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Business Law
Q:
Simone is a manager of Rolling Hills Resort LLC, a limited liability company. Rolling Hills is formed in a state that does not explicitly create fiduciary duties for LLC managers but does require the exercise of good business judgment. Unless a court rules otherwise, Simone owes fiduciary duties to
a. Rolling Hills's members.
b. Rolling Hills's suppliers.
c. Rolling Hills's customers.
d. none of the choices.
Q:
Kirby is a manager of Jumpstart Fitness LLC, a limited liability company. Jumpstart is formed in a state that imposes fiduciary duties on LLC managers. Kirby owes these duties to
a. Jumpstart's members.
b. Jumpstart's suppliers.
c. Jumpstart's customers.
d. none of the choices.
Q:
Kristal is a member of Laboratory CSI Services, LLC, a limited liability company. Kristal can participate in the firm's management
a. only to the extent that she assumes liability for the firm's debts.
b. only to the extent of her investment in the firm.
c. to any extent.
d. to no extent.
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:
Homer's Remodeling, LLC, is a limited liability company. Among the members, a dispute arises that their operating agreement does not cover. No statute applies. The dispute is governed by the principles of
a. corporate law.
b. partnership law.
c. sole proprietorship law.
d. joint venture law.
Q:
Qatar Global Investments is a foreign entitya firm owned and operated by investors in a foreign country. With respect to a limited liability company in the United States, Qatar Global 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:
StartUp Investors, LLC, is a limited liability company without a written operating agreement. Among the members, a dispute arises concerning the division of profits. Under most LLC statutes, the profits will be
a. distributed according to the members' proportionate shares of ownership in the firm.
b. divided equally among the members.
c. forfeited to the state.
d. reinvested in the business until the dispute is resolved.
Q:
Jessica's Jumpin" Jelly Beans, LLC, is a limited liability company. Unless indicated otherwise on Jessica's federal tax form, the firm will be taxed as
a. a cooperative.
b. a corporation.
c. a joint venture.
d. a partnership.
Q:
Jordana is a member of Klondike Coffee, LLC, a limited liability company. Jordana is liable for Klondike's debts
a. in proportion to the total number of members.
b. to the extent of his capital contribution.
c. to the extent that the other members do not pay the debts.
d. to the full extent.
Q:
Jeri and Knute are members of Lighthouse Tours LLC, a limited liability company. With respect to Lighthouse Tours's liability, as members, Jeri and Knute are shielded from
a. all liability.
b. no liability.
c. personal liability.
d. "alter ego" liability.
Q:
Farm2Fork, LLC, is a limited liability company. Rather than distribute 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 business trust.
Q:
Location! Realty LLC is a limited liability company. 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:
Mit-E Mart LLC was formed in New Jersey. Mit-E Mart's members are Odel, who is a citizen of New Jersey, and Pola, who is a citizen of New York. For federal diversity jurisdictional purposes, Mit-E is a citizen of
a. all states.
b. New Jersey and New York.
c. New Jersey only.
d. no state.
Q:
Coco is considering forms of business organization for her concessions businessCoco's Cupcakes. Most states require that a limited liability company have at least
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:
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:
Fay is a member of Garden Groves LLC. Like other members of limited liability companies, Fay's liability for Garden Groves's obligations resembles the liability of
a. a member of a joint venture.
b. an owner of a sole proprietorship.
c. a partner of a partnership.
d. a shareholder of a corporation.
Q:
A business trust is created by a written trust agreement.
Q:
The owners of an unincorporated cooperative have joint liability for its obligations.
Q:
The beneficiaries of a business trust are personally liable for its obligations.
Q:
A cooperative must be incorporated.
Q:
A business trust resembles a corporation.
Q:
Like a corporation, the ownership of a joint stock company is represented by shares of stock.
Q:
A syndicate may be organized as a corporation but not as a partnership.
Q:
A joint stock company is a hybrid of a partnership and a corporation.
Q:
A group of individuals getting together to finance a particular project may form a syndicate.
Q:
A syndicate may exist in the form of a partnership but not a corporation.
Q:
Joint venturers have the authority to enter into contracts for the business that will bind the joint venture.
Q:
Most courts apply the same principles to joint ventures as they apply to corporations.
Q:
A joint venturer can be held personally liable for the venture's debts.
Q:
A joint venture resembles a partnership but is taxed like a corporation.
Q:
When a limited liability company is dissolved, any member who did not wrongfully dissociate may participate in the winding up process.
Q:
When a member dissociates form a limited liability company, the member's duty of loyalty continues.
Q:
Generally, a dissociated member of a limited liability company (LLC) has the right to have his or her interest in the LLC bought out by the other members.
Q:
A member of a limited liability company (LLC) has the power and the right to dissociate from the LLC at any time.
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:
Most limited liability company statutes have no provisions regarding members' meetings.
Q:
A limited liability company must be managed by its members.
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:
If there is no limited liability company (LLC) agreement covering a topic under dispute, the state LLC statute will govern the outcome.
Q:
Foreign investors are not allowed to become limited liability company members.
Q:
State limited liability company statutes are uniform.
Q:
The members of a limited liability company enjoy limited liability.
Q:
The alter-ego doctrine can be applied to a limited liability company.
Q:
A limited liability company is a citizen of every state in which it does business.
Q:
A limited liability company can be taxed as a corporation.
Q:
A limited liability company can be taxed as a partnership.
Q:
A limited liability company is not a citizen of any state.
Q:
A limited liability company (LLC) formed in one state but doing business in another state is referred to in the second state as a foreign LLC.
Q:
Future members of a limited liability company (LLC) may enter into contracts on the entity's behalf before the LLC is formed.
Q:
A limited liability company is operated in compliance with state law.
Q:
International Exports, L.P., is a limited partnership, with $100,000 in declared but unpaid profits. International's creditors include Friendly Credit Corporation for $5,000 and Gwen, one of International's limited partners, also for $5,000. When Harry, one of International's general partners, decides to retire, the other general partners vote to liquidate and dissolve the firm. The limited partners, who are not asked their opinions, want International to continue in business and file a suit against the general partners to compel this result. Can the court order International to continue? If not, what is the priority of the distribution of International's assets on its dissolution?
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:
Connie, Drew, and Ellen are the general partners of Foreign Auto Repair, a limited partnership. Connie dies. The partnership can
a. continue only after a distribution of its assets.
b. continue only as a general partnership.
c. continue only if Drew and Ellen consent.
d. not continue because Connie's death dissolves the firm.
Q:
Energy Unlimited, LP, is a limited partnership to which its partners, including Fink, have contributed capital. Energy's creditors include Graves Engineering, Inc. On Energy's dissolution, its assets will be distributed to pay
a. Fink and Graves proportionately.
b. Fink first.
c. Graves first.
d. neither Fink nor Graves.
Q:
Venture Capital, LP, is a limited partnership. Its limited partners include more than 150 sophisticated investors and investment professionals. A Venture limited partner loses his or her limited liability if he or she
a. acts as the firm's manager.
b. does not participate in the firm's management.
c. invests in Unified Fund, one of Venture's competitors.
d. votes on the firm's sale or dissolution.
Q:
Lucy is a limited partner in Metro Contractors, a limited partnership, which cannot pay its debts. Lucy is personally liable for the debts
a. in proportion to the number of partners in the firm.
b. to no extent.
c. to the extent of her capital contribution.
d. to the full extent.
Q:
Rick and Sandy are limited partners in Total Profit Enterprises, a limited partnership. To avoid personal liability for partnership obligations, they must not
a. acquire an interest in the firm.
b. contribute property to the firm.
c. engage in activities independent of the firm's business.
d. participate in the firm's management.
Q:
Fern and Gray want to form a limited partnership to manage two restaurants: Caf Latte and Deli Delite. In most states, a limited partnership will be created when
a. a certificate of limited partnership is filed.
b. a partnership agreement is executed.
c. the business for which the firm is formed actually begins.
d. the partners make their capital contributions.
Q:
Jack and Kyra are partners in Law Firm, LLP, a limited liability partnership. Jack supervises Kyra, who negligently fails to appear in court on behalf of Milo, a client. Liability to Milo rests with
a. Jack and Kyra.
b. Jack only.
c. Kyra only.
d. neither Jack nor Kyra.
Q:
Newt is considering forms of business organization for Newton Design, an architectural firm. An advantage of a limited liability partnership is that partners can avoid personal liability for
a. their own wrongful acts.
b. only other partners' malpractice.
c. only partnership obligations that exceed capital contributions.
d. only partnership obligations that fall within capital contributions.
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:
Mead, Nero, and Olen do business as Pipe & Plumbing Services. After Mead's relationship to the firm ends, Nero and Olen agree to discontinue the business. This is
a. dissociation.
b. dissolution.
c. gross negligence.
d. simple misconduct.
Q:
Jim and Kyle are partners in J&K Sales, which exports technical equipment under a three-year partnership agreement. The U.S. government declares that the equipment can no longer be exported. J&K
a. dissolves as soon as the stated term expires.
b. dissolves as soon as the partners agree to dissolve it.
c. dissolves immediately unless the partners change its business.
d. does not dissolve.
Q:
Edgar, Jon and Phoebe do business as Reliable Movers. Phoebe develops a debilitating illness and can no longer work. Phoebe
a. may dissociate from the partnership.
b. may not dissociate from the partnership without Edgar and Jon's consent.
c. must pay damages to Edgar and Jon for the loss of her work.
d. may terminate the partnership.
Q:
Doral, Esteban, and Fiona are general partners in Centreville Dentistry, a dental clinic. Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners. Doral's assignment of his interest in the clinic to Hometown Lenders results in
a. nothing with respect to Doral or the clinic.
b. the automatic termination of the clinic's legal existence.
c. Doral's liability for all of the clinic's debts.
d. Doral's wrongful dissociation and liability for any damages.
Q:
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
The partners decide to dissolve Eastside. Dora collects and distributes the firm's assets. This results in
a. nothing with respect to the firm's existence.
b. the continuation of the firm's business.
c. the termination of the firm's legal existence.
d. the temporary suspension of the firm's business.
Q:
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
Brad's dissociation from the firm results in
a. the automatic termination of the firm's legal existence.
b. the partnership's buyout of Brad's interest in the firm.
c. the immediate maturity of all partnership debts.
d. the temporary suspension of the partnership's business.
Q:
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
Brad, Carlos, and Dora decide to admit Faisal as a new partner in Eastside Physicians. Faisal's liability for partnership debts incurred before his admission is
a. limited to his capital contribution to the firm.
b. limited to his personal assets.
c. nothing.
d. unlimited.
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:
Fay is admitted to Global Associates, an existing partnership. A partnership debt incurred before the date of her admission comes due. Fay is
a. not liable for the debt.
b. only liable for the debt up to the amount of his capital contribution.
c. personally liable only to the extent the other partners do not pay.
d. personally liable to the full extent of the debt.
Q:
Tundi is a partner in YooHoo! Amusement, a new partnership. A YooHoo! debt comes due. Tundi is
a. not liable for the debt.
b. only liable for the debt up to the amount of his capital contribution.
c. personally liable only to the extent the other partners do not pay.
d. personally liable to the full extent of the debt.
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:
Mabel and Nicol do business as One World Realty. In acting on the firm's behalf in a deal with Property Acquisition Company, Mabel fails to account for the profit. To her firm, Mabel 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:
Cody is a partner in Delta Accounting Service. Cody can inspect
a. all of Delta's books and records.
b. Delta's books and records only as the firm's management permits.
c. Delta's books and records only for a reasonable purpose.
d. Delta's books and records relating to Cody's capital contribution only.
Q:
Ryder and Sergei are partners in Timberline Gear, which sells mountain- and rock-climbing equipment. Ryder manages the business. Unless the partnership agreement states otherwise, Ryder is
a. entitled to compensation in proportion to his effect on the business.
b. entitled to compensation in proportion to his effort.
c. entitled to compensation in proportion to his capital contribution.
d. not entitled to compensation.
Q:
Sweet Selections is a general partnership that sells candy, cards and flowers. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. To pass a management decision
a. a majority of the partners must agree to the decision.
b. both Jill and Amy must agree to the decision.
c. Jill or Amy must agree to the decision.
d. 30 percent of the partners must agree to the decision.
Q:
Parker and Oscar sign a partnership agreement to do business as "Parker's Plumbing" without specifying a duration. This partnership is terminable
a. at any time by either partner.
b. only after a reasonable term.
c. only if Parker dissociates from the firm.
d. only if Oscar dissociates from the firm.
Q:
Tom and Bill are partners in Tough Trucks Towing. James is not a partner. In dealing with Fred, James holds himself out to be a partner in Tough Trucks Towing and Fred contracts to have Tough Trucks Towing tow some vehicles for him. If Tough Trucks fails to tow the vehicles, a court may conclude that
a. a partnership by estoppel exists and James is liable to Fred.
b. no partnership exists and James is not liable to Fred.
c. a partnership by estoppel exists and Fred has all partnership rights.
d. no partnership exists, but Tom and Bill are liable to Fred.