blaw chapter 31 – Flashcards
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All the business forms listed below have limited liability EXCEPT the
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general partnership
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An organization that does not pay income tax on its profits but passes them through to its owners who pay the tax at their individual rates is called a
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flow-through tax entity
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Alan, a dentist, and his wife Martha, an attorney, can protect their personal assets with limited liability from their business dealings by creating and operating a professional corporation together.
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false
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A partnership is a taxable entity, separate from the partners.
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false
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What federal agency requires that the seller of a franchise give the potential buyer Franchise Disclosure Document (FDD) and audited financial statements?
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The Federal Trade Commission (FTC)
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Corporations have a distinct advantage over other forms of business organization in the area of taxation.
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false
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The most common form of business ownership is the corporation.
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false
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The form of business ownership that is the MOST easily transferable is the
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corporation
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Jill owns a retail business by herself and was sued by a customer who fell in the store. The customer claimed the business was negligent in caring for its floors. Which statement best describes Jill's potential liability?
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Jill can only be liable to the amount she initially invested in the business.
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Franchise fees can be costly, but they are usually payable over a number of years, after profits are generated from the business.
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false
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Generally, a joint venture is a partnership created for one limited purpose.
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true
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Which of the following would NOT be personally liable for the debts of the business?
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an S corp shareholder
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If partners wish to maintain having protection against personal liability, it is essential to comply with all the technicalities of a limited liability partnership statute.
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true
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Corporations have perpetual existence.
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true
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To be a close corporation, the business must be small, with no more than 20 owners and no more than $500,000 in gross annual income.
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false
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The business form that offers the limited liability of a corporation and the tax status of a flow-through entity is
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a limited liability company.
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James was a partner in a large firm. He died unexpectedly. His son, Frank, wanted to take over for his father in the partnership and was well qualified to do the work his father had done. Which statement best describes Frank's rights in the partnership if he inherits the interest?
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Frank is entitled to the value in the partnership, but not to become a full partner.
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Which of the following is an advantage of a corporation?
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It offers limited liability for its shareholders.
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Which of the following statements regarding social enterprises is TRUE?
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Unlike charities, social enterprises can sell stock to investors.
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The advantage to an S corporation is
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its treatment of shareholders for income taxation purposes.
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The corporate form of business
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was first known and used by the Greeks and then spread through the Romans to England
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Limited liability is a major advantage of a partnership as compared to a corporation.
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false
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All of the following are characteristics of a closely held corporation EXCEPT
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the shares are publicly traded
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The Federal Trade Commission requires franchisors to
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give prospective franchisees a franchise disclosure document at least 14 business days prior to the signing of a contract or payment of any money.
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A court may pierce an LLC's veil if
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members fail to provide adequate capital.
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A court may pierce an LLC's veil if
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members fail to provide adequate capital.
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A court may pierce an LLC's veil if
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members fail to provide adequate capital.
