Smith and James were partners in S and J Partnership. The partnership agreement stated that all profits and losses were allocated 60% to Smith and 40% to James. The partners decided to terminate and wind up the partnership. The following was the balance sheet for S and J on the day of the windup: Show Accounts payable $24,000 Of the total accounts receivable, $10,000 was collected, and the remainder was written off as bad debt. All liabilities of S and J were paid by the partnership. The property and equipment are sold for $32,000. Under the Revised Uniform Partnership Act, what amount of cash was distributed to Smith? To create a Limited Liability Corporation, articles of organization must be filed with the state's Secretary of State's office. True False true One recognized advantage to a general partnership is that it allows partners to share in management and profits of the partnership. True False true
In which of the following business organizations does an owner risk losing his or her limited liability by actively and publicly managing the business? Limited Partnership Limited Liability Partnership General corporation Limited liability corporation Limited Partnership All of the following are functions of an LLC's Operating Agreement, except: To set forth rules concerning voting rights for members of the LLC. To indemnify members of the LLC from liability for any unlawful acts. To make rules concerning the transfer of interests in the LLC. To address circumstances in which the LLC would dissolve. To indemnify members of the LLC from liability for any unlawful acts. Which of the following would a represent a breach of fiduciary duty by a general to the limited partners in a limited partnership? The general partner takes action to personally profit from the business of the partnership. The general partner takes action to minimize the risks and debts that are incurred by the partnership. The general partner enters into contracts on behalf of the partnership without first consulting the limited partners. The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership. The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership. In a Limited Partnership, a limited partners risk personal liability for partnership debts when __________. The limited partner offers to sell his or her interest in the partnership. The limited partner expresses his or her opposition to a decision made by the general partner. The limited partner becomes overly involved in partnership affairs. The limited partner decides to contribute significant personal assets as capital to the partnership. The limited partner becomes overly involved in partnership affairs. A limited partnership allows limited partners to be only liable for their capital contribution. True False true A disadvantage of the Limited Liability Company is that profits are taxed both as income to the corporation and as dividends to the members. True False false The manager of a manager-managed Limited Liability Company may be a non-member. True False true Which business entity has the following characteristics: liability of the owners is limited to their investments; ownership interest is easily transferrable and there are no legal limits to the number of owners; owners elect the managers of the business who operate under duties of loyalty and due care; the entity is organized under state law and may have perpetual existence; profits are subject to double taxation? General partnership General corporation Limited liability corporation Limited partnership General corporation A principal who is discharged in bankruptcy is released from his duty to reimburse the surety. True False true When a ________ is purchased, a bonding company promises to pay an employer any loss, not to exceed a stated amount, caused by the covered employees' embezzlement. Performance bond. Fidelity bond. Security agreement. Nonperformance bond. fidelity bond Jo and Anna, who are mother and daughter, are co-owners of Joanna's Frocks. When the bank loaned money to the business, Jo and Anna agreed to be sureties on the loan. Under the loan agreement, Anna will be liable only if Jo defaults on her obligation as a surety. Anna is a __________on the loan. General guarantor Special guarantor Co-surety Sub-surety sub surety An artisan's lien is always assignable. True False false State law determines whether or not a mortgage will have priority over a mechanic's lien. True False true A creditor in possession of collateral given to him or her by the principal may return it to the principal without the consent of the surety. True False false A creditor must exhaust his or her judicial remedies against the principal before seeking to recover from the surety. True False false Misconduct of the principal that induces a party to become a surety allows that surety to avoid the contract. True False false Allison is going to create a lawn service business. Allison would like to limit her liability by creating a subchapter "S" corporation. She does not know if the state she lives in allows for a single shareholder corporation. Where should Allison look to find the answer to her question? State statutes Federal statutes US Code of Federal Regulations Local ordinances State statutes Which business entity has the following characteristics: one owner has unlimited personal liability for the debts of the business while other owners are liable only to the extent of their investments; owners lose their limited liability if they actively manage the business; the entity is organized under state law; both profits and loses pass through to the owners? General partnership Limited partnership Limited Liability Partnership Limited Liability Company Limited partnership All of the following are considered advantages to a Limited Liability Partnership, except: A limited liability partner is always insulated from personal liability of he or she commits malpractice. A limited liability partner can avoid personal liability for partnership debts. The limited liability partnership can function much like a general partnership, without the same risks of personal liability as a general partnership. Partnership proceeds may "pass through" the partnership for income tax purposes. A limited liability partner is always insulated from personal liability of he or she commits malpractice. Limited partnerships must have one general partner for every seven limited partners. True False false Which of the following is a quality that an LLC shares with a corporation? Members are only personally liable for debts to the extent of the money they put into the business. Members of an LLC usually have little to no control in major business decisions. An LLC and a corporation are treated identically for tax purposes. Both an LLC and a corporation require complex and costly procedures and filings before they can legally do business. Members are only personally liable for debts to the extent of the money they put into the business. Limited partners may lose the full amount their capital contribution if the limited partnership incurs debts that exceed its assets. True False true Individual members of an LLC may do all of the following, except: Bind the LLC in legally enforceable contracts. Voting on business personnel issues. Making capital contributions to the LLC. Using LLC funds to satisfy personal debts. Using LLC funds to satisfy personal debts. All of the following are considered advantages of doing business as an LLC, except: The LLC insulates its members from personal liabilities for the debts of the business. Members of the LLC may lawfully avoid filing personal tax returns with the IRS. The LLC can function much like a general partnership, while avoiding many of the risks of a general partnership. The LLC can provide its members voting rights that are proportionate to the members' capital contributions. Members of the LLC may lawfully avoid filing personal tax returns with the IRS. Which business entity has the following characteristics: owners have unlimited personal liability for the debts of the business, and joint and several liability for the contracts and torts of the other owners; there are few formalities in creating the entity; profits are taxed only at the owner level? General corporation General partnership Limited partnership Limited liability partnership general partnership A surety is liable to the creditor as soon as the principal ________. Enters into the contract. Makes an initial payment. Files for bankruptcy Defaults. defaults A security interest in personal property in favor of one who has performed services on the personal property is an ________. Mechanic's lien. Artisan's lien. Color of title. Security Deposit. artisans lien A surety has no obligation to the creditor unless the principal _______. Fails to perform. Fulfills his or her contractual obligations. Voids the contract. Assigns the contract. fails to perform A surety will remain liable when the creditor-principal agreement is modified if the surety consents to the modification Before the modification takes place. At the time the modification takes place. After the modification takes place. All of the above. all of the above A ________ provides security for a creditor without involving an interest in the property, where the security for the creditor is provided by a third person's promise to be responsible for the debtor's obligation. Suretyship. Artisan's lien. Mechanic's lien. Foreclosure sale. suretyship Persons who contract with the owner to furnish labor or material or construct a building are known as _________. Contractors. Subcontractors. Authorized agents. Mortgagees. contractors Rod and Todd have joint and several liability as sureties on a loan made to Rod's business by First Bank. Under this agreement, Todd is a _________________. General guarantor Special guarantor Co-surety Sub-surety cosurety State law requires that state chartered banks post bonds to protect the banks from losses caused by embezzlement by bank employees. The bonds posted by banks are __________bonds. Fidelity Performance Bank Fiduciary fidelity
An extension of time of payment between a creditor and principal must be a valid agreement supported by ______ if it is to have an impact on the surety's liability. Consideration Collateral Personal property. Real property. onsideration Any profits which a surety makes when called upon to perform the principal's duties belong to the surety. True False false Under the "pass through" principle, a business entity Avoids double taxation Assigns assets of the business to a receiver. Delegates duties of the business to a subcontractor Conducts high risk activities through a subsidiary. Avoids double taxation Which of the following is recognized as a disadvantage to doing business as an LLC? Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions. Individual members of the LLC can never bind the LLC in a valid and enforceable contract. Compared to other business entities, the LLC is taxed more heavily by the IRS. An LLC requires the participation of several owners, which can sometimes complicate day-to-day business decisions. Existing court decisions addressing LLC issues and formation are relatively undeveloped, which may lead to legal uncertainty when making business decisions. Which of the following best describes the role of a general partner in a limited partnership? The general partner usually has an insignificant role in the overall business decisions of the limited partnership. The general partner defers to the business decisions of the limited partners of the limited partnership, unless those decisions seem economically unreasonable. The general partner may participate in the business decisions of the limited partnership, but he or she will never be held personally liable for the debts of the business. The general partner manages the partnership and remains responsible for partnership liabilities. The general partner manages the partnership and remains responsible for partnership liabilities. If the formalities of creating a limited partnership are not met, a partnership will be treated by courts as a general partnership. True False true An LLC in which non-owners are hired to run the day to day activities of the firm is a ______LLC. Member-managed Manager-managed Proprietary Subchapter S manger managed Which of the following statements about the operation of a member-managed LLC is false? Articles of organization must be filed with the state as part of the application process. The application must state that it is to be a member-managed LLC. Only the managing members have access to the books and records of the LLC Any member of the LLC may bind the LLC on a contract. Only the managing members have access to the books and records of the LLC Bonding companies are usually uncompensated sureties. True False false Both contractors and subcontractors are entitled to a mechanic's lien against the owner for nonpayment of their accounts. True False true A surety owes a _______ to the principal for any profits obtained after the surety performs. Duty to account. Debt. Duty to discharge. Percentage interest. duty to account Contractors have a longer period in which to file mechanic's liens that subcontractors or suppliers have. True False true A surety who only guarantees collection is entitled to notice. True False true If a judgment for dollar damages is not paid, the judgment creditor may apply for a ______. Default judgment. Writ of Execution. Writ of Habeas Corpus. Writ of first refusal. Writ of Execution. Individual members of the LLC can never bind the LLC in a valid and enforceable contract. True False false In which of the following business forms are profits taxed at both the entity level and the owner level? General corporation Limited Partnership LLC LLP General corporation All of the following could be recognized as advantages of doing business as a limited partnership, except: A limited partnership allows limit partners to be liable only to the extent of their capital contribution. Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities. Limited partners can invest in a partnership while effectively protecting their personal assets. A Limited Partnership is often a convenient and attractive option to investors. Limited partners can actively share in management of the partnership, without incurring the risks of business liabilities. In a manager-managed LLC, a single person or a select group has the authority to control and make decisions for the LLC. True False true Which of the following usually provides an investor the least protection from personal liability for the debts of the business? General Partnership Limited Partnership LLC Corporation General Partnership Modification of the creditor-principal agreement generally discharges the surety. True False true Jason has filed suit against Luke claiming $50,000 in damages. While the claim is being litigated, Jason can ask the court for a writ to seize property belonging to Luke which could be used to satisfy a judgment. The seizure prevents Luke from selling or otherwise disposing of the property during the proceedings. The writ Jason will ask for is a writ of________________. Attachment Attainder Execution Garnishment attachment The two types of guaranty agreements are general and special. True False true Contracts of suretyship are legally indistinguishable from contracts of indemnity. True False false A ________ promises to be liable to the creditor only in the event that the surety refuses to perform and thereby defaults. Debtor. Co-surety. Subsurety. Obligee. subsurety The Statute of Limitations does not apply to surety contracts. True False false All of the following could be accurate statements about a general partnership, except: Partnership liabilities in a general partnership are limited to the amount of capital contribution. Partners can share in management of the partnership. Partners can share partnership profits. The general partnership allows for quick, easy and immediate control. Partnership liabilities in a general partnership are limited to the amount of capital contribution. Absent an agreement otherwise, a Limited Liability Company's operating agreement can only be amended with the unanimous consent of the members. True False true Because the LLC is a relatively new type of business entity, there are often fewer published court opinions addressing LLC issues. True False true Which of the following is considered a disadvantage of doing business as a general partnership? A general partnership is not a taxable entity under IRS rules. Income in a general partnership flows directly to the partners. All partners can participate in management of the partnership. All partners are/may be held liable for partnership debts. All partners are/may be held liable for partnership debts.
A limited partner risks personal liability when he or she actively participates in the management of partnership affairs. True False true Co-sureties share joint and several liability to the creditor True False true A sub-surety becomes liable to the creditor only when another surety fails to perform. True False true A surety's obligation is a generally promise to do what the principal agreed to do. True False true Compared to other business entities, a general partnership requires filing complex documentation with the secretary of state's office before it is authorized to do business. True False false In a limited partnership, each limited partner has an equal right to participate in the management of the business. True False false In a limited partnership, a general partner's fiduciary duty is breached when limited partners are not permitted to participate in management. True False false A member of an LLC risk personal liability for participating in all of the following activities, except: In the name of the LLC, the member secretly loans money to a close friend. The member knowingly files a false tax return with the IRS. The member volunteers to assume personal responsibility for a loan payments made by the LLC. The member consistently votes against decisions that are ultimately approved by the majority of other members of the LLC. The member consistently votes against decisions that are ultimately approved by the majority of other members of the LLC. A document that an LLC must submit to the secretary of state's office prior to doing business is ______. The Operating Agreement. A Partnership Agreement. The Articles of Organization. A Security Interest Filing. The Articles of Organization. A limited partner normally has no liability beyond his or her contribution True False true Restatement of Security treats contracts of suretyship as interchangeable with guarantor contracts. True False true In a _______, a creditor must have made reasonable but unsuccessful attempts to collect from the principal before the guarantor can be held liable. Absolute guaranty. Unconditional guaranty. Conditional guaranty. Satisfaction guaranty. Conditional guaranty. Perfect Painters submitted a bid to paint the dorm rooms at State University during the summer. State Law requires that all bidders for state contracts post a bond protecting the state against loss if the bidder fails to perform within the contract time. The kind of bond Perfect Painters will post is a _______________bond. Fidelity Mechanic's Performance Artisan's Performance An "improvement" to real property necessarily increases the market value of the real property. True False false Voluntary surrender of personal property subject to an artisan's lien generally terminates the lien. True False true When a ________ is purchased, a bonding company promises to pay an employer any loss, not to exceed a stated amount, caused by the covered employees' embezzlement. Performance bond. Fidelity bond. Security agreement. Nonperformance bond. Fidelity bond. All of the following are rights held by an individual member of an LLC, except: The right to request that the LLC be dissolved. Access to the LLC's books and records. The right to vote against an amendment to the LLC's operating agreement. The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC. The right to sell one's interest in the LLC without notifying or consulting the other members of the LLC. If the formalities of creating a limited partnership are not met, a partnership will be treated by courts as a general partnership. True False true
A creditor can assign a general guarantor's promise to a new creditor for value. True False true Megan agreed to act as a surety on a personal loan First Bank made to Arthur. When Arthur defaulted on the loan, Megan paid off the loan obligation. Megan now has the right of ________against Arthur. Contribution Indemnification" Reimbursement Subrogation reimbursemet When holders of mechanic's liens are equal in priority, and there are not sufficient funds to satisfy all their claims, they will share the funds that are available on a pro-rata basis. True False true Mel, who owns a car repair shop, replaced the clutch in Ellen's car. Until Ellen pays for the repairs, Mel has a ______lien on the car. Artisan's Mechanic's Judicial Guarantor's artisans A ________ is a party who limits his or her promise to a single transaction or to a single creditor. General guarantor. Special guarantor. Creditor. Obligee. Special guarantor. Which of the following would a represent a breach of fiduciary duty by a general to the limited partners in a limited partnership? The general partner takes action to personally profit from the business of the partnership. The general partner takes action to minimize the risks and debts that are incurred by the partnership. The general partner enters into contracts on behalf of the partnership without first consulting the limited partners. The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership. The general partner uses certain partnership assets to secure a loan for a business venture that is not undertaken in the name of the partnership. Absent an agreement otherwise, the members of an LLC have a statutory right to approve a merger dissolve the LLC inspect the books and records of the LLC all of the above are statutory rights all of the above are statutory rights Which of the following parties could claim an artisan's lien? A common carrier of goods. A jeweler who repaired a watch The owner of a storage facility All of the above are eligible for an artisan's lien. All of the above are eligible for an artisan's lien. Limited Partnership must have at least one general partner. True False true A Limited Partnership must have ____________. At least one limited partner who participates in management decisions. An equal ratio of limited partners to general partners. At least one general partner. Equal capital contributions from both limited and general partners. At least one general partner. An LLC where a single person or select group has the power to manage is a ____________________LLC. Manager-managed Member-managed Proprietary Subchapter S Manager-managed In a Limited Liability Company, the unanimous consent of the members is required to hire a new employee. True False false In a manager-managed LLC ___________. No one member of the LLC has authority to make business decisions on behalf of the LLC. An individual or small group has the authority to control and make decisions for the LLC. All members of the LLC participate equally in business decisions. The authority of the members of the LLC to make decisions is directly proportionate to the amount their capital contribution. An individual or small group has the authority to control and make decisions for the LLC. A limited partner has liability to the full extent of his or her capital contribution. True False true One of the disadvantages of a Limited Liability Partnership is double taxation. True False false Any third party who promises a creditor to be liable for a principal's payment is either a surety or _________. Obligee. Guarantor. Principal Debtor Obligor. guarantor ________ is a proceeding by which a plaintiff seeks to reach the assets of the defendant that are in the hands of a third party. Execution. Levy. Garnishment. Foreclosure. garnishment A lien for the value of material and labor expended in the construction of buildings and other improvements is a _________. Artisan's lien. Mechanic's lien. Suretyship. Right of redemption. Mechanic's lien. A "certificate of limited partnership" is a document that is Filed with the state Secretary of State by the limited partnership as part of its application process. Issued by the IRS to acknowledge a limited partnership's tax status. Issued by the limited partners jointly to the general partner. Issued by the general partner to the limited partners. Filed with the state Secretary of State by the limited partnership as part of its application process. State courts have the power to order that real property be sold to satisfy a mechanic's lien. True False true ABC Corporation has a $150,000 open line of credit with Local Bank. Alice, the president of ABC, promised Local Bank that she will be liable if ABC defaults on any or all of the draws it takes against its line of credit. Under this agreement, Alice is a __________________. Special guarantor General guarantor Co-principal Co-surety General guarantor Subrogation means the substitution of one person in place of another. True False true If the principal does not default, the surety never becomes liable to the creditor. True False true Pearl sued Sam and was awarded a judgment against him for $50,000. Sam has a savings account with First Bank that can be seized in partial satisfaction of the judgment. The writ the court will use ordering First Bank to turn over to it the funds in Sam's account is a writ of____________. Attainder Attachment Garnishment Execution Garnishment An "improvement" to real property necessarily increases the market value of the real property. True False false A "certificate of limited partnership" is a document that is Filed with the state Secretary of State by the limited partnership as part of its application process. Issued by the IRS to acknowledge a limited partnership's tax status. Issued by the limited partners jointly to the general partner. Issued by the general partner to the limited partners. Filed with the state Secretary of State by the limited partnership as part of its application process. State courts have the power to order that real property be sold to satisfy a mechanic's lien. True False true The limited liability partnership is often an attractive option for professional associations such as law firms, accountants and medical doctors. True False true In which of the following business organization do the losses as well as the profits pass through to the owners? LP LLC General corporation Both a and b both a and b A commonly cited disadvantage of an LLC is that its members often risk personal liability if the business of the LLC fails. True False false Which of the following parties could claim an artisan's lien? A common carrier of goods. A jeweler who repaired a watch The owner of a storage facility All of the above are eligible for an artisan's lien. All of the above are eligible for an artisan's lien. A __________ is a party whose promise is not limited to a single transaction or to a single creditor. General guarantor. Special guarantor. Creditor. Obligee.
General guarantor. The right of first refusal refers to the right of LLC members to Dissent from a business decision by a non-member manager. Vote against admitting another member. Purchase the interest of another member in the LLC before it is offered to an outside buyer Purchase an asset of the LLC before it is offered for sale to the public. Purchase the interest of another member in the LLC before it is offered to an outside buyer In a Limited Partnership, the General Partner's fiduciary duty is ______. A duty to ensure all Limited Partners has an equal voice in partnership affairs and decisions. A duty to ensure that the General Partner optimizes his or her investment in the partnership. A duty of good faith and fair dealing to all partners in the partnership. A duty to minimize financial risks taken on by all Limited Partners in the partnership. A duty of good faith and fair dealing to all partners in the partnership. A(n) _______ is a legal proceeding accompanying an action in court by which a plaintiff may acquire a lien on a defendant's property as a security for the payment of any judgment that the plaintiff may recover. Attachment. Sheriff's sale. Meeting of creditors. Discharge in bankruptcy. attachment California and New York allow only professional services firms to do business as Limited Liability Partnerships. True False true An LLC must have at least two members that participate in management in order to lawfully do business. True False false Bob is a co-surety with Sue on a loan that was made to Sue's business. If the business defaults on the loan and Bob is required to pay the full amount, Bob has the right of ____________ against Sue. Reimbursement Indemnification Contribution Subrogation. contribution Limited Partnerships offer a convenient way for professional and family-owned enterprises to do business. True False false When considering whether a partner has breached his or her fiduciary duties to the partnership, courts are likely to consider all of the following, except: Specific language of the Partnership Agreement. Applicable state partnership statutes. Prior court decisions. The partner's personal net worth. The partner's personal net worth. In a suretyship, security for the creditor is provided by Granting the creditor an interest in the debtor's real property A statutory lien on the debtor's personal property. The promise of a third party to perform if the debtor does not perform. A pledge by the debtor of personal property. The promise of a third party to perform if the debtor does not perform. Edgar Esquire has an insurance contract with Lawyers Insurance Company which provides that Lawyers Insurance will pay any malpractice judgment against Edgar up to $3 million. The insurance contract between Edgar and Lawyers Insurance Company is one of __________. Suretyship Special guarantee General guarantee Indemnity Indemnity The general contractor is eligible for a mechanic's lien on the real property, but the subcontractors on the project are not. True False false Limited Liability Companies are one of the forms of business organization True False false A _______ provides protection against losses that may result from the failure of a contracting party to perform the contract as agreed. Performance bond. Foreclosure sale. Finance agreement. Payment schedule. performance bond Lack of capacity and discharge in bankruptcy are two common defenses that are available to a surety that may be asserted against a creditor. True False
false Which statement is true about a general partnership?To have a general partnership, two conditions must be true: The company must have two or more owners. All partners must agree to have unlimited personal responsibility for any debts or legal liabilities the partnership might incur.
Which of the following best describes a general partnership quizlet?Which of the following best describes a general partnership? general partnership is a partnership in which the partners have full or shared responsibility for operating the business.
Which one of the following applies to a general partnership quizlet?Which one of the following applies to a general partnership? Any one of the partners can be held solely liable for all of the partnership's debt.
Which of the following describes a general partnership?A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business.
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Which of the following statements about a general partnership is true quizlet?
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