Question 1

Western Rodeo LLC is a limited liability company (LLC). Like other LLCs,for federal jurisdictional purposes,Western Rodeo is most likely a citizen of every state

Accepted Answer

LLCs are considered pass-through entities for tax purposes, meaning that the profits and losses pass through to the members. Therefore, for the purpose of determining diversity jurisdiction, an LLC is considered a citizen of every state in which its members are citizens.

Question 2

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

Accepted Answer

A joint venture is the most appropriate legal entity for this collaboration between Lightspeed Corporation and Mindful, Inc. A joint venture is a temporary partnership between two or more companies for a specific project or purpose, and it allows each party to contribute their resources and expertise while sharing the risks and benefits of the venture.

Question 3

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

Accepted Answer

A syndicate is a temporary investment group formed by individuals or organizations to finance a particular project or business venture, such as buying a professional basketball franchise. Each member contributes capital and shares in the profits or losses of the project. Therefore, a syndicate is the most appropriate form of business organization for Lebron, Michael, Nolan, and O'Neill to buy a professional basketball franchise.

Question 4

Dana is a member of Earthground Coffee,LLC,a limited liability company. Dana is liable for Earthground's debts

Accepted Answer

As a member of a limited liability company, Dana's liability is limited to the extent of her investment in the firm. This means that she is not personally responsible for the company's debts beyond the amount she has contributed to the company. The other choices are incorrect because they suggest that Dana has unlimited liability or liability based on factors other than her investment.

Question 5

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

Accepted Answer

The joint venture is most likely to be treated as a partnership, as it is a temporary business arrangement where two or more parties come together to achieve a specific goal. Therefore, the court is likely to apply the same principles that apply to partnerships, such as the Uniform Partnership Act.

Question 6

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

Greenway Corporation and Happy Trails, Inc. are forming a temporary partnership to achieve a specific goal - building a network of biking and hiking trails. This type of partnership is known as a joint venture. A business trust involves a group of businesses that are controlled by a board of trustees; a joint stock company is a type of company that issues shares of stock to shareholders; a syndicate involves a group of individuals or organizations coming together to finance a particular project or venture. None of these options fully describe the partnership between Greenway Corporation and Happy Trails, Inc.

Question 7

Romero is a member of Smooth Operators LLC,a limousine service. Romero's relationship to Smooth Operators ends,but the firm continues to do business. This is

Accepted Answer

Romero's relationship with Smooth Operators is ending, which means he is dissociating from the company, but the company will continue to operate.

Question 8

StartUp Investors,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, most LLC statutes default to dividing profits equally among the members.

Question 9

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

Accepted Answer

This is a business trust, also known as a real estate investment trust (REIT). The property is transferred to the trust, which is managed by Investment Managers, Inc. The profits are distributed to the owners of the trust, Global Shipping and Harbor Warehouse.

Question 10

Oil Reserves,Inc.,and Petro Refining 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

Joint ventures are typically treated as partnerships under the law, meaning that the partners share profits and losses and are jointly liable for any legal claims or debts incurred by the joint venture. Therefore, the court is most likely to apply partnership law principles to this joint venture dispute, rather than treating it as a corporation, limited liability company, or sole proprietorship.

Question 11

IT 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

Accepted Answer

Since IT Apps, LLC is a limited liability company, the dispute will be governed by the applicable state LLC statute. Each state has its own LLC statute, which sets out the rules for the operation and governance of LLCs. If the operating agreement does not address the dispute, the state's LLC statute will control.

Question 12

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

Accepted Answer

The ownership of a joint stock company is represented by shares of stock. This means that individuals can own a portion of the company by purchasing shares of stock, and the value of their ownership is determined by the market value of the company's shares. Partnership certificates, title documents, and trust certificates are not typically used to represent ownership in a joint stock company.

Question 13

Outreach Security & Rescue,LLC,is a limited liability company. Unless the members have agreed otherwise,participants in the firm's management will be considered to include

Accepted Answer

As a limited liability company, the default rule is that all members have a say in the management of the company unless the members have agreed otherwise in the operating agreement. Therefore, unless there is a provision in the operating agreement stating otherwise, all members of Outreach Security & Rescue, LLC would be considered participants in the firm's management.

Question 14

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

Accepted Answer

In most states, voting rights are apportioned according to each member's capital contributions to the LLC, unless the members have agreed otherwise in the operating agreement. This means that members who have contributed more capital have a greater voting power in the decision-making process of the LLC.

Question 15

Custom Auto Body & Detailing,LLC,is a limited liability company. Its members include Dennis and Estelle. Like other LLCs with more than one member,unless indicated otherwise,the firm will automatically be taxed as

Accepted Answer

LLCs with more than one member are automatically taxed as partnerships unless they elect to be taxed as a corporation. Therefore, the best choice is D, partnership.

Question 16

Arnie is a member of Bowling & Billiards,LLC. Arnie can participate in the firm's management

Accepted Answer

As a member of Bowling & Billiards, LLC, Arnie has the right to participate in the firm’s management to any extent unless the operating agreement specifies otherwise. LLCs are designed to give members flexibility with regard to management and ownership, allowing them to structure their organization in a way that best suits their needs. Unlike in a corporation, where ownership and management are separate, LLC members can be actively involved in the business’s day-to-day operations. Arnie's liability for the firm's debts is limited to his investment in the LLC, which means his personal assets are protected from business liabilities, so he can participate in management without incurring any personal financial risk beyond his initial investment.

Question 17

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

Accepted Answer

A joint stock company can have a perpetual existence, meaning it can continue to exist indefinitely unless dissolved according to legal requirements. This makes it a suitable option for long-term business ventures, such as rural residential development and suburban real estate.

Question 18

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

Accepted Answer

A joint venture is usually formed for a single transaction or project.

Question 19

Qatar Global Investments is a foreign entity-a firm owned and operated by investors in a foreign country. With respect to a limited liability company in the United States,Qatar Global can

Accepted Answer

Qatar Global Investments can become a member of a limited liability company in the United States, meaning they can have an ownership interest in the company similar to other members. Depending on the operating agreement of the LLC, they may also be able to participate in the management and operations of the company.

Question 20

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

Accepted Answer

Since Oni is a partner in the joint venture, she is involved in the management of the venture to any extent. Joint ventures involve shared management responsibilities and decision-making power among the partners, so Oni would have some degree of input and decision-making authority despite the partnership being between two separate businesses.

Quiz 32: Limited Liability Companies and Special Business Forms

Western Rodeo LLC is a limited liability company (LLC) . Like other LLCs,for federal jurisdictional purposes,Western Rodeo is most likely a citizen of every state