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Law
Q:
Under the _____ Clause, the power to regulate interstate trade is given to the federal government.
A. Due Process
B. Corporate
C. Commerce
D. Doing Business
Q:
The Model Business Corporation Act (MBCA) was prepared and authorized by the:
A. federal government.
B. state governments, acting together.
C. state governments, acting separately.
D. American Bar Association's Committee on Corporate Laws.
Q:
The law of piercing the corporate veil is an example of a _____ law protecting the creditors of corporations.
A. commerce
B. common
C. constitutional
D. statutory
Q:
Most of the common law of corporations deals with:
A. creditor and shareholder rights.
B. incorporation of not-for-profit organizations.
C. promoter and manager rights.
D. incorporation of sole proprietorships.
Q:
Not-for-profit corporations are regulated primarily by the:
A. states.
B. federal court.
C. federal government.
D. Supreme Court.
Q:
In which of the following classes of corporation are the controlling shareholders the only managers of the business?
A. For-profit corporation
B. Close corporation
C. Not-for-profit corporation
D. Publicly held corporation
Q:
The maximum number of shareholders that are allowed in a Subchapter S corporation is:
A. 50.
B. 75.
C. 100.
D. 500.
Q:
Which of the following statements is true of not-for-profit corporations?
A. They provide services to their members.
B. They must distribute all of their surplus revenues to their shareholders.
C. They must distribute all of their excess revenues to charities.
D. They issue stocks only to their owners.
Q:
Which of the following classes of corporation has members rather than shareholders?
A. S corporation
B. For-profit corporation
C. Publicly held corporation
D. Not-for-profit corporation
Q:
A Subchapter S corporation is typically treated like a _____ for federal income tax purposes.
A. for-profit corporation
B. partnership
C. publicly held corporation
D. not-for-profit corporation
Q:
Which of the following legal provisions treats a corporation as a person?
A. Corporation law
B. The law of contract
C. The Constitution of the United States
D. The law of torts
Q:
Which of the following is true about an S corporation?
A. It is taxed at both the corporate and shareholder levels.
B. It may only have 500 or less shareholders.
C. An S corporation election requires the consent of a majority of its shareholders.
D. Shareholders of an S corporation may be only individuals or trusts.
Q:
Which of the following corporation classes' profits are taxed only at the shareholder level?
A. An S corporation
B. For-profit corporation
C. Not-for-profit corporation
D. Publicly held corporation
Q:
Which of the following classes of corporation may not distribute surplus revenue from its operations to its members?
A. An S corporation
B. For-profit corporation
C. Not-for-profit corporation
D. Publicly held corporation
Q:
Which of the following is correct about the history of corporations?
A. In the late 18th century, general incorporation statutes emerged in the United States.
B. From the 18th century onward, France started giving privileges of incorporation to mercantile ventures.
C. Early American corporations received special privileges from state legislatures.
D. In England, the corporate form was used extensively after the 16th century.
Q:
What was the name of the documents that were given to early American corporations by state legislatures that permitted them to operate as a corporation?
A. Certificate of Corporation
B. Organization Agreement
C. Special Charter
D. Domestic Treaty
Q:
Mary Lee James, a certified public accountant at Edgewater, Florida, wishes to incorporate. According to the corporate law requirements, she needs to incorporate under the:
A. common corporation law.
B. professional corporation acts.
C. special professional charter.
D. general incorporation law.
Q:
Under the general incorporation law, the minimum number of owners a business needs to be incorporated as a for-profit corporation is:
A. 10.
B. 5.
C. 1.
D. 20.
Q:
Transfer of corporate assets to shareholders for less than fair market value is called "looting."
Q:
In order to pierce the corporate veil, a creditor needs to show that each shareholder does not actively participate in the management of the corporation.
Q:
A corporation with a reasonable debt-to-equity ratio will not have its veil pierced on the grounds of thin capitalization.
Q:
The corporate form of business has facilitated the rapid growth of development by allowing businesses to attain economies of scale compared to other forms of businesses by:
A. giving businesses a greater capacity to raise capital.
B. imposing unlimited management responsibilities on the owners.
C. maximizing the owners' liabilities.
D. granting the persons who control a corporation limited flexibility in operating it.
Q:
A foreign corporation must incorporate in each state in which it does intrastate business.
Q:
The U.S. Constitution gives the federal government to regulate business activity that occurs across state lines.
Q:
Doing intrastate business without filing with the appropriate state office will likely subject a business to a fine.
Q:
A corporation with one person who is the only shareholder, officer, and director will have its corporate veil pierced, making that person personally liable for all the obligations of the dominated corporation.
Q:
A foreign corporation is one that conducts its business in a state where it is not incorporated.
Q:
There is a similar set of legal rules that apply to both foreign and alien corporations.
Q:
The mere presence of a Nevada corporation's vacant property in California is sufficient to subject the corporation to taxes in California.
Q:
Greater contacts are needed to subject a corporation to property taxation in a state than are needed to subject it to state income and sales taxation.
Q:
Not-for-profit corporations have members instead of shareholders and none of their surplus revenue may be distributed to their members.
Q:
Incorporating a business involves following state law.
Q:
A state's courts may exercise jurisdiction over a foreign corporation that has contacts in the state.
Q:
It is possible to create a corporation without a government's permission.
Q:
The directors and officers of a corporation need to be its shareholders.
Q:
During the early period of American history the state governments issued special charters that created corporations.
Q:
Government-owned corporations are created primarily to allow their owners to have limited liability.
Q:
The purpose behind the Model Business Corporation Act is to exploit the maximum potential of workers in a corporation.
Q:
Brady is the sole general partner in ABC Limited, a limited partnership. There are five limited partners. One day, Brady went to the grocery store to purchase groceries for himself. He forgot his personal checkbook. However, he had the partnership's checkbook. Unable to otherwise pay for the groceries, he wrote a check from the partnership account, thinking that he "owned" part of the money in the account anyway. Discuss.
Q:
Bob is a partner in XYZ Limited Partnership. For tax reasons, Bob wishes to be both a general and a limited partner. May he do this?
Q:
Sandra starts a new LLLP for her gelato business. She becomes the general partner of the LLLP and her friend Katy becomes a limited partner. There are no other general or limited partners in the LLLP. Apart from being a general partner, Sandra wishes to become a limited partner in the LLLP to increase her share of profit. Can she do it? If not, suggest a method by which she might be able to do it.
Q:
A corporation is a legal entity independent of its owners.
Q:
Samantha is the general partner and Jack and Jared are the limited partners of Profiler Limited Partnership. Samantha has contributed capital of $30,000 to the partnership, Jack has contributed $150,000, and Jared has contributed $120,000. They have not agreed on how to share profits or losses. Profiler incurs a loss of $90,000 in its first year. What is Jack's share of the loss? If Jack has a total income of $225,000 from other sources and an income of $15,000 from other passive investments, how much of the loss may he deduct on his federal income tax return?
Q:
What form of statute would authorize an individual to form an LLLP?
A. Federal statute
B. State statute
C. International statute
D. City statute
Q:
The ULPA and the RULLCA permit limited partnerships and LLCs to merge with other businesses. For the merger procedure, the first requirement is that the companies have to:
A. file a suit in the proper court.
B. obtain consent from the state secretary.
C. adopt a conversion plan.
D. enter into an agreement.
Q:
How long does it take before a certificate of dissociation is effective to prevent liability as a partnership is winding down?
A. 90 days
B. 180 days
C. 365 days
D. 30 days
Q:
Kallie and Lisa wish to start XYZ Limited Liability Company. What steps do they need to take in order to establish it?
Q:
Shawn was a manager and a limited partner in a Wall Street securities investment firm limited partnership. He was expelled from the limited partnership after his conviction in a securities fraud. Which of the following is true?
A. Shawn will retain his right to receive profits.
B. Shawn will retain his right to vote as a limited partner.
C. Shawn will lose his limited liability status.
D. Shawn will retain his managerial powers.
Q:
To give notice of a dissociation that is effective against everyone, the ULPA permits the filing of a Notice of Dissociation which is effective:
A. 120 days after filing.
B. 90 days after dissociation.
C. 90 days after filing.
D. 120 days after dissociation.
Q:
Ken was a general partner in a limited partnership until March 2011, when he transferred all his transferable rights to his wife. A few days later, he was expelled from the limited partnership by other partners. If the limited partnership did not give any notice of dissociation, Ken will retain his apparent authority to transact for the limited partnership until:
A. 2012.
B. 2013.
C. 2014.
D. 2015.
Q:
What type of partner in a Limited Liability Limited Partnership (LLLP) contributes capital and manages the business.
A. General Partner
B. Limited Partner
C. Foreign Partner
D. Domestic Partner
Q:
If a limited partner becomes a general partner as well in a limited partnership:
A. her share of profits will go down.
B. she will lose her managerial powers.
C. she will lose her limited liability.
D. she will lose her right to receive profits.
Q:
A dissociated limited partner:
A. retains his right to receive profits.
B. retains his right to vote as a limited partner.
C. loses his limited liability status.
D. retains his managerial powers.
Q:
The limited partnership agreement of Davos Limited Partnership has no clause on partners who transfer their transferable interests. Davos is the only general partner of the limited partnership. There are five limited partners. Two of them transfer their transferable rights to their sons (one each). By consent of all the partners, the two transferees are also made partners. How many limited partners does Davos Limited Partnership now have?
A. 6
B. 7
C. 5
D. 3
Q:
Amanda and Sally are close friends who form a limited partnership to open a salon. They refuse to put a buyout clause for withdrawing partners in the limited partnership agreement, assuming that their friendship and business will last forever. Amanda, as a general partner, contributes $100,000 and Sally, as a limited partner, contributes $125,000. Two years later, Sally accuses Amanda of falsifying the data and withdraws from the limited partnership. How much will Sally receive from the limited partnership?
A. $125,000
B. $10,000
C. $100,000
D. $0
Q:
Under the default rules of the ULPA, a limited partner who wishes to withdraw from a limited partnership has:
A. the power but not the right to withdraw.
B. the right but not the power to withdraw.
C. neither the power nor the right to withdraw.
D. both the power and the right to withdraw.
Q:
Under the ULPA of 2001, a limited partner who participates in management and control of the limited partnership:
A. has unlimited liability to creditors of the limited partnership.
B. has limited liability only to those creditors with whom he has transacted businesses.
C. has unlimited liability only to those creditors with whom he has transacted business and who reasonably believe that he is a general partner.
D. has liability up to the limit of his capital contribution.
Q:
Carol is the only general partner in ABC Limited Partnership. She contributes $50,000 in capital. Wayne and Hosek are the only limited partners. Wayne contributes $25,000 in capital, and Hosek contributes $25,000 in capital. ABC suffers a loss of $5,000. What is Hosek's share of the loss?
A. $1,250
B. $2,500
C. $5,000
D. $0
Q:
Jason believes that he is a limited partner in Yorktown Yankees Limited Partnership. Jason discovers that no limited partnership certificate has been filed with the secretary of state. What should he do?
A. Withdraw from the limited partnership by obtaining a refund of his capital contribution.
B. Cause a proper certificate of limited partnership to be filed with the secretary of state.
C. File with the secretary of state a limited partner certificate declaring his limited partner status.
D. Nothing. His status is not affected by the failure to file a limited partnership certificate.
Q:
Terrance and Barbara created a limited partnership, but inadvertently misstated its name in the certificate of limited partnership. How will their liability be affected by this?
A. The partners will have unlimited liability.
B. Only general partners will have limited liability.
C. Only general partners will have unlimited liability.
D. The partner contributing more will be held for liability.
Q:
Under the Uniform Limited Partnership Act (ULPA), a new partner may be admitted only upon the fulfillment of which of the following conditions?
A. Each partner's consent is required.
B. A written agreement is required.
C. The secretary of state's consent is required.
D. The Vote of the partners is required.
Q:
A limited partner's obligation to contribute capital may be enforced only by the:
A. general partners and the creditors of the limited partnership.
B. limited partners of the limited partnership.
C. limited partnership and the general partners.
D. limited partnership and creditors of the limited partnership.
Q:
A limited partner in a limited partnership:
A. provides capital and shares profits.
B. is a fiduciary of the business.
C. has management powers.
D. possesses complete liability for its obligations.
Q:
With regard to an LLLP, a _____ is conclusive proof that a limited partnership exists.
A. Domicile Certificate
B. Certificate of Authority
C. Certificate of Incorporation
D. Certificate of Existence
Q:
As commonly occurs, a(n) _____ may be the sole general partner of a limited partnership.
A. association
B. natural person
C. corporation
D. trust
Q:
A limited partnership certificate must contain the:
A. partners' shares of profits.
B. signature of each general partner.
C. names of the limited partners.
D. capital contributions of the general partners.
Q:
A general partner in a limited partnership believes wrongly that an LLLP has been created. In such a case, which of the following will apply?
A. He will be considered a limited partner of the limited partnership.
B. He will lose his management powers over the limited partnership.
C. He will have to share profits equally with all other partners.
D. He will have unlimited liability for the obligations of the limited partnership.
Q:
Josh, Betty, and Danny formed an LLC to manage their accounting business. Josh contributed $20,000 to the LLC. Betty and Danny contributed $40,000 each. Being close friends, they did not include a profit and loss sharing plan in the operating agreement. A year later, they realize their working styles do not match. All the members agree to dissolve the LLC and sell all of its assets. Assuming that the LLC did not have any creditors and a total of $175,000 was obtained after the sale of all the assets of the dissolved LLC, how much will Betty get?
A. $100,000
B. $75,000
C. $50,000
D. $65,000
Q:
Who is liable for the acts of the managers of the LLC?
A. Only the LLC itself
B. The organizers of the LLC
C. The members of the LLC
D. The incorporators of the LLC
Q:
The primary reason to choose the limited liability limited partnership instead of a limited partnership as a form of business is to:
A. create a tax shelter for the partners.
B. raise large amounts of capital.
C. limit the liability of all of its general partners.
D. relieve owners from managing the business.
Q:
Nathan wrote a new software and named it "Black Mamba." To commercialize it, he formed an LLC (with a 50-year term) with his friend Pete. Two years later, Nathan withdrew from membership of the LLC since his and Pete's working styles did not match in any way. Under which of the following conditions can Nathan ask for a judicial dissolution of the LLC?
A. The LLC failed to purchase Nathan's interest within a week of his dissociation.
B. Since Nathan wrote "Black Mamba," Pete should not profit from it or the LLC.
C. Pete is using the profits from the LLC to sell a fake version of "Black Mamba."
D. The LLC failed to give fair value to Nathan for his transferable interest.
Q:
After all the assets of an LLC have been sold, the proceeds will be distributed first to LLC:
A. creditors.
B. founders.
C. transferees.
D. dissociated members.
Q:
Joshua, Rachel, and Daniel formed an LLC to manage their accounting business. Joshua contributed $20,000 to the LLC. Rachel and Daniel contributed $40,000 each. A year later, the LLC needed capital injection and Joshua lent a credit of $50,000. However, nothing could save the LLC and it entered bankruptcy and got dissolved. Joshua was the only creditor of the LLC. If a total of $50,000 was obtained after the sale of all the assets of the dissolved LLC, how much will Rachel get?
A. $0
B. $10,000
C. $50,000
D. $25,000
Q:
The RULLCA allows for automatic dissolution of an LLC when:
A. a member of the LLC dies.
B. a majority of the members dissociate.
C. a member of the LLC goes bankrupt.
D. it becomes unlawful for the LLC business to continue.
Q:
A member of an LLC is treated as a transferee of his/her transferable interest only after:
A. he/she transfers his/her transferable interest to another person.
B. he/she gives notices to third parties about the transfer.
C. a creditor receives his/her transferable interest.
D. his/her dissociation from the LLC due to judicial expulsion.
Q:
Which of the following is a nonwrongful kind of member dissociation from an LLC?
A. Dissociation caused by a member being a debtor in a bankruptcy.
B. Dissociation caused by a member's death due to a motor vehicle accident.
C. Dissociation caused by the judicial expulsion of a member.
D. Dissociation caused by a member withdrawing from an LLC before the LLC's term has expired.
Q:
A dissociating member will be liable to the LLC for damages caused by the dissociation due to:
A. the member being a debtor in a bankruptcy.
B. the member's death due to a motor vehicle accident.
C. a guardian being appointed over affairs of an Alzheimer-inflicted member.
D. the member withdrawing from the LLC after its term has expired.
Q:
Johnathan LLC has a term of eight years. It had only two partners, Jonathan and John, in its first five years of existence. It was not dissolved when John withdrew from membership in the sixth year. The LLC has continued its business and Johnathan has agreed to pay John, as per the provisions of the RULLCA. Consequently, Johnathan is obligated to pay John the value of his interest within:
A. 120 days after John's dissociation.
B. 90 days after John's dissociation.
C. 120 days after the end of the LLC's term.
D. 90 days after the end of the LLC's term.
Q:
Steve, Martha, and Pete formed an LLC two years ago. Steve has contributed $100,000, Martha has contributed $50,000, and Pete has contributed $50,000 to date to the LLC. The LLC made a profit of $30,000 in two years. By default, how much will Steve's share of profits be?
A. $10,000
B. $20,000
C. $15,000
D. $30,000
Q:
What is the document that is filed with the secretary of state to form an LLC?
A. Articles of Incorporation
B. Certificate of Organization
C. Operating Agreement
D. Bylaws