Business Law, 8e: Chapter 32

Chapter 32
Formation of a Business:

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1. General and limited partnerships require a written partnership agreement.: a. True
b. False

2. An advantage of a limited liability company (LLC) is that it provides pass-through taxation without unlimited personal liability.: a. True
b. False

3. A limited partnership can be formed with one general partner and one limited partner.: a. True
b. False

4. Limited partners who become actively involved in the management of the business may lose their status as limited partners.: a. True
b. False

5. The election of the corporate officers and the adoption of the corporate bylaws ordinarily occur at the organizational meeting.: a. True
b. False

6. Courts ordinarily view a corporation and its shareholders as separate legal entities.: a. True
b. False

7. A group of parents formed an association in an effort to convince the school board to ban certain books from the school libraries. This association is a partnership.: a. True
b. False

8. Ryan owns 95% of the outstanding stock of Marvet, Inc. An employee of Marvet negligently injured a customer causing $10,000 in damages. As a majority shareholder, Ryan is personally liable for these damages.: a. True
b. False

9. The death of a majority shareholder terminates a corporate enterprise.: a. True
b. False

10. Closely held corporations are also called subchapter "S" corporations.: a. True
b. False

11. The business form that is taxed as a partnership, provides all owners with limited liability, and has flexibility in its management structure is called:: a. a corporation.
b. a limited partnership.
c. a limited liability company.
d. a general partnership.

12. A sole proprietorship is taxed:: a. on the corporate level.
b. on the personal level.
c. on a personal and corporate level.
d. on a partnership level.

13. Mohammad is a member of an LLC. Mohammad is active in managing the day-to-day affairs of the LLC. An employee of the LLC negligently crashed into Madeline's car causing $4,000 in damages. In this situation:: a. Mohammad will be personally liable for these damages because he is a member of the LLC.
b. Mohammad will be personally liable for these damages because he is active in the management of the LLC.
c. Mohammad will not be personally liable for these damages.
d. Both a and b.

14. What is not a correct statement concerning promoters?: a. They are agents of the corporation.
b. They generally are active before the corporation is formed.
c. They owe fiduciary duties to the corporation.
d. They are liable for any torts that they commit while promoting the corporation.

15. The phrase "piercing the corporate veil" refers to:: a. the technique of getting past the receptionist to see the purchasing manager of the corporation.
b. inspecting the books of the corporation.
c. learning the identity of the shareholders of the corporation.
d. the ignoring by courts of the corporate entity in order to do justice.