Deck 43: LPs, LLCs, and LLPs

Question 1

A general partner within a limited partnership may be a corporation.

Answer 1

True

Question 2

In a limited partnership, general partners are not responsible for the debts of the firm.

Answer 2

False

Question 3

A limited partner may receive a share of the profits.

Answer 3

True

Question 4

The limited liability company combines the tax advantage of the partnership with the limited liability feature of the corporate form of business organization.

Question 5

While most states have adopted limited liability company statutes, few states have created statutes allowing the formation of limited liability partnerships.

Question 6

The dissolution of a limited partnership is governed by unique rules quite different from those applicable to the dissolution of a general partnership.

Question 7

Firms offering professional services (for example, accounting firms) are prohibited from becoming limited liability partnerships.

Question 8

It is impossible to form a business in a manner that allows for single taxation and limited liability.

Question 9

Limited partners may contribute cash or property as their capital contributions.

Question 10

If a limited partnership certificate is never filed, all partners are treated as limited partners.

Question 11

Limited liability is not a feature of general partnership law.

Question 12

A limited liability company pays federal income tax.

Question 13

It is possible for a limited partner to be subject to the debts of the firm if the limited partner participates in the control of the business.

Question 14

A limited partner may never sue the business.

Question 15

Even limited partners are completely liable for debts of the business.

Question 16

Both general partnerships and limited partnerships are created only through the process of executing a certificate.

Question 17

A limited partner can never lose money.

Question 18

Every limited partnership must have at least one general partner.

Question 19

Limited liability companies are formed without filing formal articles of organization with the secretary of state; in this sense, limited liability companies are easier to create than corporations.

Question 20

Under the Revised Uniform Limited Partnership Act, limited partners may engage in certain "safe harbor" activities without losing their protection from liability. These activities include being a contractor for, or an agent or employee of, the limited partnership or of a general partner.

Question 21

A limited liability company:

A) is the same type of business entity as a "Subchapter S" corporation.
B) has no restriction on the number of owners.
C) is taxed in a manner similar to that of a corporation.
D) exposes at least one (1) of its owners to unlimited liability.

Question 22

Under the Revised Uniform Limited Partnership Act:

A) the words "limited partnership" must appear without abbreviation in the firm name.
B) a limited partner may contribute services, cash or property to the limited partnership.
C) Both a. and b.
D) none of the above.

Question 23

A limited liability company:

A) always qualifies for partnership tax treatment.
B) never qualifies for partnership tax treatment.
C) may qualify for partnership tax treatment.
D) None of the above.

Question 24

The dissolution and winding up of a limited partnership is governed by the same principles applicable to a __________.

A) "Subchapter S" corporation.
B) limited liability company.
C) general partnership.
D) none of the above.

Question 25

Under the Revised Uniform Limited Partnership Act, a limited partner probably will not lose the protection of limited liability when the limited partner:

A) becomes a contractor for, or an agent or employee of, the limited partnership or of a general partner.
B) consults with and advises a general partner regarding the partnership business.
C) votes on partnership matters, such as dissolving and winding up the limited partnership or removing a general partner.
D) all of the above.

Question 26

Each limited partner in a limited partnership is entitled to which of the following?

A) the right to have the limited partner's name as part of the limited partnership name
B) the right to sue the general partner to protect the limited partners' interest.
C) Neither a. nor b.
D) Both a. and b.

Question 27

In a member-managed limited liability company, who controls the operation of the firm?

A) partners
B) shareholders
C) members
D) none of the above

Question 28

A limited liability company may be managed directly by the owners.

Question 29

In a limited partnership, the most limited partners can lose is:

A) their preferred (not common) stock shares.
B) $1,000,000.
C) their investment in the limited partnership.
D) their investment in the limited partnership, as well as all of their personal assets, since the term "limited" refers to the limited partners' managerial obligations, rather than to their liability exposure.

Question 30

A limited liability company may hold property in its own name.

Question 31

Members of a limited liability company share profits:

A) according to their status (general or limited) in the firm.
B) in proportion to their contribution of services.
C) in proportion to their capital contribution.
D) according to the terms of the operating agreement.

Question 32

All owners of a limited liability company are known as officers.

Question 33

For tax purposes, a limited liability company may be treated as a partnership.

Question 34

The spread of limited liability corporation statutes resulted from:

A) a United States Supreme Court decision.
B) an Internal Revenue Service ruling.
C) a Wyoming Supreme Court decision.
D) a Securities and Exchange Commission ruling.

Question 35

A limited liability company is identical to a Subchapter S corporation.

Question 36

Under the Revised Uniform Limited Partnership Act, a limited partner may contribute:

A) cash only.
B) property only.
C) services only.
D) cash, property, and services.

Question 37

A limited partnership can be formed by one (1) or more __________ partners and one (1) or more __________ partners.

A) unreserved; reserved
B) active; silent
C) licensed; unlicensed
D) general; limited

Question 38

The partners who manage the limited partnership and are personally liable for the firm debts are __________ partners.

A) general
B) active
C) licensed
D) unreserved

Question 39

The owners of a limited liability company are known as:

A) members.
B) partners.
C) contributors.
D) electors.

Question 40

When no limited partnership certificate is filed, what is the result?

A) Only limited partners are fully liable.
B) Only general partners are fully liable.
C) Limited partners retain their limited liability.
D) Both general and limited partners are fully liable.

Question 41

You are asked to provide two friends who are in business together with advice regarding what they need to do to legally in order to form a limited liability company. Although your friends like the general notion of limited liability in the operation of their business, they are totally unfamiliar with the legal processes for forming a LLC, so you need to provide them with the basic requirements for LLC creation. What specific advice would you give them?

Question 42

It is expected that in the future, the limited liability company will in many instances replace which of the following forms of business ownership?

A) the general partnership
B) the limited partnership
C) the close corporation
D) all of the above

Question 43

A limited liability partnership must include which of the following terms in its name?

A) LLP
B) limited liability partnership
C) either a. or b.
D) neither a. nor b.

Question 44

A limited liability company may be classified as a partnership for tax purposes if:

A) such an election is made by "checking the box" for partnership tax treatment on the appropriate Internal Revenue Service form.
B) such an election is made in the operating agreement.
C) such an election is made in the articles of incorporation.
D) a majority of its members petition the Internal Revenue Service for partnership tax treatment.

Question 45

Alice, Betty, and Cathy are interested in forming a business venture. Alice is quite wealthy and is ready to contribute money to the venture. Betty has a degree in business from an excellent university, worked for five years as a manager in a major corporation, and currently is a leadership/management consultant. Cathy is a scientist who has developed a process that will, according to her, "revolutionize cancer treatment throughout the world." Alice, Betty, and Cathy believe it is in their best interest to form a general partnership. Do you agree? Is there a more appropriate form of business you might recommend?

Question 46

Most limited liability company statutes provide that a LLC will dissolve:

A) by the consent of the members.
B) upon the death of a member.
C) upon the expulsion of a member.
D) all of the above.

Question 47

Which form of business entity was created primarily to shield innocent owners, particularly those in professions, from malpractice liability generated from other owners in the firm?

A) the limited partnership
B) the limited liability partnership
C) the limited liability company
D) none of the above