Question 1

If a joint venturer secretly profits from a project that was supposed to be a venture-related deal, the other joint venturers may be awarded damages for the breach of loyalty.

Accepted Answer

This is a breach of loyalty, which is an obligation of joint venturers to act in good faith towards each other and for the benefit of the venture. A joint venturer who secretly profits from the project is in violation of this obligation and may be held liable for damages.

Question 2

The operating agreement of a limited liability company cannot provide for the calculation of a buyout price on a member's dissociation because the event has not yet occurred.

Accepted Answer

The operating agreement of a limited liability company can provide for the calculation of a buyout price on a member's dissociation.

Question 3

Grape Vineyards LLC, the members of which include Howie and Ilya, can hold title to property because as a limited liability company the firm is

Accepted Answer

A limited liability company is considered a legal person, meaning it is a distinct entity from its members and has the ability to hold title to property in its own name.

Question 4

Ensure Care LLC's owners are Fez and Guan. As a limited liability company, Ensure Care enters into contracts

Accepted Answer

As a limited liability company, Ensure Care LLC is a separate legal entity apart from its owners. Therefore, it can enter into contracts on its own behalf and is responsible for fulfilling the terms of the contract, not its owners.

Question 5

If the members of a limited liability company do not stipulate in their operating agreement how voting rights will be apportioned, in most states, only the member-managers will be entitled to vote.

Accepted Answer

In most states, if the members of a limited liability company do not stipulate in their operating agreement how voting rights will be apportioned, voting rights are typically apportioned according to the members' respective contributions to the company, not limited to member-managers.

Question 6

A syndicate may be organized as a corporation or a partnership, or in some situations as no recognizable form of business organization.

Accepted Answer

A syndicate can be formed as a corporation or a partnership, but it can also be formed in a more informal or unconventional manner without a recognizable form of business organization.

Question 7

If a limited liability company is not meeting the economic purpose for which it was established, a court may order the dissolution of the firm.

Accepted Answer

This is true according to most state LLC statutes. If the LLC is not fulfilling its primary purpose, a court may order its dissolution.

Question 8

In most situations, with respect to a limited liability company's debts, the firm's members are shielded from

Accepted Answer

The answer of In most situations, with respect to a...

Question 9

Because the activities of a partnership are more limited than the business of a joint venture, the members of a joint venture are presumed to have more power to bind their co-venturers.

Accepted Answer

In a joint venture, the activities are typically more limited and specific compared to a partnership, which generally involves a broader and ongoing business relationship. Therefore, the presumption about the power to bind co-venturers does not necessarily hold based on the scope of activities.

Question 10

Like a partner in a partnership, the member of a limited liability company has the power to dissociate from the firm at any time, but may not have the right.

Accepted Answer

While a member of a limited liability company has the power to dissociate, they may not necessarily have the right to do so. The terms of dissociation should be outlined in the LLC operating agreement.

Question 11

The operating agreement of a limited liability company and a state's LLC statute can be applied together to determine the outcome of a dispute between the firm's members.

Accepted Answer

Both the operating agreement and the state LLC statute govern the operation of a limited liability company, and they can be used together to determine how disputes between members should be resolved.

Question 12

The beneficiaries of a business trust are personally liable for the trust's debts and obligations.

Accepted Answer

The beneficiaries of a business trust are not personally liable for the trust's debts and obligations. The trust's assets are used to pay off any obligations and if there aren't enough assets to cover the debts, the beneficiaries are not required to contribute their personal funds.

Question 13

Like partners, unless otherwise agreed, joint venturers have an equal voice in controlling a venture-related project.

Accepted Answer

Joint venturers typically have an equal say in making decisions related to a jointly owned business or project, unless they have specified otherwise in their agreement or contract.

Question 14

When a limited liability company is dissolved, the members may preserve the assets for a reasonable time to optimize their return during the winding up process.

Accepted Answer

This is true according to the default rules of most state LLC statutes in the US. However, the specific LLC operating agreement may provide for a different process for winding up and distributing assets.

Question 15

A cooperative can be incorporated.

Accepted Answer

A cooperative can be incorporated as a legal entity under the applicable laws and regulations of a country or state.

Question 16

Among the states, the law governing limited liability companies is far from uniform because

Accepted Answer

Limited liability company statutes vary from state to state, meaning that each state has its own laws and regulations regarding LLCs. There is no Uniform Limited Liability Company Act, which would provide a consistent set of rules across all states. Therefore, there is a lack of uniformity in the legal framework governing LLCs.

Question 17

In a joint stock company, the shareholders are considered to be agents of one another, as the partners are in a partnership.

Accepted Answer

In a joint stock company, shareholders are not considered agents of one another; instead, the company itself is a separate legal entity responsible for its own actions.

Question 18

If a member of a limited liability company dissociates from the firm in violation of the operating agreement, the member can be held liable for any loss to the business resulting from the withdrawal.

Accepted Answer

According to the Uniform Limited Liability Company Act, if a member dissociates from an LLC in violation of the operating agreement and causes harm to the business, they can be held liable for any loss resulting from the withdrawal.

Question 19

If a member of a limited liability company dissociates from the firm, the other members can continue the firm's business, and the dissociated member can continue to act as an agent for the firm.

Accepted Answer

Upon dissociation, a member loses the ability to act as an agent for the LLC and cannot bind the LLC in business dealings or transactions.

Question 20

A business organizational form that limits its owners' liability allows the firm to lawfully

Accepted Answer

A business organizational form that limits its owners' liability allows the firm to take risks, but it does not condone reckless or misconduct behavior. The limited liability protection means that the owners' personal assets are shielded from the company's debts or legal issues, but they are still responsible for acting ethically and following the law.

Quiz 32: Limited Liability Companies and Special Business Forms