Question 1

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Accepted Answer

A sole proprietorship is an uninc...

Question 2

John,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

Accepted Answer

A)   an S corporation.
B)   a C corporation.
C)   a close corporation.
D)   an LLC. C

Question 3

In the case of Marsh v.Gentry,the court held:

Accepted Answer

A)   Gentry had the right to purchase the property without disclosing his identity to Marsh because of the special rules for auction sales.
B)   state statutory law gave Marsh the absolute right to know Gentry was the purchaser.
C)   Gentry acted properly because he was following "accepted business practice. "
D)   Gentry acted properly because Marsh had consented to a sale of the property.

Question 4

Lance and Darrell have an equal partnership.This year,after expenses,the partnership had a profit of $100,000.Lance and Darrell will each pay taxes on:

Accepted Answer

A)   whatever they receive from the partnership.
B)   $50,000.
C)   $100,000.
D)   None of the above. The partnership itself will pay the taxes on the business's profit.

Question 5

The case of Apcar v.Gaus illustrates that it is essential to comply with all the technicalities of a limited liability partnership statute.

Accepted Answer

A) True 
 B)False

Question 6

Lawrence,Pablo,and Shanna,who plan to start a business:

Accepted Answer

A)   should consider taxes, potential liability, ease and cost of formation, and transferability of interests when they select a form of organization.
B)   will be affected by business law which attempts to balance the rights, obligations, and liabilities of the entrepreneurs, managers, investors, and customers.
C)   will be subject to a form of organization the law automatically selects by default if they do not select the form of organization themselves.
D)   All of the above.

Question 7

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Accepted Answer

A)   Limited liability company.
B)   Business trust.
C)   Close corporation.
D)   Franchise.

Question 8

To create an LLC:

Accepted Answer

A)   organizers must have a charter and an operating agreement.
B)   standard forms for start-up documents are well established, widely available, and effective.
C)   a lengthy, detailed charter must be filed with the county clerk in the jurisdiction in which the LLC is being formed.
D)   the use of customized forms, although more expensive than using standard forms, is recommended since the law related to LLCs is so unsettled.

Question 9

All of the following are characteristics of a closely held corporation EXCEPT:

Accepted Answer

A)   the shares are publicly traded.
B)   the corporation can typically operate without a board of directors.
C)   the shareholders usually restrict share transfer.
D)   minority shareholders are provided more protection than in regular corporations.

Question 10

Miranda was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Miranda:

Accepted Answer

A)   has no potential liability to the customer.
B)   can be held personally liable to the customer since she is a partner.
C)   can only be held liable to the amount of her investment.
D)   is personally liable, but the customer must first collect from the general partners before collecting from Miranda.

Question 11

Which of the following is considered by the IRS to be a sale of assets,subject to a tax on the value of the assets?

Accepted Answer

A)   Change from the corporate form to an LLC.
B)   Change from an LLC to a corporation.
C)   Change from a partnership to an LLC.
D)   All of the above.
E)   None of the above.

Question 12

Lee and Jan are debating whether to use an LLC or corporate form for a new business.Major advantages of an LLC over a corporation include the tax status of an LLC,the fact that an LLC is easier and less expensive to set up than a corporation,and the fact that venture capitalists generally prefer to invest in LLCs over corporations.

Accepted Answer

A) True 
 B)False

Question 13

Briefly discuss the limitations on a corporation electing Subchapter "S" status

Accepted Answer

For a corporation to elect Subchapter "S...

Question 14

Andy wants to start his own business.He has decided to rent space in a "strip mall" and open a pet shop.Additionally,he will provide dog grooming services.He figures he can do almost everything himself,though he will need to hire a part-time employee on an "as needed" basis.His friend,Lacy,has agreed to work when needed.
Andy is considering operating his business as a sole proprietorship.What are the primary legal advantages and disadvantages to this form of business ownership for Andy's pet shop?

Accepted Answer

There are many advantages to operating t...

Question 15

A partnership is not a separate,taxable entity.

Accepted Answer

A) True 
 B)False  True

Question 16

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Accepted Answer

A)   sole proprietorship.
B)   partnership.
C)   joint venture.
D)   limited liability company.

Question 17

Guy and Peggy bought a racehorse together,agreeing to share all expenses and split profits equally.There was no agreement as to the duration of the partnership.After two racing seasons,Peggy decided she was tired of the business and left the partnership.Is Guy correct in claiming Peggy's leaving was wrongful?

Accepted Answer

A)   Yes, Peggy was legally required to secure Guy's permission before leaving the partnership.
B)   Yes, Peggy had a legal duty to stay in the partnership unless she had a better reason for leaving, such as impossibility of continuation.
C)   Yes, Peggy had a legal duty to stay in the partnership until a new partner could be found.
D)   No, in a partnership at will, a partner has the right to leave the partnership at any time.

Question 18

The most common form of business ownership is the sole proprietorship.

Accepted Answer

A) True 
 B)False  True

Question 19

The corporate form of business was:

Accepted Answer

A)   first known and used by the Greeks and then spread through the Romans to England.
B)   not known or conceived of until about 1737 by Sir Francis LaRue.
C)   first allowed in the State of New York around 1811 and is considered to be an American creation.
D)   None of the above.

Question 20

Generally,a joint venture is a partnership created for one limited purpose.

Accepted Answer

A) True 
 B)False

Exam 18: Starting a Business: Llcs and Other Options

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Correct Answer
verified
A sole proprietorship is an uninc...
View Answer

John,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

Correct Answer
verified
C

In the case of Marsh v.Gentry,the court held:

Correct Answer
verified

Lance and Darrell have an equal partnership.This year,after expenses,the partnership had a profit of $100,000.Lance and Darrell will each pay taxes on:

Correct Answer
verified

The case of Apcar v.Gaus illustrates that it is essential to comply with all the technicalities of a limited liability partnership statute.

Correct Answer
verified

Lawrence,Pablo,and Shanna,who plan to start a business:

Correct Answer
verified

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Correct Answer
verified

To create an LLC:

Correct Answer
verified

All of the following are characteristics of a closely held corporation EXCEPT:

Correct Answer
verified

Miranda was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Miranda:

Correct Answer
verified

Which of the following is considered by the IRS to be a sale of assets,subject to a tax on the value of the assets?

Correct Answer
verified

Correct Answer
verified

Briefly discuss the limitations on a corporation electing Subchapter "S" status

Correct Answer
verified
For a corporation to elect Subchapter "S...
View Answer

Correct Answer
verified
There are many advantages to operating t...
View Answer

A partnership is not a separate,taxable entity.

Correct Answer
verified
True

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Correct Answer
verified

Correct Answer
verified

The most common form of business ownership is the sole proprietorship.

Correct Answer
verified
True

The corporate form of business was:

Correct Answer
verified

Generally,a joint venture is a partnership created for one limited purpose.

Correct Answer
verified

Exam 18: Starting a Business: Llcs and Other Options

Compare and contrast the following forms of business organization: sole proprietorship,general partnership,limited partnership,limited liability company,and corporation as to ease of formation,liability of owners,management,and tax implications.

Correct AnswerverifiedA sole proprietorship is an uninc...View AnswerShow Answer

John,his parents,and three brothers own all the stock of their family farm corporation.This corporation,which is taxed as a corporation,is probably:

Correct AnswerverifiedC

In the case of Marsh v.Gentry,the court held:

Correct AnswerverifiedShow Answer

Lance and Darrell have an equal partnership.This year,after expenses,the partnership had a profit of $100,000.Lance and Darrell will each pay taxes on:

Correct AnswerverifiedShow Answer

The case of Apcar v.Gaus illustrates that it is essential to comply with all the technicalities of a limited liability partnership statute.

Correct AnswerverifiedShow Answer

Lawrence,Pablo,and Shanna,who plan to start a business:

Correct AnswerverifiedShow Answer

Which of the following forms of organization is a compromise between starting one's own business as an entrepreneur and working for someone else as an employee?

Correct AnswerverifiedShow Answer

To create an LLC:

Correct AnswerverifiedShow Answer

All of the following are characteristics of a closely held corporation EXCEPT:

Correct AnswerverifiedShow Answer

Miranda was a limited partner in a retail business that was sued by a customer who fell in the store.The customer claimed the business was negligent in caring for its floors.Miranda:

Correct AnswerverifiedShow Answer

Which of the following is considered by the IRS to be a sale of assets,subject to a tax on the value of the assets?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Briefly discuss the limitations on a corporation electing Subchapter "S" status

Correct AnswerverifiedFor a corporation to elect Subchapter "S...View AnswerShow Answer

Correct AnswerverifiedThere are many advantages to operating t...View AnswerShow Answer

A partnership is not a separate,taxable entity.

Correct AnswerverifiedTrue

Charles and Ellen,an unmarried couple,run an ice cream store.The business is not incorporated and they have filed no formation papers with the state.Their business is a:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The most common form of business ownership is the sole proprietorship.

Correct AnswerverifiedTrue

The corporate form of business was:

Correct AnswerverifiedShow Answer

Generally,a joint venture is a partnership created for one limited purpose.

Correct AnswerverifiedShow Answer

Correct Answer
verified
A sole proprietorship is an uninc...
View Answer

Correct Answer
verified
C

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
For a corporation to elect Subchapter "S...
View Answer

Correct Answer
verified
There are many advantages to operating t...
View Answer

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
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Correct Answer
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