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1. A limited liability company can be taxed as a partnership.
1. Limited liability companies (LLCs) are governed by state LLC statutes.
1. A limited liability company (LLC) formed in one state but doing
business in another state is referred to in the second state as a
foreign LLC.
1. A limited liability company is not a citizen of any state.
1. A limited liability company as an entity is not liable for the wrongful
acts or omissions of its members.
1. The liability of the members of a limited liability company is limited to
the amount of their investments.
1. A limited liability company that has only one member cannot be taxed.
1. In many states, an operating agreement is not required for a limited
liability company to exist.
1. A limited liability company must be managed by non-member managers.
1. Normally, a dissociated member of an limited liability company (LLC)
has the right to force the LLC to dissolve.
1. When a member dissociates form a limited liability company, the
member’s duty of loyalty continues.
1. A limited liability partnership allows its partners to avoid personal
liability for the malpractice of other partners.
1. In a limited partnership, a limited partner has full responsibility for the
partnership and for all its debts.
1. A limited partner who gives a general partner advice on matters relating
to the management of the partnership cannot be liable as a general
partner.
1. Only a limited partnership’s limited partners have a fiduciary obligation
to the other partners.
1. In a limited partnership, with the exception of the right to participate in
management, limited partners have essentially the same rights as
general partners.
1. Some states have passed laws prohibiting the withdrawal of limited
partners from a limited partnership.
1. An assignment of the interest of a limited partner dissolves a limited
partnership.
1. A general partner has the power to dissociate from a limited
partnership regardless of what the partnership agreement specifies.
1. In a limited liability limited partnership, the liability of a general partner
is limited to the amount of capital he or she has invested in the
partnership.
1. Sustainable Café LLC is a limited liability company. Like any other LLC,
unless Sustainable Café chooses otherwise, the firm will be taxed as
a. a corporation.
b. a person.
c. a partnership.
d. a sole proprietorship.
1. Esteban and Florian want to form a limited liability company (LLC) to
manage their business, Gordian Nuts. LLC statutes have been adopted
in
a. all states.
b. no states.
c. less than one-fifth of the states.
d. only Wyoming and Florida.
1. Bee Hive Honey, LLC’s members include Chad. For purposes of suing
and being sued, Bee Hive Honey is
a. an aggregate of Chad and the other members.
b. a natural person in the members’ “family.”
c. a legal entity apart from the owners.
d. a non-participating third party.
1. Greta is a member of Hovercraft LLC. As a member, Greta is
a. a manager or officer, but not an owner.
b. an investor, but not a manager, officer, or owner.
c. an owner.
d. a participant, but not an investor, manager, officer, or owner.
1. Coco is considering forms of business organization for her concessions
business—Coco’s Cupcakes. Most states require that a limited liability
company have at least
a. no minimum number of members.
b. at least one member.
c. at least two members.
d. at least three members, including at least one general partner.
1. Location! Realty LLC is a limited liability company. Like other LLCs, for
federal jurisdictional purposes, Location! Realty is most likely a citizen
of
a. all states.
b. every state in which its members are citizens.
c. no state.
d. only the state in which it was formed.
1. Vijay is a member of Watchit, LLC, a limited liability company. Vijay is
liable for Watchit’s debts
a. in proportion to the total number of members.
b. to the extent of his capital contribution.
c. to the extent that the other members do not pay the debts.
d. to the full extent.
1. Lui is considering forms of business organization for a chain of Magic
Trix novelty stores. One advantage of the limited liability company form,
with respect to tax options, is its
a. flexibility.
b. lack of accountability.
c. limited liability.
d. rigidity.
1. CPA Accounting, LLC, is a limited liability company. If the law in CPA’s
state is like the law in most states, unless the members have agreed
otherwise, participants in the firm’s management will be considered to
include
a. all members.
b. no member.
c. one member.
d. two members, including at least one general partner.
1. B2B, LLC, is a limited liability company. Among its members, a dispute
arises that the operating agreement does not cover. The dispute is gov-
erned by
a. the applicable state LLC statute.
b. the federal Uniform LLC Law.
c. the principles of partnership law.
d. the state corporation statute.
1. Cecilia’s Day Spa, LLC, is a member-managed limited liability company.
If the law in Cecilia’s state is like the law in most states, unless the
members have agreed otherwise, voting rights are apportioned
according to
a. capital contributions.
b. participation in management.
c. the number of members.
d. transactions with the firm.
1. Flip is a member of Great States Trucking LLC. Flip’s relationship to
Great States ends, but the firm continues to do business. This is
a. dissociation.
b. dissolution.
c. winding up.
d. wrongful.
1. Vasili is considering forms of business organization for Vasili’s Designs,
an architectural firm. An advantage of a limited liability partnership is
that partners may be able to avoid personal liability for
a. any partnership obligation.
b. only other partners’ wrongdoing.
c. only partnership obligations that exceed capital contributions.
d. only partnership obligations that fall within capital contributions.
1. Jack and Kyra are partners in Law Firm, LLP, a limited liability
partnership. Jack supervises Kyra, who negligently fails to appear in
court on behalf of Milo, a client. Liability to Milo rests with
a. Jack and Kyra.
b. Jack only.
c. Kyra only.
d. neither Jack nor Kyra.
1. Fern and Gray want to form a limited partnership to manage two
restaurants: Café Latte and Deli Delite. In most states, a limited
partnership will be created when
a. a certificate of limited partnership is filed.
b. a partnership agreement is executed.
c. the business for which the firm is formed actually opens its
doors.
d. the partners make their capital contributions.
1. Maury, Neil, and Ogden want to form a limited partnership to manage
their Picture This photo studio. Their firm must have
a. at least one general partner and one limited partner.
b. at least two general partners.
c. at least two limited partners.
d. no general partners.
1. Lucy is a limited partner in Metro Contractors, a limited partnership,
which cannot pay its debts. Lucy is personally liable for the debts
a. in proportion to the number of partners in the firm.
b. to no extent.
c. to the extent of her capital contribution.
d. to the full extent.
1. Venture Capital, LP, is a limited partnership. Its limited partners include
more than 150 sophisticated investors and investment professionals. A
Venture limited partner loses his or her limited liability if he or she
a. acts as the firm’s manager.
b. does not participate in the firm’s management.
c. invests in Unified Fund, one of Venture’s competitors.
d. votes on the firm’s sale or dissolution.
1. Stu is a limited partner and Tia is a general partner in S&T, a limited
partnership. Between Stu and Tia, on S&T’s dissolution its assets will
first be distributed to pay
a. either partner’s unpaid distribution of partnership assets.
b. returns on either partner’s contribution.
c. Stu.
d. Tia.
1. Energy Unlimited, LP, is a limited partnership to which its partners, in-
cluding Fink, have contributed capital. Energy’s creditors include Graves
Engineering, Inc. On Energy’s dissolution, its assets will be distributed
to pay
a. Fink and Graves proportionately.
b. Fink first.
c. Graves first.
d. neither Fink nor Graves.
1. Petra. Queenie, and Randell want to form Sales-to-Infinity, LLC (limited
liability company). What should they provide in their operating
agreement? If they fail to include some important operating details,
what determines these details?
1. International Exports, L.P., is a limited partnership, with $100,000 in de-
clared but unpaid profits. International’s creditors include Friendly Credit
Corporation for $5,000 and Gwen, one of International’s limited
partners, also for $5,000. When Harry, one of International’s general
partners, decides to retire, the other general partners vote to liquidate
and dissolve the firm. The limited partners, who are not asked their
opinions, want International to continue in business and file a suit
against the general partners to compel this result. Can the court order
International to continue? If not, what is the priority of the distribution of
International’s assets on its dissolution?
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