Question 1

Mit-E Mart LLC was formed in New Jersey.Mit-E Mart's members are Odel,who is a citizen of New Jersey,and Pola,who is a citizen of New York.For federal jurisdictional purposes,Mit-E is a citizen of

Accepted Answer

For federal jurisdictional purposes, an LLC is considered a citizen of every state in which its members are citizens. Since Mit-E Mart's members are citizens of New Jersey and New York, the LLC is a citizen of both states.

Question 2

QuikBooks LLC is a limited liability company.Like any other LLC,unless QuikBooks chooses otherwise,the firm will be taxed as

Accepted Answer

By default, an LLC is taxed as a partnership, meaning the income is passed through to the owners and taxed on their personal tax returns.

Question 3

Blake is a general partner in Caring Dry Cleaners,LLLP,a limited liability limited partnership,which cannot pay its debts.Blake is personally li?able for the debts

Accepted Answer

The answer of Blake is a general partner in Caring...

Question 4

Fay is admitted to Global Trading Partners,an existing partnership.A partnership debt incurred before the date of her admission comes due.Fay is

Accepted Answer

The answer of Fay is admitted to Global Trading Partners,an...

Question 5

Fact Pattern 24-1 
Brad is a general partner,and Carlos and Darlene are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
-Refer to Fact Pattern 24-1.Carlos's assignment of his interest in Eastside to Guaranty Credit Corporation results in

Accepted Answer

Carlos's assignment of his interest in Eastside to Guaranty Credit Corporation does not result in anything with respect to Eastside's existence. Eastside can continue to operate as a medical clinic with Brad and Darlene as remaining partners. However, Guaranty Credit Corporation now has the right to receive any distributions of profit from Carlos's portion of the partnership interest.

Question 6

Fact Pattern 24-1 
Brad is a general partner,and Carlos and Darlene are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
-Refer to Fact Pattern 24-1.Brad's dissociation from the firm results in

Accepted Answer

The answer of Fact Pattern 24-1 
Brad is a general...

Question 7

Maury,Neil,and Ogden want to form a limited partnership to manage their Picture This photo studio.Their firm must have

Accepted Answer

A limited partnership must have at least one general partner who has unlimited personal liability for the debts and obligations of the partnership, and at least one limited partner who has limited liability but cannot participate in managing the business. Therefore, the best choice is A as it meets these minimum requirements.

Question 8

Dale and Eiger are partners in First-Place Athletic Supplies,which sells sports equipment.Dale manages the business.Unless the partnership agreement states otherwise,Dale is

Accepted Answer

In a partnership, unless otherwise stated in the partnership agreement, partners are not entitled to compensation for their efforts beyond their share of the profits.

Question 9

Clu,Dolf,and Elton do business as Fertile Valley Farm,a partnership.Clu's relationship to the firm ends,but it continues to do business.Clu's ceasing to be involved with the farm is termed

Accepted Answer

Clu's ceasing to be involved with the farm is called dissociation, which means he has withdrawn from the partnership but the business continues to operate. Dissolution, on the other hand, refers to the end of the entire partnership and the winding up process involves settling the partnership's affairs and distributing its assets after dissolution. Wrongful refers to an unlawful act by a partner.

Question 10

Dan is considering forms of business organization for his financial advisory firm.Like most states,Dan's state requires that to form a limited liabil?ity company,he must file with a central state agency

Accepted Answer

To form a limited liability company, the required document to file with the state agency is articles of organization.

Question 11

Bluto is considering forms of business organization for Consult Me!,his Web site consult?ing firm.Most states require that a limited liability com?pany have at least

Accepted Answer

Most states require only one member for a limited liability company (LLC).

Question 12

Vijay is a member of Watchit,LLC,a limited liability company.Vijay is li?able for Watchit's debts

Accepted Answer

As a member of a limited liability company, Vijay's liability for the company's debts is usually limited to the extent of his investment in the firm. This means that he is only responsible for the debts in proportion to his ownership share in the company, and not personally liable for the company's debts beyond that.

Question 13

Fact Pattern 24-1 
Brad is a general partner,and Carlos and Darlene are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
-Refer to Fact Pattern 24-1.Eastside is dissolved and its assets are collected,liquidated,and distributed.This results in

Accepted Answer

When a limited partnership is dissolved, its legal existence is terminated, which means the correct answer is D. The assets are collected, liquidated, and distributed, but the partnership itself ceases to exist.

Question 14

Mabel and Nicol do business as One World Realty.Mabel acts on the firm's behalf in a deal with Property Acquisition Company,but fails to account to One World for the profit.To her firm,Mabel is

Accepted Answer

Mabel is in breach of the duty of loyalty to her firm by failing to account for the profits made in the deal. This duty requires her to act solely in the interest of the firm and not to engage in conduct that would conflict with that interest. As a result, Mabel is liable for any losses or damages that One World Realty suffers as a result of her actions. Therefore, the best answer is C.

Question 15

Energy Resources,LLC,is a limited liability company.Rather than dis?tribute its profits to its members,Energy wants to reinvest the profits in its business.For this reason,Energy may choose to be taxed as

Accepted Answer

If Energy wants to reinvest its profits, it would benefit from being taxed as a corporation. This way, the company can retain its earnings and use them for future growth and expansion, without having to distribute them to shareholders.

Question 16

Bo and Clancy decide to do business as Dynamo Production Associates.To be a partnership,this association can result from an agreement that is

Accepted Answer

A partnership agreement can be oral, written or implied by conduct. Therefore, choice C is the correct option.

Question 17

Wild Horses Ranch is a family limited liability partnership (FLLP).In an FLLP,all of the partners must be

Accepted Answer

In an FLLP, the partners can be natural persons or persons acting as fiduciaries for natural persons, such as a trust or estate. This allows for a wider range of partners than if only natural persons were allowed. Therefore, option B is the correct choice.

Question 18

Grady and Hedy do business as Island Tours.For federal income tax purposes,Island Tours would be treated as

Accepted Answer

The answer of Grady and Hedy do business as Island...

Question 19

Daisy is considering forms of business organization for Daisy's Designs,an ar?chitectural firm.An advantage of a limited liability partnership is that partners can avoid personal liability for

Accepted Answer

In a limited liability partnership (LLP), partners are protected from personal liability for the misconduct or negligence of other partners.

Question 20

Sabin and Tyler agree while talking on the phone to form a partner?ship to open a coffee kiosk.Their partnership agreement is legally binding

Accepted Answer

When two or more people agree to enter into a business partnership, their agreement is legally binding without any other requirements such as involving a third person or reducing it to writing. However, it is always a good practice to have a written partnership agreement to avoid any potential misunderstandings or disputes in the future.

Quiz 24: Sole Proprietorships, partnerships, Ltd Liability