Deck 43: LPs, LLCs, and LLPs

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

A limited partner may never sue the business.

Question 5

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 6

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

Question 7

A limited liability company pays federal income tax.

Question 8

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

Question 9

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

Question 10

Every limited partnership must have at least one general partner.

Question 11

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 12

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

Question 13

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

Question 14

A limited partner can never lose money.

Question 15

Courts tend to resolve ambiguities in limited partnership agreements against the general partners.

Question 16

Limited liability is not a feature of general partnership law.

Question 17

A limited partner may receive a share of the profits.

Question 18

The names of limited partners and investors must be included on the certificate of limited partnership.

Question 19

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

Question 20

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

Question 21

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

Question 22

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 23

Limited liability partnership statues are designed to permit the conversion of existing general partnerships into limited liability partnerships.

Question 24

Managers of an LLC have the same fiduciary duties to the entity as corporate officers have to a corporation.

Question 25

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 26

Limited liability companies may be formed without filing formal articles of organization with the secretary of state.

Question 27

A limited liability partnership protects partners from liability for the wrongful acts of those whom they directly supervise and control.

Question 28

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 29

Management of an LLC is vested in its:

A) members
B) partners
C) shareholders
D) managers

Question 30

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

Question 31

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 32

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 33

Which of the following statements regarding limited partnerships is true?

A) The words limited partnership or simply LP must appear in the firm's name.
B) General partners cannot avoid personal liability by incorporating.
C) Limited partners can lose their liability limitation if they participate in the control of the business.
D) All of the statements are true.

Question 34

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

Question 35

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 36

An LLC is a legal entity with the authority to conduct business in its own name.

Question 37

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

Question 38

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 39

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

A) A share of the profits.
B) The right to sue the general partner to protect the limited partners' interest.
C) Both a.and b.
D) Neither a.nor b.

Question 40

The operating agreement of an LLC must be in writing to be valid.

Question 41

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 42

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 43

A limited liability company:

A) must have at least one member that is subject to unlimited liability.
B) member may actively participate in control of the business without losing limited liability status.
C) both a.and b.
D) neither a.nor b.

Question 44

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

Question 45

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) has unlimited life regardless of what happens with any individual member.

Question 46

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 47

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 48

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 49

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 50

A limited liability company's operating agreement:

A) is equivalent to the bylaws of a corporation.
B) must be in writing.
C) does not cover member compensation..
D) all of the above.

Question 51

The owners of a limited liability company are known as:

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

Question 52

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?