Question 1

Paving LLC is a foreign limited liability company in the state of Ohio. In dealing with Paving, Ohio will apply the law of the state where the firm

Accepted Answer

When dealing with a foreign limited liability company, the state where the firm was formed typically applies the law of its home state. Therefore, Ohio would apply the law of the state where Paving LLC was formed.

Question 2

Rocket Corporation and Star Inc. wish to combine their capabilities to launch a single flight to the moon. The appropriate legal entity for this project is most likely

Accepted Answer

A joint venture is the most appropriate choice for Rocket Corporation and Star Inc. to combine their capabilities for a short-term project, such as a single flight to the moon. This allows both companies to maintain their separate legal status and control over their own assets, while still working together towards a common goal. A business trust, joint stock company, and syndicate are better suited for longer-term arrangements or more complex business scenarios.

Question 3

Accounting LLC is a member-managed limited liability company. Unless the members have agreed otherwise, all decisions with respect to the firm's business are made by

Accepted Answer

In a member-managed limited liability company, all decisions with respect to the firm's business are made by majority vote unless the members have agreed otherwise. This means that each member has an equal say in the decision-making process and decisions are made based on the majority vote of the members.

Question 4

In some states, to form a limited liability company, a business must have

Accepted Answer

In some states, to form a limited liability company, it is a requirement to have at least two members. This is because LLCs are designed to provide liability protection to their owners, and having at least two members ensures that there is some level of separation between the business and its owners. However, there is no requirement for a registered promoter, designated founder, or non-member manager.

Question 5

With respect to taxes imposed on limited liability companies, most states

Accepted Answer

Most states follow the federal rules for taxes imposed on limited liability companies, meaning they are treated as pass-through entities and are not subject to federal income tax at the entity level. Instead, the profits and losses of the LLC are passed through to the owners' personal tax returns, and they pay taxes on their share of the profits or can use their share of the losses to offset other income. However, some states may have differing rules regarding state taxes imposed on LLCs.

Question 6

Global Capital S.A. is a foreign investor. With respect to the operations of a limited liability company in the United States, Global can

Accepted Answer

As a foreign investor, Global Capital S.A. can become a member of a limited liability company in the United States. This means they can have ownership interest in the company and potentially participate in management decisions. However, there may be certain restrictions and requirements for foreign investors, such as obtaining approval from the Committee on Foreign Investment in the United States (CFIUS).

Question 7

Start-Up 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

Accepted Answer

In the absence of a written operating agreement specifying how profits should be divided, most LLC statutes default to dividing profits equally among the members, regardless of their proportionate investment or ownership in the company.

Question 8

Singh, a member of Trucking LLC, ceases to be associated in the carrying on of the business of the firm. Despite the dissociation

Accepted Answer

When a member dissociates from a firm, their duty of care continues with respect to prior events. This means that they will still be held responsible for any actions or decisions they made while they were a member of the firm. However, their duty of loyalty and their rights to participate in management and act as an agent for the firm will depend on the terms of the partnership agreement and the laws of the jurisdiction in which the firm operates.

Question 9

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

Accepted Answer

When the articles of organization do not specify a particular management structure, it is assumed that the LLC is member-managed. This means that the members of the LLC have the authority to make decisions and run the business, unless they choose to delegate this authority to a manager or management group.

Question 10

A limited liability company that wants to distribute profits to its members could avoid "double taxation" by electing to be taxed as

Accepted Answer

A limited liability company can avoid double taxation by electing to be taxed as a partnership. This means that the company's profits will pass through to its members who will report them on their individual tax returns. This avoids the profits being taxed at the business level and then again at the individual level. If the company were taxed as a corporation, it would face double taxation, where the profits are taxed at the corporate level and then again when they are distributed as dividends to shareholders. Option A is incorrect because an LLC cannot be taxed as a person. Option B is incorrect because taxation as a corporation would lead to double taxation. Option C is incorrect because an LLC cannot be taxed as a sole proprietorship.

Question 11

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

Accepted Answer

A joint venture is a partnership between two or more businesses or individuals who agree to combine their resources and expertise for a specific project or goal. In this case, Greenway Corporation and Happy Trails, Inc. are partnering to build a network of biking and hiking trails.

Question 12

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

Accepted Answer

The joint venture between Oil Inc. and Petro Corporation would be treated as a partnership because it involves the sharing of profits and losses between the two companies. Therefore, the court would apply the principles that it applies to partnerships when resolving any disputes that may arise.

Question 13

A limited liability company that operates in more than one state may not receive consistent treatment. This is because, according to the principle that in most states determines the law that applies to a foreign limited liability company, one state's courts must

Accepted Answer

According to the principle of comity, one state's courts must interpret and apply another state's laws. Therefore, a limited liability company that operates in more than one state may not receive consistent treatment as different states may have different laws or interpretations of the same law.

Question 14

As the promoter of Glassworks LLC, Hans enters into a contract with Interstate Transport Company. Once formed, Glassworks can

Accepted Answer

Glassworks LLC can adopt the contract through novation, which is a process of replacing one party with another. This will allow Glassworks to become a party to the contract and assume all the rights and obligations under the agreement.

Question 15

Dairy Products, Inc., and Eden Farms Corporation form a joint venture to make and test-market Frosty Ice Cream. If this joint venture is like most joint ventures, it will continue

Accepted Answer

Joint ventures are typically formed for a single project or a specific purpose, after which they are dissolved once the project is completed or the purpose is achieved.

Question 16

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

Accepted Answer

The answer of Loren, Marie, and Nina form a syndicate...

Question 17

Bayside Restaurant LLC is a limited liability company. Its sole member is Conrad. For federal income tax purposes, unless the firm indicates otherwise, it will automatically be taxed as

Accepted Answer

A limited liability company (LLC) with only one member is automatically considered a disregarded entity for federal income tax purposes, meaning it is taxed as a sole proprietorship unless it elects to be taxed as a corporation. Since Conrad is the sole member, the LLC would be taxed as a sole proprietorship by default.

Question 18

To gain an advantage in a business deal, Masonry LLC engages in fraud. Nicole, a member of Masonry, significantly contributes to the firm's misconduct. For any resulting damages, a court is most likely to hold Nicole

Accepted Answer

As a member of the firm who significantly contributed to the fraud, Nicole can be held personally liable for any resulting damages. Limited liability protections typically provided to members of an LLC do not extend to cases of fraud or intentional misconduct. Therefore, Nicole may be held responsible for damages beyond her investment in the firm, and the court may order her to pay the full amount of any losses suffered by the victim.

Question 19

Like other limited liability companies, for federal jurisdictional purposes, Rodeo Productions LLC is most likely a citizen of

Accepted Answer

For federal jurisdictional purposes, a limited liability company (LLC) is considered a citizen of every state of which its members are citizens. This is because, unlike corporations, which are treated as separate legal entities with a specific citizenship, the citizenship of an LLC is determined by the citizenship of its members.

Question 20

Phone Apps LLC is forming as a limited liability company. To become a manager-managed firm, Phone Apps' members must

Accepted Answer

To become a manager-managed LLC, the members must refrain from participating in the firm's operations, allowing designated managers to handle the management duties.

Quiz 32: Limited Liability Companies and Special Business Forms