liability company
E) limited liability limited partnership

Question 51

It is required that the limited liability company (LLC) members file a _____ with the secretary of the state during its creation.

A) certificate of stare decisis
B) certificate of organization
C) certificate of ultra vires
D) certificate of derivative action
E) certificate of parens patriae

Question 52

Which of the following is not required for an LLC.

A) A filing with the state.
B) At least 10 members.
C) A name indicating that the business is a limited liability company.
D) Annual meetings with minutes properly kept.
E) That its existence be terminated upon the withdrawal of any member.

Question 53

Which of the following is true of an S corporation?

A) It can be incorporated anywhere in the World.
B) It cannot have more than one hundred shareholders.
C) The corporation has two classes of stock: common stock and preferred stock.
D) It is capitalized as a general partnership firm.
E) Any person from anywhere in the World can become a shareholder of the S corporation.

Question 54

Which of the following states of US has not adopted any of the versions of the Uniform Limited Partnership Act?

A) Washington
B) California
C) Louisiana
D) Alaska
E) Connecticut

Question 55

Federal law determines which of the following:

A) How hybrid business forms are created.
B) The liability of general partners in LLCs.
C) Whether a business entity will be considered a corporation or not.
D) What is considered "in the scope of business" when considering a tort committed by an LLC member.
E) Whether a hybrid business form must register in a state in which it was not set up.

Question 56

_____ is the lack of incentive to guard against a risk when a person is protected against it, as by being afforded limited liability.

A) Moral hazard
B) Embezzlement
C) Battery
D) Larceny
E) Allonge

Question 57

Carl and Christine decided to open a small food joint together by investing capital and sharing the profits. However, Christine chose not to participate in the day to day activities of the food joint and Carl was singularly liable to any losses that their food joint made. It can be said that a _____ was formed by Carl and Christine.

A) closed shop
B) sole proprietorship
C) general partnership
D) limited partnership
E) hot cargo agreement

Question 58

LLCs cannot have free transferability of the LLC interest.

Question 59

The primary disadvantage of the Sub-S corporation remains the double taxation of its income.

Question 60

The original source of limited partnership law is the _____ that was drafted in 1916.

A) Uniform Limited Partnership Act (ULPA)
B) Revised Uniform Limited Partnership Act
C) National Conference of Commissioners on Uniform Laws
D) Companies Act
E) Limited Liability Partnership Act

Question 61

a) Barry Artistic is not entitled to examine the corporate books and records. Normally a shareholder can inspect the books, but the right is to be exercised for "a proper purpose," and this is request obviously is based on a desire to examine the competition's records, not on a desire to find out how the corporation is doing to watch over his investment.

Question 62

What are the characteristics of a corporation? What characteristics must a limited liability company lack to not be considered a corporation for tax purposes?

Question 63

a) The partnership and Ingrid are liable to Paul Plaintiff; he is also partly liable for his own losses. Ingrid is liable because a person is always liable for her own torts (negligent driving). The partnership is liable because in a partnership, all partners are considered employees and employers; under master-servant rules the employer is liable for torts committed by the employee. Paul Plaintiff is liable because he contributed to his own injuries (defective brake light): where a person is contributorily or comparatively negligent, his tort recovery will be zero or will be reduced by his degree of liability. You could also argue on these facts that Paul's defective brake light was not a factor in the accident (if they had a head-on collision, for example), in which case he wouldn't be negligent or liable. But you need to deal with the fact that "Ingrid was on her cell phone at the time of the crash"; that's negligence and she and her employer would be liable (as above).

Question 64

According to the Uniform Limited Partnership Act (1985 and precedents), what are the various things that a limited partner could do that would not risk the loss of insulation from the personal liability?