Deck 30: Limited Liability Company and Limited Liability Partnership

Question 1

The Uniform Limited Liability Company Act codifies LLC law.

Answer 1

True

Question 2

Most states have enacted laws that permit certain types of professionals,such as accountants,lawyers,and doctors,to operate as limited liability partnerships.

Answer 2

True

Question 3

Unless otherwise agreed,under the Uniform Limited Liability Company Act,limited liability company profits are shared equally,but losses are allocated to members in proportion to each member's capital contribution.

Answer 3

False

Question 4

The ULLCA covers most problems that arise in the formation,operation,and termination of LLCs.

Question 5

Statutes regulating the formation of limited liability companies are commonly referred to as limited liability company codes.

Question 6

A limited liability company can only be created pursuant to the laws of the state in which the LLC is being organized.

Question 7

The ULLCA is not law unless a state adopts it as its LLC statute.

Question 8

The United States Congress initially authorized the development of limited liability companies.

Question 9

A limited liability company can choose whether to be taxed as a partnership or as corporation.

Question 10

The United States Congress issued the Uniform Limited Liability Company Act.

Question 11

An LLC is a separate legal entity distinct from its members.

Question 12

The Uniform Limited Liability Company Act mandates that a limited liability company member has the right to an equal share in profits,and that such right may not be modified.

Question 13

A limited liability company may elect to be taxed as a partnership,the owners can manage the business,and the owners have limited liability for debts and obligations of the partnership.

Question 14

Many entrepreneurs who begin new businesses choose the limited liability company as their legal form for conducting business.

Question 15

A limited liability company is an unincorporated business entity that combines the most favorable attributes of general partnership,limited partnerships,and corporations.

Question 16

The goal of the ULLCA is to establish comprehensive LLC law that is uniform throughout the United States.

Question 17

Administrative law judges interpret state limited liability statutes to decide disputes between limited liability companies and their members.

Question 18

Limited liability companies are creatures of federal law.

Question 19

The use of limited liability companies as a form of conducting business in the United States dates back to the American Revolution.

Question 20

Limited liability companies are treated as an artificial person who can sue or be sued,enter into and enforce contracts,hold title to and transfer property,and be found civilly and criminally liable for violations of law.

Question 21

Under the ULLCA,the articles of organization of a limited liability company must set forth whether one or more of the members of the limited liability company are to be personally liable for the LLC's debts and obligations.

Question 22

In order to come into existence,a limited liability company must file articles of organization with the appropriate state office.

Question 23

A limited liability company is an "at-will" limited liability company unless it is designated as a "term" limited liability company,and the duration of the term is specified in the articles of organization.

Question 24

An operating agreement for a limited liability company regulates the affairs of the company and the conduct of its business,but not relations among the members,managers,and company.

Question 25

Most LLCs,particularly small ones,choose as the state of organization the state in which the LLC will be doing most of its business.

Question 26

Under the ULLCA,the articles of organization of a limited liability company must set forth the name of the limited liability company.

Question 27

A limited liability company can be organized in only one state,even though it can conduct business in all other states.

Question 28

For federal income tax purpose,a limited liability company is taxed at the entity level; as a result,its income or losses do not "flow through" to its members' individual income tax returns.

Question 29

Under the ULLCA,the articles of organization of a limited liability company must set forth the name and address of the initial agent for service of process.

Question 30

Limited liability companies can issue notes and bonds.

Question 31

Max has operated as a partnership for several years with Mabel,his wife.His daughter has just taken a business law class,where she learned about limited liability companies,and she suggests to Max that he convert to a limited liability company.If Mabel agrees,the partnership may convert to a limited liability company by delivering articles of organization to the Secretary of State.

Question 32

Under the ULLCA,the articles of organization of a limited liability company must set forth whether the limited liability company is a term LLC,and if so,the term specified.

Question 33

"ABC Company" is an acceptable name for a limited liability company.

Question 34

Operating agreements are required to be in writing.

Question 35

Under the ULLCA,the articles of organization of a limited liability company need not set forth the address of the limited liability company's initial office.

Question 36

A limited liability company has the same powers as an individual to do all things necessary or convenient to carry on its business or affairs.

Question 37

A certificate of interest issued by a limited liability company acts the same as a stock certificate issued by a corporation.

Question 38

Under the ULLCA,the articles of organization of a limited liability company need not set forth the name and address of each organizer.

Question 39

The existence of a limited liability company begins when the articles or organization are filed.

Question 40

Under the ULLCA,the articles of organization of a limited liability company need not set forth whether the limited liability company is to be a manager-managed LLC

Question 41

A limited liability company is "manager-managed," unless the articles of incorporation provide that it is "member-managed."

Question 42

Owners of limited liability companies are said to have "quasi-limited" liability.

Question 43

A limited liability company can be either a member-managed LLC or a manager-managed LLC.

Question 44

Under the Uniform Limited Liability Company Act,the articles of organization of a limited liability company must set forth whether the limited liability company is to be "manager-managed."

Question 45

In a "member-managed" limited liability company,management power and the number of votes allowed each member are determined by each member's capital contribution.

Question 46

Each member of a member managed limited liability company has rights in the management of the business of the limited liability company based upon the amount of the capital contribution,and those rights may not be modified by agreement.

Question 47

Unless otherwise provided in the operating agreement,a transfer of an interest in a limited liability company does not entitle the transferee to become a member of the LLC or to exercise any right of a member.

Question 48

A member's ownership interest in a limited liability company is called a proportional interest.

Question 49

A limited liability company is not a separate legal entity distinct from its members.

Question 50

A manager of a limited liability company who negligently causes injury to another person while on the job is liable to the injured person.

Question 51

In a limited liability company,the owners have limited liability only for judgments under $500,000.

Question 52

Limited liability companies can enter into contracts only if the owners execute personal guarantees.

Question 53

The general rule is that owners of a limited liability company are not personally liable to third parties for the debts,obligations,and liabilities of a limited liability company beyond their capital contribution.

Question 54

A member is personally liable for the debts of a limited liability company if he or she personally guarantees the repayment of the limited liability company's debts.

Question 55

A transferee of a distributional interest in a limited liability company becomes a member of the LLC if it is so provided in the operating agreement or if all the other members of the LLC consent.

Question 56

A member's distributional interest in a limited liability company is personal property and may be transferred in whole or in part.

Question 57

A transferor who transfers his or her distributional interest in a limited liability company is not released from liability for the debts,obligations,and liabilities of the LLC.

Question 58

A manager of a limited liability company is personally liable for the debts of the limited liability company.

Question 59

A limited liability company is liable for any loss or injury caused to anyone as a result of a wrongful act or omission by a member,a manager,an agent,or an employee of the LLC who commits the wrongful act while acting within the ordinary course of business of the LLC or with authority of the LLC.

Question 60

A limited liability company member is personally liable for torts he or she commits while conducting company business.

Question 61

A non-manager member of a "manager-managed" limited liability company is never entitled to remuneration for services performed for the limited liability company.

Question 62

In terms of fiduciary duty,a non-manager member of a manager-managed limited liability company is treated equally to a shareholder in a corporation.

Question 63

Most states do not restrict the use of limited liability partnerships to certain types of professionals.

Question 64

At the expiration of the term of a "term" limited liability company,the limited liability company can only be continued if all the members vote unanimously for its continuation.

Question 65

If a covered member or manager of a limited liability company commits an ordinarily negligent act that is not grossly negligent,he or she is not liable to the LLC.

Question 66

If a member disassociates from an "at-will" limited liability company,and the disassociation was not wrongful,the limited liability company must purchase the disassociated member's distributional interest.

Question 67

A member of a member-managed limited liability company and a manager of a manager-managed LLC owe a fiduciary duty of care to the LLC not to engage in a known violation of law,intentional conduct,reckless conduct,or grossly negligent conduct that injures the LLC.

Question 68

A member of a manager-managed limited liability company who is not a manager owes no fiduciary duty of loyalty or care to the LLC or its other members.

Question 69

The right to dispose of all or substantially all of the limited liability company's property may not be delegated to a manager.

Question 70

In a "manager-managed" limited liability company,members who are not managers have no rights to manage the limited liability company.

Question 71

As a form of conducting business in the United States,limited liability companies began:

A) in Massachusetts, in the early 1800s.
B) in 1950, when New York became the first state in the United States to enact legislation allowing limited liability companies.
C) in 2000, when the United States Congress enacted legislation allowing limited liability companies.
D) in Massachusetts, in the 1700s.
E) in 1977, when Wyoming became the first state in the United States to enact legislation allowing limited liability companies.

Question 72

In a limited liability partnership,there is no tax paid at the partnership level,and all profits and losses are reported on the individual partner's income tax return.

Question 73

A member of a member-managed limited liability company and a manager of a manager-managed LLC owe a fiduciary duty of loyalty to the LLC.

Question 74

The fiduciary duty of loyalty includes the duty not to usurp the limited liability company's opportunities,make secret profits,secretly deal with the LLC,secretly compete with the LLC,or represent any interests adverse to those of the LLC.

Question 75

LLCs are treated as ________ distinct from its members.

A) artificial persons
B) partnerships
C) sole proprietorships
D) "C" corporations
E) "S" corporations

Question 76

Limited liability company ________ regulate the formation,operation,and dissolution of LLCs.

A) decrees
B) mandates
C) codes
D) decisions
E) annotations

Question 77

In a limited liability partnership,all of the partners have limited liability.

Question 78

Limited liability companies are creatures of ________.

A) local ordinance
B) state law
C) federal law
D) constitutional mandate
E) the United States Supreme Court

Question 79

Unless the operating agreement provides otherwise,a member of a "member-managed" limited liability company has the power to withdraw from the limited liability company,but a member of a "manager-managed" limited liability company does not.

Question 80

A limited liability company can give constructive notice of a member's disassociation by filing a statement of disassociation with the Secretary of State,stating the name of the limited liability company,and the name of the member disassociated from the limited liability company.