BUSI301 – Quiz 4 – Flashcards
Unlock all answers in this set
Unlock answersquestion
If someone successfully sues a sole proprietorship, they must exhaust the businesses assets before they may go after the principal's personal assets.
answer
True
question
If a sole proprietorship loses money, the principal may deduct the losses from her own personal tax liability if any.
answer
True
question
Jonathan has graduated and wants to start a business. Which business entity gives him the most complete and exclusive control over the business and any business decisions?
answer
sole proprietorship
question
A business which exists in fact although not formally recognized is referred to as being:
answer
de facto
question
Which of the following does not require the filing of a form with a governmental agency to come into existence?
answer
a general partnership
question
A general partnership may be formed by:
answer
either oral, written or implied agreement.
question
Some states do not require a written management agreement regarding LLCs.
answer
True
question
The name of an LLC must contain a designator such as "Company", "Limited", "Limited Liability Company" or "LLC".
answer
True
question
LLPs may choose to be taxed like a corporation or choose pass-through taxation treatment.
answer
False
question
The IRS has classified the LLC as a type of corporation for tax purposes.
answer
False
question
The operating agreement of the LLC often controls the amount and methods of capitalizing the business.
answer
True
question
Voting rights of LLC principals are governed by:
answer
the operating agreement
question
Corporations may be created by written agreement between the principals and no strict or formal filing is required as long as the agreement is written.
answer
False
question
Eight businesswomen have formed a privately held corporation. Their stock certificates and the stock register of the corporation are public documents.
answer
False
question
Privately held corporations are more common than are publicly held corporations.
answer
True
question
Privately held corporations may issue a ________ in lieu of conducting a formal annual meeting.
answer
unanimous consent resolution
question
Offering or trading ownership interests in corporations is governed by:
answer
federal laws
question
Which of the following is an incorrect statement regarding Subchapter S corporations?
answer
they may be domestic or foreign but cannot be alien
question
The SEC has the power to initiate criminal actions against individuals or companies that violate security laws.
answer
True
question
Violation of Section 16, a finding of short-swing liability, does not require evidence of the use of insider information and is deemed a strict liability provision.
answer
True
question
The original Howey test required that the investor have no involvement with the generation of profits, however, modern courts have permitted a limited passive involvement on the part of the investor.
answer
True
question
Issuing securities to the public markets the first time is called an initial public offering.
answer
True
question
Federal securities laws can, depending on the language and circumstances, classify a business plan as a form of securities offering.
answer
True
question
Whether a dividend is paid depends on:
answer
the board of directors agreeing to pay the dividend.
question
The purchase and sale of issued securities between investors is called the:
answer
secondary market.
question
In United States v. Morton, Morton was declared a general partner despite all paperwork including tax returns naming her as a limited partner because of her conduct.
answer
True
question
You have been invited to become a member of a partnership. What are some of the considerations you need to assess in making a decision to become a general or limited partner?If you choose to become a general partner, you will have unlimited liability for any partnership debts or liabilities. You will, however; have the right to participate in the management of the business. You will also have a better and more flexible ability to dissociate or withdraw from the business.
answer
If you choose to become a general partner, you will have unlimited liability for any partnership debts or liabilities. You will, however; have the right to participate in the management of the business. You will also have a better and more flexible ability to dissociate or withdraw from the business. If you choose to enter as a limited partner, your personal assets are protected as your risk of loss is limited to the amount of your investment in the partnership. Limited partners are prohibited from participating in the day to day operations of the business so there will be a lack of ability to completely control the ongoing business. Dissociation and withdrawal are limited to the time specified for the business or for your relationship to end.
question
All states require some sort of a written agreement when forming an LLC, with some requiring a full agreement and others requiring only certain parts of the agreement be in writing.
answer
False
question
The management structure of a member-managed LLC is most similar to that of a:
answer
general partnership
question
Business Trusts are also known as ________ trusts.
answer
Massachusetts
question
The Small Business Franchise Act provides for a statutorily required ________ period for a franchisee to cure any defaults prior to a notice of termination by the franchisor.
answer
30 day
question
To qualify for Subchapter S status, a supermajority of the shareholders must consent to the Subchapter S designation.
answer
False
question
Bonds, Inc. is incorporated in the state of Florida. In the state of Florida, Bonds would be characterized as a/an:
answer
domestic corporation.
question
Redrock GP has decided to go out of business. The sale of the partnership assets and the making of payments to creditors will occur during the ________ phase of the closing of a partnership.
answer
winding up
question
The first LLPs were formed by statute in:
answer
Texas
question
LLP profits and losses are reported on the LLP's tax returns and any taxes are paid or deducted by the LLP itself.
answer
False
question
A lawsuit against an officer or director brought by a shareholder is called a ________ suit.
answer
Derivative
question
The SEC has the power to suspend or revoke the licenses of brokers that violate securities laws.
answer
True
question
Annuities issued by insurance companies are exempt from full SEC registration requirements.
answer
True
question
Payments made to common stock holders based on the profitability of the company are called _______.
answer
Dividends
question
Business entities are sometimes referred to as business _______.
answer
Organizations
question
Under the Revised Uniform Limited Partnership Act, limited partners may act as consultants and may contribute their expertise to the limited partnership.
answer
True
question
Which of the following is an incorrect statement regarding Subchapter S corporations?
answer
they may be domestic or foreign but cannot be alien
question
Bill is a general partner in a four member limited partnership with two general and two limited partners. The partnership is silent with regard to the duration of the partnership and Bill wishes to retire.
answer
Bill may withdraw at any time and the partnership continues.
question
LLCs originated in 1977 and were immediately recognized as partnerships for tax purposes by the IRS.
answer
False
question
The owners of a corporation are the:
answer
shareholders
question
Which of the following gives a person the right to vote at an annual meeting?
answer
a share of stock
question
Officers, directors and controlling shareholders are often called _______.
answer
Insiders
question
Public corporation disclosures and filings are made available to the general public.
answer
True
question
Gina is the executive secretary to the CEO of a large public corporation. One day her boss takes her into a back room containing numerous cardboard file boxes and three shredding machines and he orders her to shred every document and file in the room. He then says, "We're under investigation by the SEC and if they get their hands on anything in this room we're ruined." She asks what is going on and is told that the company has been perpetrating frauds for years and they need to destroy all the evidence.
answer
Gina could be imprisoned for up to 20 years if she shreds the documents
question
In Clancy v. King, the plaintiff and defendant had operated a general partnership to promote certain literary works. Their partnership agreement contained standard language requiring the duty of diligence and care but specifically permitted the partners to freely compete against the partnership on an individual basis. The partnership entered into a very profitable agreement to have Clancy lend his name to fictional works of other authors taking advantage of Clancy's substantial fame and marketing power. Clancy retained the right to withdraw the use of his name at any time. Subsequent to his divorce from King, Clancy withdrew the use of his name from use in the agreement despite the lucrative nature of the agreement although the Clancy/King partnership continued to operate. Clancy's only participation in the agreement was the use of his name and no labor or other duties were required of him. King sued claiming a lack of good faith and the court decided:
answer
the duty to act in good faith was not negated by the clause permitting competition so because Clancy withdrew his name solely to spite and injure his ex-wife he is liable to her and may not withdraw his name from the contract.
question
The officer with the least amount of implied authority in relation to the other officers is the _______.
answer
Treasurer
question
The Revised Uniform Limited Partnership Act requires that there be a written partnership agreement regarding limited partnerships.
answer
False
question
The foundation and underlying principle of all securities regulation is disclosure.
answer
True
question
The sales of securities in the secondary market does not raise capital for the business whose stock is sold.
answer
True
question
Issuing securities to the public markets the first time is called an initial public offering.
answer
True
