Limited Liability Companies and Partnerships
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1. The key characteristics of a limited liability corporation (LLC) are:
a. the tax characteristics of a corporation plus the liability of shareholders.
b. the tax characteristics of a partnership plus the liability of partners.
c. the tax characteristics of a corporation plus the liability of a partnership.
d. the tax characteristics of a partnership plus the liability of a corporation.
2. LLCs were first created:
a. in the Middle Ages by merchants.
b. in the 19th century by the great industrialists.
c. in the 1930s by the Securities and Exchange Commission.
d. in 1977 by the state of Wyoming.
3. One of the great benefits of LLCs, which helps promote investment, is that:
a. investors must be accredited investors to participate.
b. foreign investors are allowed to become LLC members.
c. members are registered with the SEC.
d. LLC articles of organization are privately filed, protecting the identities of investors.
4. A member is someone:
a. who has an ownership interest in an LLC.
b. who purchases the securities in an LLC in order to resell these to the public.
c. who manages an LLC as a non-owner.
d. has management responsibility and unlimited liability for all debts.
5. When a group of members join to form an LLC, the name of their organization:
a. must convey the purpose of their organization.
b. must be registered with the SEC.
c. must include the words "limited liability corporation" or the letters "LLC."
d. must be approved by a vote of the state legislature.
6. One disadvantage of an LLC is:
a. it is taxed like a partnership, unless the members choose differently.
b. its members have limited liability for LLC debts.
c. there is no uniform law governing LLCs in the U.S.
d. they are subject to extensive regulation by the Treasury Department.
7. The case of Hurwitz v. Padden involved which issue?
a. Whether partnership principles apply to the dissolution and winding up of an LLC.
b. Whether corporate principles apply to the dissolution and winding up of an LLC.
c. Whether a receiver abused his fiduciary duty in winding up an LLC.
d. Whether the articles of organization of an LLC must be in writing in order to be valid.
8. Management of an LLC may take one of two forms, a member-managed LLC or a manager-managed LLC. In the latter:
a. an outside consultant manages the firm.
b. an outside certified accountant manages the firm.
c. one member, or a group of the members, governs the firm.
d. a non-member employee is the sole manager of the firm.
9. In a manager-managed LLC, the non-manager members may face which possible problem?
a. They may be held personally liable for LLC debts.
b. They will be taxed as a corporation unless they elect otherwise.
c. Their membership interests may be considered securities.
d. They may face greater malpractice liabilities than ordinary partners.
10. The two categories of business for whom an LLP is especially attractive are:
a. farmers and manufacturers.
b. manufacturers and computer hardware companies.
c. professional service firms and farmers.
d. professional service firms and unions.
11. If Frank, a dentist who is a member of an LLP, negligently harms Kathy while attempting to complete a root canal, what is the liability of the other members of the LLP?
a. If Frank was negligent, they are also liable.
b. None of them will be liable.
c. They will be liable only if Frank intended to harm Kathy.
d. Only the supervising partner will be liable, if there is a supervising partner.
12. Jessica and her sister own a small farm producing organic fruits and organic fruit juices. If she were choosing a particularly good business form for her organization, she would probably choose which of the following?
a. A family limited liability partnership.
b. A limited partnership.
c. A corporation.
d. A sole proprietorship.
13. Limited partnerships originated:
a. in the mid-SW Legal in the 1980s.
b. in medieval Europe.
c. in the 19th century to meet the needs of growing industries.
d. in Wisconsin in 1987.
14. The members of a limited partnership include:
a. general and limited partners.
d. sole proprietors.
15. If a limited partner undertakes some management responsibilities:
a. she will become a major partner.
b. she will become an accredited investor.
c. she will become personally liable for partnership debts.
d. she will be shielded from partnership debts and other obligations.
16. In order for a limited partnership to be legally valid, it must:
a. file articles of organization.
b. file a certificate of limited partnership.
c. file amended articles of partnership.
d. have at least one general, and one limited partner; that's all.
17. The case of Drucker v. Mige Associates II involved an issue of:
a. whether limited partners accurately signed a partnership document.
b. whether a limited partnership had a valid general partner.
c. whether a partner violated his fiduciary duties to general and limited partners.
d. whether a limited partnership was really an LLC.
18. Generally speaking, a limited partnership may be dissolved by which of the following events or occurrences?
a. By the filing of articles of limited partnership.
b. By a relocation of the partnership.
c. By the marriage of a limited partner.
d. By the bankruptcy of a general partner.
19. Generally speaking, what will the legal effect be of the personal bankruptcy of one limited partner?
a. Generally speaking, there will be no effect.
b. The partnership will be dissolved.
c. The partnership will be forced to liquidate.
d. The partnership will begin winding-up procedures.
20. In an limited liability limited partnership, which party's role and responsibilities change?
a. The limited partners' responsibilities.
b. The responsibilities of the general partners.
c. The responsibilities of the members.
d. The responsibilities of the secretary of state.
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