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Business Law
Q:
When a corporation is dissolved voluntarily, the corporation must notify its creditors of the dissolution.
Q:
Dissolution can be brought about voluntarily by the directors and shareholders of a corporation.
Q:
Federal securities laws strictly control the terms, duration, and circumstances under which most tender offers are made.
Q:
A corporate takeover is the process of acquiring control over a corporation by the purchase of a substantial number of the voting shares of its stock.
Q:
Generally, a corporation that purchases the assets of another corporation is automatically responsible for the liabilities of the selling corporation.
Q:
A corporation that is selling all of its assets must obtain approval only from its board of directors.
Q:
Once a dissenting shareholder elects appraisal rights, the shareholder loses his or her shareholder status.
Q:
Shareholder appraisal rights do not usually extend to short-form mergers.
Q:
A short-form merger is the legal combination of two or more corporations online.
Q:
In a share exchange, some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation.
Q:
The board of directors of each corporation involved must approve a share exchange.
Q:
The officers employees of each corporation involved must approve a merger.
Q:
After a consolidation, there is only one surviving corporation.
Q:
A merger involves the legal combination of two or more corporations, only one of which continues to exist.
Q:
Venture capital is capital provided to new business ventures by professional, outside investors.
Q:
Usually, a private equity firm buys an entire corporation and may later reorganize it as a publicly held corporation.
Q:
Preferred shares normally have a fixed maturity date on which the firm must pay them off.
Q:
Common stock provides a proportionate interest in the corporation with regard to net assets.
Q:
Bonds represent the purchase of ownership in a business firm.
Q:
Firms are obligated to return a principal amount per share to each holder of common stock.
Q:
Stocks represent the borrowing of funds by firms.
Q:
Common stock provides a proportionate interest in the corporation with regard to control.
Q:
A court will not pierce the corporate veil of a corporation that is merely too "thinly" capitalized.
Q:
To pierce the corporate veil means to ignore the corporate structure, exposing the shareholders to personal liability.
Q:
When the corporate privilege is abused for personal benefit, the courts will require the owners to assume personal liability.
Q:
A court will not pierce the corporate veil of a corporation that is formed merely to evade an existing legal obligation.
Q:
A close corporation cannot operate as an S corporation.
Q:
A corporation whose shares are held by relatively few persons is a partnership.
Q:
A corporation is liable for the torts committed by its officers within the course and scope of their employment.
Q:
A holding company is a company whose business activity consists of holding shares in another company.
Q:
Normally, corporate shareholders are personally liable for the obligations of the corporation.
Q:
A corporate director is the owner of the corporation.
Q:
Sally and Tom decide to go into business, selling discounted merchandise through their Web site "e-Buy." They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm. The agreement also states that only Sally will have the authority to bind the partnership in deals with third parties, but the agreement says nothing about the management of the firm or a division of profits. Without Sally's knowledge, Tom tells United Computer Products, Inc., that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy. In the first year, e-Buy makes a profit of $50,000. What are the partners' rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year's profits? If so, how much is each entitled to?
Q:
Ewa, the owner of Face-2-Face Enterprises, is a sole proprietor. What are the chief characteristics, advantages, and disadvantages of this form of business organization? Ewa wants to obtain additional capital to expand Face-2-Face, but she does not want to lose control of the firm. As a sole proprietor, what is her best option to attain these goals?
Q:
Felipe is a member of Great States Transport LLC. Felipe's relationship to Great States ends, but the firm continues to do business. This is
A.dissociation.
B.dissolution.
C.winding up.
D.wrongful.
Q:
Cecilia's Day Spa, LLC, is a member-managed limited liability company. If the law in Cecilia's state is like the law in most states, unless the members have agreed otherwise, voting rights are apportioned according to
A.capital contributions.
B.participation in management.
C.the number of members.
D.transactions with the firm.
Q:
CPA Accounting, LLC, is a limited liability company. If the law in CPA's state is like the law in most states, unless the members have agreed otherwise, participants in the firm's management will be considered to include
A.all members.
B.no member.
C.one member.
D.two members, including at least one general partner.
Q:
Pizza & Cookies, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement and the state LLC statute do not cover. The dispute is governed by
A.no law.
B.the federal Uniform LLC Law.
C.the principles of partnership law.
D.the state corporation statute.
Q:
B2B, LLC, is a limited liability company. Among its members, a dispute arises that the operating agreement does not cover. The dispute is governed by
A.the applicable state LLC statute.
B.the federal Uniform LLC Law.
C.the principles of partnership law.
D.the state corporation statute.
Q:
China Bank is a foreign entity-a firm owned and operated by investors in a foreign country. With respect to an LLC in the United States, China Bank can
A.act as a creditor, but cannot otherwise invest or participate.
B.become a member.
C.not become a member, but can participate in its operations.
D.not become a member or otherwise participate in its operations.
Q:
Energy Green, LLC, is a limited liability company. Instead of distributing its profits to its members, Energy wants to reinvest the profits in its business. For this reason, Energy may prefer to be taxed as
A.a corporation.
B.a partnership.
C.a sole proprietorship.
D.a natural person.
Q:
QuizBooks LLC is a limited liability company. Like any other LLC, unless QuizBooks chooses otherwise, the firm will be taxed as
A.a corporation.
B.a natural person.
C.a partnership.
D.a sole proprietorship.
Q:
Jay is a member of Kitchen Cookouts, LLC, a limited liability company. Jay is liable for Kappa's debts
A.in proportion to the total number of members.
B.to the extent of his investment in the firm.
C.to the extent that the other members do not pay the debts.
D.to the full extent.
Q:
Sustainable Caf LLC is a limited liability company. Like any other LLC, unless Sustainable Caf chooses otherwise, the firm will be taxed as
A.a corporation.
B.a sole proprietorship.
C.a partnership.
D.none of the choices.
Q:
Location! Realty LLC is a limited liability company (LLC). Like other LLCs, for federal jurisdictional purposes, Location! Realty is most likely a citizen of
A.all states.
B.every state in which its members are citizens.
C.no state.
D.only the state in which it was formed.
Q:
Dani is considering forms of business organization for her financial advisory firm. Like most states, Dani's state requires that to form a limited liability company, she must file with a central state agency
A.articles of certification.
B.articles of formation.
C.articles of organization.
D.no specific documents.
Q:
Coco is considering forms of business organization for her confections business-Coco's Cupcakes. Most states require that a limited liability company have
A.no minimum number of members.
B.at least one member.
C.at least two members.
D.at least three members, including at least one general partner.
Q:
Greta is a member of Hovercraft LLC. As a member, Greta is
A.a manager or officer, but not an owner.
B.an investor, but not a manager, officer, or owner.
C.an owner.
D.a participant, but not an investor, manager, officer, or owner.
Q:
Esteban and Florian want to form a limited liability company (LLC) to manage their business, Gordian Nuts. LLC statutes have been adopted in
A.every state.
B.no state.
C.less than one-fifth of the states.
D.only Wyoming.
Q:
Kelly, Lars, and Mona agree to be partners in Neighborhood Delivery Service (NDS), splitting the profits equally. Kelly contributes 67 percent of the capital. When NDS is dissolved, its liabilities are greater than its assets. The losses are paid by
A.all of the partners in proportion to their capital contributions.
B.all of the partners in proportion to their shares of the profits.
C.Kelly because she contributed most of the capital.
D.Lars and Mona because they contributed the least of the capital.
Q:
Hud and Iggy form Jerry-Bilt Construction to enter into a contract to build one bridge. Under their partnership agreement, Jerry-Bilt is to dissolve when the bridge is built. Iggy signs a contract for the firm to build a second bridge. Jerry-Bilt
A.dissolves as soon as the first bridge is built.
B.dissolves as soon as the second bridge is built.
C.dissolves immediately on Iggy's signing of the second contract.
D.does not dissolve.
Q:
Clu, Dolf, and Elton do business as Fertile Valley Farm. Clu's relationship to the firm ends, but it continues to do business. This is
A.dissociation.
B.dissolution.
C.winding up.
D.wrongful.
Q:
Fact Pattern 23-2
Luann and Mace are partners in Networx, a computer peripherals firm.
Refer to Fact Pattern 23-2. Mace dissociates from Networx. Luann signs a contract with Physik Drives, a wholesale component supplier, apparently on Networx's behalf. Physik does not know of Mace's dissociation. The contract is binding on
A.Luann, Mace, and Networx.
B.Luann only.
C.Networx only.
D.Physik only.
Q:
Fact Pattern 23-2
Luann and Mace are partners in Networx, a computer peripherals firm.
Refer to Fact Pattern 23-2. Luann signs a contract with Oleo Chips, a retail component supplier, apparently on Networx's behalf. The contract is binding on
A.Luann, Mace, and Networx.
B.Luann only.
C.Networx only.
D.Oleo only.
Q:
Corbin, a partner in Doctors Medical Clinic, applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners. Evermore knows that Corbin is not authorized to take out the loan. Corbin defaults on the loan. Liability for its unpaid amount is imposed on
A.Corbin and Doctors, jointly.
B.Corbin only.
C.Doctors only.
D.Evermore only.
Q:
Megan and Nicole do business as One World Realty. In acting on the firm's behalf in a deal with Property Acquisition Company, Megan fails to account for the profit. To her firm, Megan is
A.liable for breach of the duty of common sense.
B.liable for breach of the duty of economic sense.
C.liable for breach of the duty of loyalty.
D.not liable.
Q:
Rona and Savannah do business as Treasure Island Traders. Acting in good faith on the firm's behalf in a deal with Unlimited Potential, Inc., Rona makes an honest error in overestimating the profit. To her firm, Rona is
A.liable for breach of the duty of care.
B.liable for breach of the duty of economic sense.
C.liable for breach of the duty of loyalty.
D.not liable.
Q:
Denise and Elke do business as Final Curtain Decorators. In most states, for purposes of holding title to property, this partnership would be treated as
A.an aggregate of the individual partners.
B.a natural person.
C.an entity.
D.a non-existent party.
Q:
Sable and Rex agree while talking on the phone to form a partnership to deal in transfers of real property, which fall under the Statute of Frauds. Their partnership agreement is legally binding
A.only if a copy of the agreement is filed in the appropriate state office.
B.only if the agreement is reduced to writing.
C.only if an information return is filed with the Internal Revenue Service.
D.without more.
Q:
Noah and Orin do business as Pest Control Partners. In most states, for the purposes of suing and being sued, Pest Control Partners would be treated as
A.an aggregate of the individual partners.
B.a natural person.
C.an entity.
D.a non-existent party.
Q:
Fact Pattern 23-1
Desi starts up eSites, an Internet service, and leases office space in a building owned by Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of eSites' profits, each month. The term is two years. Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50, plus a commission of 10 percent of the profits. The term is also two years.
Refer to Fact Pattern 23-1. Desi and Gwen are
A.not partners, because Gwen does not have an ownership interest or management rights in eSites.
B.not partners, because the pay includes an hourly wage.
C.not partners, because the pay includes only 10 percent of the profits.
D.partners in a partnership for two years.
Q:
Fact Pattern 23-1
Desi starts up eSites, an Internet service, and leases office space in a building owned by Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of eSites' profits, each month. The term is two years. Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50, plus a commission of 10 percent of the profits. The term is also two years.
Refer to Fact Pattern 23-1. Desi and Fred are
A.not partners, because Fred does not have an ownership interest or management rights in eSites.
B.not partners, because the lease includes a "base rental."
C.not partners, because the rent includes only 10 percent of the profits.
D.partners in a partnership for two years.
Q:
Ben, who runs a livestock breeding business, owes the Circle C Ranch $40,000. Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid. Because of this agreement, the Circle C is
A.Ben's creditor and partner.
B.Ben's creditor only.
C.Ben's partner only.
D.neither Ben's creditor nor his partner.
Q:
Guy and Hanna do business as G-H Associates. If G-H is a partnership, it is governed by the Uniform Partnership Act
A.in the absence of an express agreement.
B.in the absence of an implied agreement.
C.only in the presence of an express agreement.
D.under all circumstances.
Q:
Jody owns KuppaJoe Kiosks, a sole proprietorship. Jody's liability is
A.limited by state statute and varies from state to state.
B.limited to the extent of her capital expenditures.
C.limited to the extent of her original investment.
D.unlimited.
Q:
Kelly, the owner of Llama Farms, a sole proprietorship, wants to obtain additional business capital but to maintain control. This can best be accomplished by
A.borrowing funds.
B.bringing in partners.
C.issuing stock.
D.selling the business.
Q:
Bernie wants to go into the business of trucking refrigeration units. Among the reasons that would probably convince Bernie to set up his business as a sole proprietorship would be
A.its greater flexibility.
B.its limited liability.
C.its perpetual existence.
D.the ease of transferring the business to others.
Q:
Carl sells Direct Marketing Enterprises, a sole proprietorship, to Eve. This is a transfer of
A.a license.
B.a trade name.
C.the formula to make a product.
D.the ownership of the business.
Q:
Jim organized, and owns and operates, Jim's Landscaping Service in the simplest form of business organization. This is
A.none of the choices.
B.a limited liability company.
C.a partnership.
D.a sole proprietorship.
Q:
As with partnerships, a court can order a limited liability company to dissolve in certain circumstances.
Q:
Most limited liability company statutes have no provisions regarding members' meetings.
Q:
Normally, a dissociated member of a limited liability company (LLC) has the right to have his or her interest in the LLC bought by the other members.
Q:
When a member dissociates from a limited liability company, the member's duty of loyalty continues.
Q:
Some states provide that in the absence of an agreement to the contrary each member of a limited liability company has one vote.
Q:
A limited liability company must be managed by non-member managers.
Q:
In many states, an operating agreement is not required for a limited liability company to exist.
Q:
The liability of the members of a limited liability company is limited to the amount of their investments.
Q:
For federal income tax purposes, one-member limited liability companies are automatically taxed as sole proprietorships.
Q:
A limited liability company can be taxed as a partnership.
Q:
A limited liability company is not a citizen of any state.