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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
Q:
Marc and Sonia were the only members of the MS Limited Liability Company. Marc then sold all his rights in the LLC to Gertrude. As a result:
A. Gertrude becomes a member of the LLC.
B. Gertrude gains the right to receive Marc's share of distributions.
C. Marc ceases to be a member of the LLC.
D. the LLC becomes a sole proprietorship of Sonia.
Q:
A limited liability company:
A. is either member-managed or manager-managed.
B. shares its profits equally with shareholders.
C. is not required to pay federal income tax.
D. is owned only by shareholders.
Q:
The LLC is not ordinarily liable for the wrongful acts of:
A. manager members in a member-managed LLC.
B. nonmanager members in a manager-managed LLC.
C. nonmanager members in a member-managed LLC.
D. manager members in a manager-managed LLC.
Q:
Which of the following is correct concerning a limited liability company?
A. It has limited ability to buy, hold, and sell property.
B. Typically, an LLC is a tax shelter for big corporations.
C. It is mandatory to have an operating agreement.
D. Members who manage an LLC are fiduciaries of the LLC.
Q:
Any of the managers in a manager-managed LLC may be removed at any time by a vote of:
A. one third of all LLC members.
B. two-thirds of all LLC members.
C. a majority of LLC members.
D. the board of directors.
Q:
A majority of the members of an LLC must agree for a plan to merger.
Q:
How are limited liability companies (LLCs) taxed?
A. They are always taxed the same as general partnerships.
B. They are always taxed the same as corporations.
C. They are taxed either as partnerships or as corporations, at the option of the LLC.
D. They are taxed either as partnerships or sole proprietorships, at the option of the LLC.
Q:
Which state passed the first limited liability company (LLC) statute in 1977?
A. Wyoming
B. Nevada
C. Montana
D. Nebraska
Q:
The owners of an LLC are called:
A. natural persons.
B. members.
C. partners.
D. managers.
Q:
Limited partners have the right to vote on partnership matters as a class.
Q:
In general, the ULPA does not grant partners much power to expel other partners from the partnership.
Q:
In a limited partnership, a general partner's liability is limited to his investments in the business.
Q:
One partner leaving a limited partnership will not cause the partnership to be dissolved.
Q:
Each partner in a limited partnership owns an interest in the partnership. This is deemed his personal property.
Q:
A general partner in an LLLP will have unlimited liability if the LLLP was formed defectively.
Q:
A partner's transfer of his/her transferable interest has no effect on his/her status as a partner, absent a contrary agreement.
Q:
A member's most important right within an LLC is to receive distributions.
Q:
Except for the liability of limited partners, limited partnerships and LLLPs are identical.
Q:
The death of a general partner causes dissolution of the limited partnership.
Q:
Losses of the business allocated to a limited partner in a limited partnership or an LLLP offset his income from any other sources.
Q:
A certificate of limited partnership must state the capital contributions of the limited partners.
Q:
Limited Liability Companies (LLC) are formed under federal law for international commerce purposes.
Q:
Owners of an LLC are called members.
Q:
In the absence of a decision by the members of an LLC, any member can demand the distribution of profits prior to the dissolution of the LLC.
Q:
After all the LLC assets have been sold, the proceeds will be distributed first to the partners.
Q:
Discuss a partner's authority to borrow money during winding up.
Q:
Karla retires from Orton Associates, a partnership. The business is continued by the remaining partners and Wes, a new partner who has agreed to assume Karla's liability for partnership obligations. Creditors have not been notified of Karla's retirement. What are Karla's and Wes's liabilities to the creditors?
Q:
A limited liability company may elect to pay no federal income tax.
Q:
An LLC member has no individual liability on LLC contracts, unless he/she also signs LLC contracts in his/her personal capacity.
Q:
Ordinarily, members of a limited liability company have limited right to manage the business of the LLC.
Q:
Mr. Green enters into a partnership with IT Doctors LLP. Mr. Green's capital investment into the business is $10,000. Shortly after joining the new business a client sues the IT Doctors LLP and wins a judgment of $750,000. How much is Mr. Green liable for?
A. $10,000
B. $100,000
C. $750,000
D. $0
Q:
Abraham, who is a partner in Adona's firm, has been declared a terrorist by the court following investigations of a criminal case. His partners at the firm want to expel him from partnership but they are not ready to give his interest in partnership. Is Abraham entitled to his interest in partnership?
Q:
Xavier, Yellie, and Zelda are partners of Koral Associates. The term of the partnership is 5 years, but Zelda withdraws after 1 year because she no longer wished to continue. Discuss the nature and consequences of Zelda's dissociation.
Q:
Discuss the rules of dissociation and dissolution for mining partnerships.
Q:
Which of the following is true about buyout of nonwrongfully dissociated partners?
A. The partnership may wait to buy out the partner until the end of the partnership's term.
B. The buyout price must deduct the interest from the date of dissociation.
C. The dissociated partner cannot ask the court to determine the buyout price.
D. The partner must be paid in cash within 120 days.
Q:
Poxabogue Associates, a partnership, is dissociated by the retirement of a partner. The business is continued by the remaining partners and a new partner, Enrica. What is Enrica's liability to creditors for partnership obligations that arose before she became a partner?
A. Enrica is liable to the extent of partnership assets.
B. Enrica is liable only if she agrees to assume the retired partner's liability.
C. Enrica is fully liable.
D. Enrica has no liability.
Q:
Which of the following is true about the effect of LLP statutes after appointment of a new partner?
A. RUPA provides that the new partner has full liability for the LLP's obligations.
B. The former partners will be personally responsible on committing a malpractice.
C. For obligations incurred before his admission, the new partner may not be held liable.
D. LLP partnership agreements often change the RUPA rule about a new partner's liability.
Q:
Bob was a partner in F & B Co., a partnership. Bob dissociated himself from it on June 1, 2000. On December 1, 2000, F & B Co. entered into a contract with Carey. Under which of the following scenarios may Bob be held liable to Carey, even though he is no longer a partner?
A. Bob files a Statement of Dissociation with the secretary of state.
B. Bob tells Carey on November 1, 2000 that he is no longer a partner.
C. The contract was entered into on the company's premises and Bob's name is still listed as a partner on the office door.
D. Bob files a Statement of Dissociation with the court.
Q:
In an LLP that is continuing business after dissociation:
A. a dissociated partner has high risk of continuing liability for contracts.
B. a dissociated partner has less risk of torts occurring before or after the partner leaves the LLP.
C. the partner's liability is limited beyond the LLP's assets.
D. the buyout payment made to a dissociated LLP partner will impair the ability of the LLP to pay its creditors.
Q:
Mark is a partner in Harbin Associates, a partnership. The term of the partnership agreement is one year and includes a clause on buyouts. After the term expires, Mark decides to dissociate while the remaining partners wish to continue. Under the RUPA:
A. the remaining partners must wind up and terminate the partnership.
B. they must buy out Mark of his interest on Mark's demand for the same.
C. they must not pay Mark the greater of the liquidation price or the sale price of the business.
D. they can renew their partnership agreement.
Q:
As per RUPA, if a nonwrongfully dissociated partner demands payment from the partnership, he should be paid:
A. within 90 days from the date of demand.
B. within 120 days from the date of demand.
C. within no such specified period.
D. within such time as per the terms and conditions of the partnership.
Q:
Carlita retires from Mortex Associates, a partnership. The business is continued by the remaining partners. What is Carlita's liability on debts incurred while she was a partner?
A. Carlita has liability to the extent of her capital contribution.
B. Carlita is fully liable.
C. Carlita has no liability.
D. Carlita has liability to the extent of partnership assets at the time of dissociation.
Q:
Ace Software Co. signed a deal with Gill Associates, a partnership, and has extended credit to it. Paul, a partner in Gill associates, retires but his partners continue the business. In order to release Paul from the debt owned to Ace, which of the following must occur?
A. The continuing partners must release Paul from liability on the debt.
B. Paul must not secure his release from Ace.
C. Paul has to contribute toward the debt as early as possible.
D. The continuing partners should volunteer to set off Paul's liability.
Q:
Which of the following is true about the liability of a dissociated partner for obligations incurred while a partner?
A. To complete the requirements for novation, a dissociated partner must also secure his release by the partnership's creditors.
B. Dissociated partners are not liable to partnership creditors for partnership liabilities incurred while they were partners.
C. Continuing partners must not indemnify dissociated partners from liability on partnership obligations.
D. A creditor's agreement to release an outgoing partner from liability may be implied, but usually it is express.
Q:
The RUPA makes a dissociated partner liable as a partner to a party that entered into a transaction with the continuing partnership, unless:
A. the other party believed the dissociated partner was still a partner.
B. the transaction was entered into more than two years after the partner has dissociated.
C. the transaction was entered into 90 days before the filing of a Statement of Dissociation with the secretary of state.
D. the other party was not made aware of the partner's dissociation.
Q:
Leonard, Ted, and Julius are partners at Jutle Associates. They signed a two year lease agreement with Property Company for business purposes. Five months into the new agreement, Leonard dissociates from the partnership. Under what circumstances will Leonard no longer be liable on the lease agreement?
A. Leonard gives proper notice to Property Company of his intent to dissociate from Jutle.
B. The three partners and Property Company enter into an appropriate novation agreement.
C. Leonard filed a Statement of Dissociation more than 90 days prior to leaving the partnership.
D. Property Company will not serve to relieve Leonard of liability under the lease agreement.
Q:
Which of the following is true about asset distribution in an LLP?
A. If the LLP has been profitable, each partner will receive the net amount in his capital account.
B. The partners have liability for partnership obligations beyond the firms' assets.
C. An LLP partner has to contribute an amount equal to the negative balance in his account to pay creditors.
D. The creditors must sue the partner to force the partner to pay the debt.
Q:
Termination of a partnership occurs automatically after:
A. wrongful dissociation has occurred.
B. dissolution has occurred.
C. the assets of the partnership have been distributed.
D. the winding up process has begun.
Q:
Which of the following is true about successor's liability for predecessor's obligations?
A. Once continuation begins after dissociation, the creditors remain the creditors of the predecessor.
B. Partners may escape prior liabilities by forming new partnerships.
C. There has to be an agreement with creditors to eliminate liability for prior obligations.
D. The original partners are not liable for obligations incurred prior to dissociation.
Q:
Emmy, Shane, and Rusty are partners of the firm Esha Associates. Rusty nonwrongfully dissociates himself from the partnership. Under these circumstances, Rusty will not be liable to the creditors for the liabilities incurred while he was partner only:
A. if all the partners consent to it.
B. if there is an agreement.
C. if there is a court order.
D. by novation.
Q:
The Barrel & Wine partnership is being wound up and liquidated. Net assets are to be distributed according to which of the following order of priority?
A. First to creditors who are not partners, then to creditors who are partners
B. First to all creditors, then to partners as per their capital accounts
C. First to partners per their capital accounts, then to all creditors
D. First to partners who have made loans to the partnership, then to all other creditors
Q:
In limited liability partnership, most of the partners have liability for partnership obligations:
A. beyond the partnership assets.
B. up to the extent of the partnership assets.
C. as per the partnership rules & regulation.
D. as per the demand of the partner.
Q:
Which of the following is true about charging a partner's capital account during distribution?
A. Losses from sale of partnership assets during winding up are not charged against a partner's capital account.
B. Partners are given the gross amount existing in their capital accounts.
C. On account of negative balance in a partner's account, other partners are under no obligation to contribute to set off the shortage.
D. If partnership creditors cannot be paid from the partnership assets, the creditors may proceed against the partners' capital accounts.
Q:
If a partner fails to contribute the amount equal to her negative capital account balance, then it can be recovered:
A. from that partner's assets.
B. by obtaining an undertaking from that partner.
C. from the other partners.
D. by charging the creditor's account.
Q:
When the winding up partners disagree during the process:
A. majority partner approval is required for actions in the ordinary course of winding up.
B. unanimous partner approval is required for every decision.
C. unanimous partner approval is required for actions in the ordinary course of winding up.
D. majority partner approval is required for every decision.
Q:
Amos, Beverly, Carlos, and Dan were partners in a partnership in which the agreement states that the partnership will continue until 2010. Amos died in 2006. What vote of the remaining partners is necessary to continue operating the partnership business?
A. A simple majority vote
B. A two-thirds majority vote
C. A three-quarters majority vote
D. A unanimous vote
Q:
When proceeds from the sale of partnership assets are being distributed during winding up, which of the following is settled first?
A. Payment to partners to the extent of their capital contributions
B. Payment to creditors of the partnership
C. Payment to partners to the extent of their share of profits
D. Payment to creditors after charging the partners' shares of losses
Q:
Which of the following causes dissolution and winding up?
A. A partner's transfer of his transferable partnership interest
B. When the partnership has completed the undertaking for which it was created
C. A creditor's obtaining a charging order
D. The addition of a new partner to the partnership
Q:
Which of the following is an implied authority of a partner winding up the business of an accounting partnership?
A. Entering into new contracts made after the dissolution
B. Disposing of the partnership's excess supplies
C. Making a contract to audit the financial records of a new client
D. Borrowing money in the name of the partnership
Q:
Which of the following is true about partnership rules for mining partnerships?
A. Mining partnerships are easiest to dissolve.
B. The transferability of mining partnership interest is restricted.
C. A mining partner may sell his interest to another person.
D. The death of a mining partner affects a dissolution.
Q:
Which of the following is an apparent authority during winding up?
A. Providing a third party notification of the dissolution
B. Continue making new contracts with disregard to the third parties' awareness about the same
C. Conducting business the way it was before dissolution
D. Filing a Statement of Dissolution with the secretary of state
Q:
Which of the following is true about eliminating partners' apparent authority?
A. Eliminating the apparent authority is not a safe practice during winding up.
B. Apparent authority cannot be eliminated by merely informing the existing business clients.
C. Filing a Statement of Dissolution will increase the partners' apparent authority.
D. The partnership should post notice of the dissolution at its place of business to let third parties know.
Q:
Which of the following is true about the effect of partnership agreement?
A. The dissociations listed in the RUPA are merely default rules.
B. The partners cannot change the definition of wrongful dissociations.
C. Partners cannot require dissociation if a partner transfers his transferable partnership interest.
D. The effects of nonwrongful dissociation cannot be changed.
Q:
Which of the following is true about dissolution and winding up the partnership?
A. In liquidation, the assets may not be sold separately.
B. Winding up always requires the sale of assets.
C. During winding up, the partners continue as fiduciaries to each other.
D. Most firms provide the partners with the firms' assets rather than proceeds from the sale of the same.
Q:
What is the term for the orderly sale of the assets of the partnership as part of dissociation?
A. Winding up
B. Incorporation
C. Organizing
D. Foreclosure
Q:
To avoid winding up:
A. a unanimous vote of all partners, who have not wrongfully dissociated, is necessary to continue business.
B. two-thirds majority of partners wanting to continue business is necessary.
C. the court has to pass judgment to continue business.
D. the remaining partners must file a continuing statement with the public office.
Q:
Mr. Smith and Mr. Blue enter into a partnership at will in which each owns half of the business. Mr. Blue decides to leave the partnership. What should Mr. Blue be paid for leaving the business?
A. Mr. Blue should be paid half of the value of the business.
B. Mr. Blue should receive 15% of the value of the business for leaving agreement.
C. Mr. Blue receives 1/3 of the value of the business for leaving.
D. Mr. Blue receives nothing for his dissociation.
Q:
Which of the following is a consequence of wrongful dissociation?
A. The dissociated partner may demand dissolution of the partnership.
B. The partnership must terminate on grounds of wrongful dissociation.
C. The dissociated partner should contribute to performing the winding up.
D. The dissociated partner is not entitled to receive the buyout price until the term of the partnership has expired.
Q:
Which of the following causes dissociation?
A. A partner's transfer of his transferable partnership interest
B. A creditor's obtaining a charging order
C. A partner's wrongful conduct materially affecting the partnership business
D. The addition of a new partner to a partnership
Q:
Which of the following is a wrongful dissociation?
A. A partner retires at age 70 when the partnership agreement allows partners to retire at age 60.
B. A partner assigns his partnership assets to a personal creditor.
C. A judicial dissociation due to a partner's persistent and substantial use of partnership property for his own benefit.
D. Death of a partner.
Q:
Which of the following is true about a wrongfully dissociated partner?
A. He may perform the winding up.
B. He may demand the partnership be dissolved.
C. He is not entitled to the value of any of his partnership interest.
D. He is entitled to his share of the partnership interest; minus the damages he caused the partnership.
Q:
Which of the following causes a dissociation of a partnership?
A. Withdrawal of a partner from a partnership at will
B. Three partners disagreeing on a matter in the ordinary course of business
C. A partner being provided his partnership interest
D. Addition of a partner to the partnership
Q:
Hagus was a partner at Ace-Star General partnership. The partnership agreement stated that all partners would continue as partners until the year 2010. However, in 2006, Hagus was offered another business opportunity that was more attractive than remaining a partner with Ace-Star. Following this, he dissociated himself from Ace-Star. Which of the following is true with regard to this situation?
A. Hagus dissolved the Ace-Star General partnership.
B. Hagus used his power to dissociate to withdraw from the partnership.
C. Hagus eliminated his liability to the partnership obligations.
D. Hagus used his right to dissociate to withdraw from the partnership.
Q:
Anthony, a partner of a partnership firm, was convicted for rash driving. Following this, all other partners dissociated him from the partnership, as per the terms of the agreement. This is an example of _____ dissociation.
A. wrongful
B. nonwrongful
C. discriminatory
D. valid
Q:
What is the term for a dissociation that violates the partnership agreement?
A. Wrongful dissociation
B. Breach dissociation
C. Fraud dissociation
D. Agent dissociation
Q:
A new partner to a LLP is liable only to the amount of capital invested in the business.
Q:
Which of the following is true about dissociation?
A. It is a partner's right to dissociate himself from the partnership.
B. A partner has the power to dissociate from the partnership at any time.
C. When a partner's dissociation violates the partnership agreement, it is nonwrongful dissociation.
D. Consequences of wrongful and nonwrongful dissociations are always the same.
Q:
Which of the following is a nonwrongful dissociation?
A. A partner's filing a bankruptcy petition
B. A partner's retirement at age 60 when the partnership agreement requires the partners to retire at age 70
C. A partner's willful and persistent breach of the partnership agreement
D. Death of a partner
Q:
Mark, John, and Graham are partners. Mark voluntarily and nonwrongfully leaves the partnership. However, the partnership has a three-year lease with Green Real Estate Inc. So long as Mark leaves the partnership, he is no longer liable for the lease agreement.