Question 1

If a member disassociates him or herself from an at-will LLC,the LLC must only purchase the disassociating member's distributional interest on the expiration of the specified term of the LLC.

Accepted Answer

If a member disassociates him or herself from an at-will LLC, the LLC must purchase the disassociating member's distributional interest within a reasonable time, not just at the expiration of the specified term of the LLC.

Question 2

An LLC may only be member-managed.

Accepted Answer

An LLC may be either member-managed or manager-managed. This decision is made in the operating agreement of the LLC.

Question 3

A party may usurp an LLC's business opportunity,as this will not breach the duty of loyalty owed to the LLC.

Accepted Answer

One of the fundamental duties of a member or manager in an LLC is the duty of loyalty, which requires them to act solely in the best interest of the LLC and not to take personal advantage of any business opportunity that belongs to the LLC. If a party usurps an LLC's business opportunity, they would be breaching the duty of loyalty and could be liable for damages.

Question 4

At the conclusion of a term LLC's term,a majority vote by the members to continue operating will result in the creation of a new term LLC.

Accepted Answer

A majority vote to continue operating typically extends the existing LLC's term rather than creating a new LLC.

Question 5

Where a disassociating member of an LLC is entitled to payment for her interest,she is entitled to fair market value even if the operating agreement provides otherwise.

Accepted Answer

The operating agreement of an LLC typically governs the terms of payment for a disassociating member's interest, including any deviations from fair market value.

Question 6

Where a member's disassociation from an LLC is not wrongful,the LLC must purchase the member's distributional interest.

Accepted Answer

This is known as a "mandatory buyout" provision, which requires the LLC to buy the departing member's distributional interest if their disassociation is not wrongful.

Question 7

A member has the power to withdraw from a term LLC prior to the time specified.

Accepted Answer

According to the default rules of most state LLC laws, members have the power to withdraw from the LLC at any time prior to the specified term without cause. However, the operating agreement of an LLC may include provisions that limit or restrict a member's ability to withdraw.

Question 8

A non-manager member of an LLC is entitled to remuneration for services performed for the LLC including the winding up of the business of the LLC.

Accepted Answer

A non-manager member of an LLC is typically not entitled to remuneration for services performed for the LLC, including winding up, unless there is an agreement or provision in the operating agreement that specifies such compensation.

Question 9

The authority for the formation of LLCs comes from:

Accepted Answer

The formation and regulation of LLCs is governed by state statutes in the United States. Each state has its own set of laws and regulations that dictate how LLCs can be formed and operated. Some states have adopted the Uniform Limited Liability Company Act (ULLCA), while others have developed their own LLC laws. Federal law does not govern the formation and operation of LLCs, although certain federal laws may apply to specific types of LLCs, such as those engaged in regulated industries like banking or telecommunications.

Question 10

Non-manager members in a manager-managed LLC can bind the LLC to contracts.

Accepted Answer

Only managers have the authority to bind the LLC to contracts in a manager-managed LLC. Non-manager members have no such authority.

Question 11

In a member-managed LLC,all members have agency authority to bind the LLC to contracts.

Accepted Answer

The answer of In a member-managed LLC,all members have agency...

Question 12

If a member-manager commits an ordinarily negligent act,he or she is not liable to the LLC.

Accepted Answer

In many jurisdictions, LLC member-managers are protected by the business judgment rule, which shields them from liability for ordinary negligence in their management decisions, as long as they act in good faith and in the best interest of the LLC.

Question 13

Which of the following is true about limited liability companies?

Accepted Answer

Limited liability companies (LLCs) are a type of business structure in which owners have limited personal liability for the company's debts and obligations. One advantage of an LLC is that owners can choose how they want the business to be taxed - as a partnership, S corporation, or C corporation. This flexibility allows owners to choose the most advantageous tax treatment for their specific circumstances. Option A is incorrect as all owners in an LLC have limited liability. Option B is incorrect as specific steps are required to form an LLC. Option D is incorrect as owners in an LLC are called members. Option E is incorrect as LLCs can have centralized management by a few members, though this is not required.

Question 14

Accountants,lawyers,and doctors are among the professionals allowed to create a limited liability partnership.

Accepted Answer

Limited liability partnerships (LLPs) are allowed in many countries, including the United States and the United Kingdom, for certain professions such as accountants, lawyers, and doctors. LLPs offer limited liability to partners, meaning they are not personally liable for the debts and liabilities of the partnership beyond their investment in the business.

Question 15

In a member-managed LLC,any matter relating to the LLC's business is decided by a majority vote of the members.

Accepted Answer

In a member-managed LLC, decisions related to the business of the LLC are made by a majority vote of the members.

Question 16

Constructive notice is not sufficient when a member disassociates him or herself from the LLC.

Accepted Answer

The answer of Constructive notice is not sufficient when a...

Question 17

In order for an LLP to conduct business in a state other than the one it is organized in,it must register as a foreign LLP in any state in which it wants to conduct business.

Accepted Answer

This is true. A Limited Liability Partnership (LLP) must register as a foreign LLP in any state where it wants to conduct business other than the one it is organized in. This is because each state has its own laws and requirements for LLPs to operate within their jurisdiction. Failure to register as a foreign LLP can result in legal consequences and penalties.

Question 18

After dissolution and winding up,an LLC may terminate its existence.

Accepted Answer

After dissolution and winding up, an LLC may terminate its existence.

Question 19

A member's distributional interest in an LLC is personal property.

Accepted Answer

A member's distributional interest in an LLC is considered personal property, as it represents their share of the company's profits and losses rather than an ownership interest in specific LLC assets. This means that a member can transfer, sell, or pledge their distributional interest just like any other form of personal property.

Question 20

Members who are not managers of a manager-managed LLC still have rights to manage the LLC regardless of the operating agreement.

Accepted Answer

Members who are not managers of a manager-managed LLC do not have rights to manage the LLC unless it is explicitly stated in the operating agreement. The operating agreement typically designates the managers as the individuals responsible for managing the day-to-day operations of the LLC.

Quiz 39: Limited Liability Companies and Limited Liability Partnerships