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Q:
Which of the following is true of a member-managed LLC?
A) Each member has equal rights in the management of the business of the LLC.
B) The member with the highest capital contribution becomes the de facto manager of the LLC.
C) Any matter relating to the business of the LLC is decided by a unanimous vote of the members.
D) Shareholders are not allowed to decide matters relating to the business of the LLC.
Q:
Mary, Harold, Harvey, and William form an LLC by contributing $20,000, $50,000, $55,000, and $150,000 respectively. The LLC is designated to be member-managed. When a decision is put to vote, Mary, Harvey, and Harold vote "yes," whereas William votes "no". Which of the following is true in this context?
A) William's decision prevails as he has invested the maximum capital.
B) No conclusion can be derived as the vote is not unanimous.
C) Mary, Harvey, Harold's decision prevails due to simple majority.
D) The decision is put to vote among employees of the company.
Q:
Which of the following methods are used to appoint a manager of a manager-managed LLC?
A) appointed by the secretary of state
B) vote of majority of the members
C) unanimous vote of members
D) unanimous vote of shareholders
Q:
A ________ is a person who intentionally or unintentionally causes injury or death to another person.
A) protagonist
B) supplanter
C) reversionist
D) tortfeasor
Q:
A member's distributional interest in an LLC is ________ and may be transferred in whole or in part.
A) a vote
B) a proxy
C) personal property
D) an authority in management
Q:
John, Nathan, and Julio form JNJ, LLC with equal capital investment each. On his way to a business meeting with clients of JNJ, Nathan accidentally injures Jessica in a car accident. Which of the following is true in this scenario?
A) Jessica can claim damages from JNJ, LLC as she was injured in the ordinary course of business.
B) Jessica can only claim damages from Nathan and not from JNJ, LLC.
C) Jessica can choose to claim damages from any one of the three.
D) John, Nathan, and Julio have equal personal liability to Jessica's injuries.
Q:
Members of an LLC have ________ liability.
A) limited
B) unlimited personal
C) unlimited capital
D) strict
Q:
Which of the following is true of liabilities of LLCs?
A) Members of the LLC are liable to the extent of their capital contribution.
B) Managers of LLCs are personally liable for the debts, obligations, and liabilities of the LLC.
C) LLCs are not liable for any loss or injury caused by their employees.
D) LLCs are not liable for losses caused due to negligence of their managers during the ordinary course of business.
Q:
A(n) ________ refers to an agreement entered into among members that governs the affairs and business of the LLC and the relations among members, managers, and the LLC.
A) certificate of interest
B) articles of organization
C) operating agreement
D) agreement of conversion
Q:
Peter, Preston, and Penny organize an LLC in the month of January. While composing the operating agreement, they forget to include the amendment clause. Six months later, the situation demands an amendment to the operating agreement. Which of the following would best apply in this scenario?
A) The operating agreement can be amended if all three members approve.
B) The operating agreement cannot be amended as it contains no amendment provision.
C) The operating agreement can be amended with the affirmative majority of all shareholders.
D) The operating agreement can be amended only 60 days after a new amendment provision is included.
Q:
In which of the following cases does the conversion of an existing business to an LLC take effect?
A) when the articles of organization are filed with the secretary of state
B) when the members enter into an agreement of conversion
C) when an operating agreement is finalized by members
D) when the first certificate of interest is issued
Q:
Philip and Deborah form an LLC. Philip contributes $50,000 capital, and Deborah contributes $75,000 capital. They do not have an agreement as to how profits are to be shared. If the LLC makes $100,000 profit in its first year, how will the profit be divided among the members?
A) Philip gets $30,000 and Deborah gets $70,000.
B) Philip gets $50,000 and Deborah gets $50,000.
C) Philip gets $25,000 and Deborah gets $75,000.
D) Philip gets $35,000 and Deborah gets $65,000.
Q:
Gerard and Tony organize an LLC by investing $55,000 and $45,000 respectively. The operating agreement states that profits are to be shared in the ratio of 55:45 between Gerard and Tony and makes no mention of sharing losses. The LLC incurs a loss of $100,000 in its first year. How is this loss shared?
A) Both Gerard and Tony have to pay $50,000 each.
B) Gerard pays $55,000 while Tony pays $45,000.
C) Gerard pays $45,000 while Tony pays $55,000.
D) Gerard and Tony are not liable for the losses of the LLC.
Q:
Which of the following best defines the term distributional interest?
A) the ratio in which profit is distributed among members of an LLC
B) the process of distributing profits or losses according the capital investment of the member
C) the constitution of management of the LLC based on the extent of each member's financial investment
D) a member's ownership interest in an LLC that entitles the member to receive distributions of money and property from the LLC
Q:
A member's ownership interest in an LLC is called a ________.
A) certificate of interest
B) distributional interest
C) collateral interest
D) creditor's interest
Q:
An LLC that was organized in Alabama and operating in Texas with no operations outside the U.S. is considered a ________ in Texas.
A) foreign limited liability company
B) limited liability partnership
C) domestic limited liability company
D) general partnership
Q:
Sam Muller and Toby Richardson organize an LLC in the state of Delaware. In the articles of organization, they specify the duration of the LLC as "25 years from the date of filing the articles of organization." Which of the following true in this context?
A) The LLC is invalid, as it does not specify a date of termination.
B) The LLC may be dissolved at will any time after 25 years from the date of filing the articles of organization.
C) Muller and Richardson have organized a valid term LLC.
D) Muller and Richardson have organized an at-will LLC.
Q:
A(n) ________ refers to a document that evidences a member's ownership interest in an LLC.
A) certificate of interest
B) articles of organization
C) operating agreement
D) agreement of conversion
Q:
The certificate of interest acts the same as a(n) ________ issued by a corporation.
A) promissory note
B) stock certificate
C) deposit note
D) initial public offer
Q:
An LLC is a ________ in the state in which it is organized.
A) sole proprietorship
B) domestic LLC
C) term LLC
D) general partnership
Q:
Which of the following is true of the ULLCA?
A) It provides comprehensive laws for the formation of corporations.
B) It provides uniform laws for the dissolution of LLCs.
C) It is a state law that is uniform across the United States.
D) It governs the operation of proprietorships and LLPs.
Q:
Which of the following is true of LLC taxation?
A) An LLC is taxed as a corporation in all general cases.
B) Income or losses of an LLC do not flow through to the members' individual income tax returns.
C) Members of an LLC are subject to double taxation.
D) An LLC is not taxed at the entity level.
Q:
Which of the following is true of an LLC formation?
A) Doctors and lawyers cannot operate practices as LLCs.
B) An LLC has to be organized in every state that it operates.
C) "LC" cannot be used to denote an LLC.
D) An LLC is a creation of federal law.
Q:
In states where an LLC may be organized by only one member, ________ can obtain the benefit of the limited liability shield of an LLC.
A) corporations
B) sole proprietors
C) LLPs
D) general partnerships
Q:
________ refer to the formal documents that must be filed at the secretary of state's office of the state of organization of an LLC to form the LLC.
A) Operating agreements
B) Certificates of interest
C) Articles of organization
D) Articles of amendment
Q:
A(n) ________ is a document that sets forth the rights and duties of general and limited partners.
Q:
A(n) ________ is a document that is filed with the secretary of state upon the dissolution of a limited partnership.
Q:
Which of the following is true of an LLC?
A) An LLC is a creature of federal law.
B) An LLC is regarded a separate legal entity.
C) An LLC cannot hold title to property.
D) The owners of LLC are called general partners or specific partners.
Q:
The ________ is a model act that provides comprehensive and uniform laws for the formation, operation, and dissolution of LLCs.
A) Williams Act
B) Securities Exchange Act
C) ULLCA
D) ULPA
Q:
The owner of an LLC is called ________.
A) general partner
B) limited partner
C) proprietor
D) member
Q:
________ is a rule which provides that upon the death of a general partner, the deceased partner's right in specific partnership property vests in the remaining partner or partners; it does not pass to his or her heirs or next of kin.
Q:
The ________ Act is a uniform act that regulates the formation, operation, and termination of limited partnerships.
Q:
Limited partnerships are also known as ________.
Q:
A(n) ________ is a document that two or more persons must execute and sign that makes a limited partnership legal and binding.
Q:
________ occurs when (1) a certificate of limited partnership is not properly filed, (2) there are errors in a certificate that is filed, or (3) some other statutory requirement for the creation of a limited partnership is not met.
Q:
The ________ Act is a model act that codifies general partnership law.
Q:
General partners have ________ liability for the debts and obligations of the partnership.
Q:
While claiming under ________ liability, a plaintiff must name the partnership and all of the partners as defendants in a lawsuit.
Q:
A(n) ________ is a partnership created for a fixed duration.
Q:
A(n) ________ is a partnership created with no fixed duration.
Q:
Explain the events that cause the dissolution of a limited partnership under RULPA.
Q:
The designation of ________ is used for businesses that are operating under a trade name.
Q:
A(n) ________ is a document that is filed with the state that designates a trade name of a business.
Q:
The sole proprietor has ________ liability.
Q:
An ordinary partnership is also known as a(n) ________.
Q:
Who among the following get first priority in the distribution of assets upon the dissolution of a partnership?
A) investors
B) limited partners
C) general partners
D) creditors
Q:
List the advantages and disadvantages of a sole proprietorship.
Q:
Explain in brief the formation of a general partnership.
Q:
How are assets distributed after the dissolution of a general partnership?
Q:
Explain in brief the liabilities of general and limited partners in a limited partnership.
Q:
If Gerard Koontz retires from being a general partner in a limited partnership, which of the following is true?
A) A member from Mr. Koontz's immediate family is allowed to take his partnership interest.
B) Only the person Mr. Koontz nominates can take his partnership interest.
C) The partnership is dissolved, according to RULPA norms.
D) The partnership operates normally, without a general partner.
Q:
Which of the following is a cause for the dissolution of a partnership?
A) written consent of the general partners
B) withdrawal of a general partner
C) withdrawal of all limited partners
D) acquisition of business by another partnership
Q:
If a corporation is a general partner to a limited partnership, which of the following would result from the dissolution of the corporation?
A) dissolution of the limited partnership
B) creation of a general partnership
C) reformation of the limited partnership
D) transfer of the partnership to other parties
Q:
Which of the following happens when a general partner withdraws from a limited partnership?
A) The partnership must be sold.
B) The partnership is transferred.
C) The partnership is dissolved.
D) The partnership operates normally.
Q:
Which of the following types of liability do general partners of a limited partnership have for the debts and obligations of the limited partnership?
A) unlimited personal liability
B) limited capital liability
C) liability of termination as partner
D) limited personal liability
Q:
Which of the following types of liability do limited partners of a limited partnership have for the debts and obligations of the limited partnerships?
A) unlimited personal liability
B) liability restricted to debts up to their capital contributions
C) liability of termination as partner
D) unlimited organizational capital liability
Q:
According to the RULPA, what liability does a corporation have if it is a general partner to a limited partnership?
A) unlimited personal liability
B) liability restricted to debts up to its capital contributions
C) liability of termination as partner
D) unlimited organizational capital liability
Q:
Under partnership law, ________ have the right to manage the affairs of the limited partnership.
A) investors
B) sole proprietors
C) limited partners
D) general partners
Q:
Laura is an investor limited partner in a limited partnership. Two years after she becomes a limited partner, Laura thinks that the general partners are not doing a very good job managing the affairs of the limited partnership and participates in the management of the limited partnership. While she is doing so, a bank loans $1 million to the limited partnership, believing that Laura is a general partner. If the limited partnership defaults on the $1 million loan, which of the following holds well?
A) Laura is not personally liable as she is a limited partner on paper.
B) Laura is personally liable as the bank, in good faith, thought she is a general partner.
C) Laura has unlimited personal liability as a limited partner.
D) Laura's liability is restricted to the value of her capital investment in the partnership.
Q:
Which of the following information should a certificate of limited partnership contain?
A) the latest date of dissolution of the partnership
B) a clause to not accept new general partners
C) the name of the party who becomes a general partner in the event of transfer
D) the scope of potential business opportunities and related investment
Q:
Which of the following governs a limited partnership, its internal affairs, and the liability of its limited partners?
A) the federal government
B) all states in which the business operates
C) the articles of limited partnership
D) the law of the state in which it is organized
Q:
________ is said to have occurred if a certificate of limited partnership was not properly filed.
A) Defective formation
B) Illegitimate partnership
C) Void partnership
D) Voidable association
Q:
Partners who erroneously but in good faith believe they have become limited partners can escape liability as general partners by ________.
A) adding their surname to the name of the business establishment
B) filing for a refund of his or her initial investment with interest
C) bringing a lawsuit against all general and limited partners
D) withdrawing from any future equity participation in the enterprise
Q:
Which of the following is true of a limited partnership agreement?
A) It provides that all transactions must be approved by all partners.
B) It does not contain information about dissolution of the partnership as it an agreement of formation.
C) It provides that general and limited partners have equal voting rights.
D) It sets forth the terms and conditions regarding the termination of the partnership.
Q:
Which of the following is true of general and limited partners in a limited partnership?
A) Limited partners are exempt from annual capital investment and need only participate in management functions.
B) General partners are not personally liable for partnership debts.
C) General partners are required to invest capital and refrain from managerial activities.
D) Limited partners are not personally liable for partnership debts beyond their capital contributions.
Q:
Justin and Michael form a limited partnership and start a car dealership. Justin is the general partner and Michael is the limited partner. Seven months after the commencement of the business, Pedro makes an investment and wishes to become a general partner. A week later, Michael's mother wishes to join the partnership as a limited partner. Which of the following is true in this scenario?
A) Pedro cannot become a general partner to the partnership after the business has commenced.
B) Pedro cannot become a general partner to the partnership as a limited partnership can only have one general partner.
C) Michael's mother cannot become a limited partner to the partnership as a limited partnership can only have one limited partner.
D) Both Pedro and Michael's mother can choose to become either general or limited partners to the partnership.
Q:
Which of the following is true of a limited partnership?
A) Other limited partnerships cannot become limited partners in an existing limited partnership.
B) A limited partner is personally liable for the debts of the partnership.
C) Corporations are allowed to become partners in a limited partnership.
D) A limited partnership can have only one general partner but multiple limited partners.
Q:
Which of the following partners of a limited partnership invest capital but do not participate in management?
A) specific partners
B) limited partners
C) general partners
D) sole proprietors
Q:
________ is a situation in which a partner withdraws from a partnership without having the right to do so at that time.
A) Winding up
B) Indemnification
C) Wrongful dissolution
D) Proliferation
Q:
According to priority, which of the following claims are satisfied first after dissolution?
A) creditors
B) creditor-partners
C) capital contributions
D) profits
Q:
A limited partnership has two types of partners, ________.
A) general partners and sole proprietors
B) general partners and limited partners
C) ordinary partners and liable partners
D) special partners and sole proprietors
Q:
Which of the following partners in a limited partnership invest capital, manage the business, and are personally liable for partnership debts?
A) specific partners
B) limited partners
C) general partners
D) sole proprietors
Q:
Which of the following is true of profits and losses in a general partnership?
A) The proportion of profit shared is equal to the general partner's initial investment.
B) Losses are shared equally by all general partners.
C) The general partner who proposed the idea of the business gets most profit.
D) The proportion of investment governs only the proportion of loss shared and not profit obtained.
Q:
Instead of suing the partnerships or other partners at law, general partners are given the right to bring a(n) ________ against other partners.
A) claim for damages
B) tort action
C) call for action
D) action for an accounting
Q:
Which of the following is true of tort liability of a general partnership?
A) Only the partner who committed the tort is liable.
B) Partners who have not committed the tort but had to pay liability cannot indemnify from the partner that committed the torn.
C) A partner can be sued even if he or she did not participate in the commission of the tort.
D) If one of the partners in the partnership is released, the other partners are discharged of liability.
Q:
Which of the following is true of the liability of an incoming partner?
A) An incoming partner is liable for the previous debts of the partnership.
B) An incoming partner is equally liable for all existing debts of the partnership.
C) An incoming partner is liable for the debts of the partnership only to the extent of his or her capital contribution.
D) An incoming partner is not liable for the future debts of the partnership.
Q:
The change in the relationship of partners in a partnership caused by any partner ceasing to be associated in the carrying on of the business is known as ________.
A) action for an accounting
B) indemnification
C) winding up
D) dissolution
Q:
Inference of the existence of a general partnership is drawn only if profits are received as ________.
A) share in partnership
B) payment of wages
C) interest owed on a loan
D) a debt owed to a creditor
Q:
Which of the following is true in the creation of a general partnership?
A) The business name has to have the names of all the partners.
B) The business name cannot be a fictitious name.
C) The name selected by the partnership cannot indicate that it is a corporation.
D) The business cannot operate under a trade name.
Q:
Which of the following must be in writing even if it is below the time stipulation of the Statute of Frauds?
A) businesses that have more than one commercial venture
B) partnerships authorized to deal real estate
C) businesses that are authorized to lend money
D) enterprises which deal with health and medicine