Question 1

The certificate of organization may restrict membership in an LLC to only those possessing a professional license in a named field.

Accepted Answer

A) True 
 B)False

Question 2

LLPs are formed with the filing of ________ with the proper public official.

Accepted Answer

A)   a statement of qualification
B)   a certificate of formation: LLP
C)   a record of business creation
D)   articles of organization

Question 3

Typically, day-to-day decision making in an LLC is performed by:

Accepted Answer

A)   the individual principal who filed the initial paperwork to form the business.
B)   its board of directors.
C)   the top 10 percent of the principal investors.
D)   its managing members.

Question 4

What is the purpose of an operating agreement, and what benefits does it afford an LLC?

Accepted Answer

LLCs are frequently governed by agreemen...

Question 5

The first LLP legislation was enacted in:

Accepted Answer

A)   New York.
B)   Texas.
C)   Florida.
D)   Iowa.

Question 6

All states require that LLPs have a written partnership agreement.

Accepted Answer

A) True 
 B)False

Question 7

Though they may elect a different structure, for tax purposes LLCs are typically treated as:

Accepted Answer

A)   nonprofit organizations.
B)   hybrid entities.
C)   corporate tax entities.
D)   pass-through entities.

Question 8

In an LLP, any income is taxed:

Accepted Answer

A)   when distributed to shareholders.
B)   at the end of the fiscal year.
C)   at the level of the entity.
D)   only when distributed to its partners.

Question 9

LLCs are pass-through entities for tax purposes; however, LLPs are taxed at the entity level without tax liability passing to partners other than their personal salary income if any.

Accepted Answer

A) True 
 B)False

Question 10

When an LLP is formed, who files the initial paperwork?

Accepted Answer

A)   an individual representing two or more persons desiring to start a new business
B)   the principal in a sole proprietorship already in operation
C)   a limited partnership already in operation
D)   a general partnership already in operation

Question 11

The ability to flow through to the investors the tax deductions and losses that are typically generated by an emerging company or a company with significant up-front debt is an advantage of a:

Accepted Answer

A)   corporate tax structure.
B)   pass-through entity.
C)   member-managed LLC.
D)   manager-managed LLC.

Question 12

Some states do not require a written management agreement regarding LLCs.

Accepted Answer

A) True 
 B)False

Question 13

Because it is not a taxable entity, an LLP:

Accepted Answer

A)   files an information tax return.
B)   does not need to file a tax return.
C)   needs to file only a federal tax return.
D)   needs to file only a state and local tax return.

Question 14

LLCs are frequently governed by an agreement of the parties called an LLC agreement or _______.

Accepted Answer

The answer of LLCs are frequently governed by an agreement...

Question 15

Partners in an LLP may choose to have LLP income taxed as a corporation.

Accepted Answer

A) True 
 B)False

Question 16

LLCs are not permitted to capitalize by selling equity ownership in the LLC itself.

Accepted Answer

A) True 
 B)False

Question 17

An LLC can last until a specified term expires.

Accepted Answer

A) True 
 B)False

Question 18

When completing the certificate of organization, the organizers of an LLC are not required to disclose how the business is to be managed.

Accepted Answer

A) True 
 B)False

Question 19

All income and losses of an LLP are reported:

Accepted Answer

A)   on the entity's return.
B)   to the IRS and state and local tax authorities.
C)   on the partners' individual returns.
D)   annually.

Question 20

States may require that LLPs carry liability insurance to protect clients and customers as a condition of LLP formation.

Accepted Answer

A) True 
 B)False

Exam 15: Limited Liability Companies and Limited Liability Partnerships

States may require that LLPs carry liability insurance to protect clients and customers as a condition of LLP formation.

Correct AnswerverifiedShow Answer

The certificate of organization may restrict membership in an LLC to only those possessing a professional license in a named field.

Correct AnswerverifiedShow Answer

Because it is not a taxable entity, an LLP:

Correct AnswerverifiedShow Answer

Partners in an LLP may choose to have LLP income taxed as a corporation.

Correct AnswerverifiedShow Answer

An LLC can last until a specified term expires.

Correct AnswerverifiedShow Answer

LLCs are pass-through entities for tax purposes; however, LLPs are taxed at the entity level without tax liability passing to partners other than their personal salary income if any.

Correct AnswerverifiedShow Answer

What is the purpose of an operating agreement, and what benefits does it afford an LLC?

Correct AnswerverifiedLLCs are frequently governed by agreemen...View AnswerShow Answer

In an LLP, any income is taxed:

Correct AnswerverifiedShow Answer

The ability to flow through to the investors the tax deductions and losses that are typically generated by an emerging company or a company with significant up-front debt is an advantage of a:

Correct AnswerverifiedShow Answer

LLCs are frequently governed by an agreement of the parties called an LLC agreement or _______.

Correct AnswerverifiedShow Answer

LLPs are formed with the filing of ________ with the proper public official.

Correct AnswerverifiedShow Answer

All states require that LLPs have a written partnership agreement.

Correct AnswerverifiedShow Answer

When an LLP is formed, who files the initial paperwork?

Correct AnswerverifiedShow Answer

Though they may elect a different structure, for tax purposes LLCs are typically treated as:

Correct AnswerverifiedShow Answer

Typically, day-to-day decision making in an LLC is performed by:

Correct AnswerverifiedShow Answer

When completing the certificate of organization, the organizers of an LLC are not required to disclose how the business is to be managed.

Correct AnswerverifiedShow Answer

Some states do not require a written management agreement regarding LLCs.

Correct AnswerverifiedShow Answer

LLCs are not permitted to capitalize by selling equity ownership in the LLC itself.

Correct AnswerverifiedShow Answer

All income and losses of an LLP are reported:

Correct AnswerverifiedShow Answer

The first LLP legislation was enacted in:

Correct AnswerverifiedShow Answer

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LLCs are frequently governed by agreemen...
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