BLAW 2301 - Exam 4 Questions With All Correct Answers 2026 Latest
Up- date!!!
1. Sole Proprietor- An unincorporated business owned by one person
ship
2. Flow-through tax An organization that doe not pay income tax on its profits but passes them through
entity to its owners who pay the tax at their individual rates
3. Advantages of 1. Ease of formation - No formal steps necessary to create a sole proprietorship
Sole Proprietor- 2. Taxes - Flow through tax entity
ship
4. Disadvantages of 1. Liability - The owner is responsible for all of its debts
Sole Proprietor- 2. Limited Capital - Owner of Sole proprietorship has limited options for financing
ship the business
5. C Corporation A corporation that provides limited liability to its owners, but is a taxable entity
6. Advantages of a 1. Limited Liability - A corporation protects managers and investors from personal
corporation liability for the debts of the corporation and actions of others, but not against
liability for their own torts and crimes
2. Transferability of Interests - flexibility to easily buy and sell corporate stock
3. Duration - Corporations can continue without their founders
7. Disadvantages of 1. Logistics - Corporations require substantial expense and ettort to
a Corporation 2. Taxes - A corporation is a taxable entity
8. S Corporation Provides shareholders limited liability as well as flow-through taxing
9. S Corporation Re- 1. There can be only one class of stock
strictions 2. There can be no more than 100 shareholders
3. Shareholders must be individuals, estates, charities, pension funds, or trusts,
not partnerships or corporations
4. Shareholders must be citizens or legal residents of the United States, not
, BLAW 2301 - Exam 4 Questions With All Correct Answers 2026 Latest
Up- date!!!
nonresident aliens
5. All shareholders must agree that the company should be an S corporation
10. Close corpora- A corporation with a small number of shareholders whose stock is not publicly
tion traded and whose shareholders play an active role in management. It is entitled
to special treatment under state law.
11. Features of a 1. Protection of minority shareholders
Close Corpora- 2. Transfer restrictions
tion 3. Flexibility
4. Dispute Resolution
12. LLC (Limited Lia- Otters the limited liability of a corporation and the tax status of a flow-through
bility Company) entity
13. Formation of an 1. The only required document is a certificate of organization ( also called a
LLC charter).
2. An LLC should have am operating agreement that sets out the rights and
obligations of the members.
14. LLC Flexibility can have members that are corporations, partnerships, or nonresident aliens.
LLCs can also have ditterent classes of members. Unlike corporations, LLCs are
not required to hold annual meetings or maintain a minute book.
15. LLC Transferabili- Members can transfer their right to receive a check from the LLC, but not their
ty of Interest right to participate in decision-making.
16. LLC Duration Most state laws and the ULLCA provide that an LLC has perpetual existence and
continues in operation even after a member withdraws. This is the case unless the
operating agreement states otherwise.
17. LLC Going Public - Once an LLC goes public it loses its favorable tax status and is taxed as a
corporation.
Up- date!!!
1. Sole Proprietor- An unincorporated business owned by one person
ship
2. Flow-through tax An organization that doe not pay income tax on its profits but passes them through
entity to its owners who pay the tax at their individual rates
3. Advantages of 1. Ease of formation - No formal steps necessary to create a sole proprietorship
Sole Proprietor- 2. Taxes - Flow through tax entity
ship
4. Disadvantages of 1. Liability - The owner is responsible for all of its debts
Sole Proprietor- 2. Limited Capital - Owner of Sole proprietorship has limited options for financing
ship the business
5. C Corporation A corporation that provides limited liability to its owners, but is a taxable entity
6. Advantages of a 1. Limited Liability - A corporation protects managers and investors from personal
corporation liability for the debts of the corporation and actions of others, but not against
liability for their own torts and crimes
2. Transferability of Interests - flexibility to easily buy and sell corporate stock
3. Duration - Corporations can continue without their founders
7. Disadvantages of 1. Logistics - Corporations require substantial expense and ettort to
a Corporation 2. Taxes - A corporation is a taxable entity
8. S Corporation Provides shareholders limited liability as well as flow-through taxing
9. S Corporation Re- 1. There can be only one class of stock
strictions 2. There can be no more than 100 shareholders
3. Shareholders must be individuals, estates, charities, pension funds, or trusts,
not partnerships or corporations
4. Shareholders must be citizens or legal residents of the United States, not
, BLAW 2301 - Exam 4 Questions With All Correct Answers 2026 Latest
Up- date!!!
nonresident aliens
5. All shareholders must agree that the company should be an S corporation
10. Close corpora- A corporation with a small number of shareholders whose stock is not publicly
tion traded and whose shareholders play an active role in management. It is entitled
to special treatment under state law.
11. Features of a 1. Protection of minority shareholders
Close Corpora- 2. Transfer restrictions
tion 3. Flexibility
4. Dispute Resolution
12. LLC (Limited Lia- Otters the limited liability of a corporation and the tax status of a flow-through
bility Company) entity
13. Formation of an 1. The only required document is a certificate of organization ( also called a
LLC charter).
2. An LLC should have am operating agreement that sets out the rights and
obligations of the members.
14. LLC Flexibility can have members that are corporations, partnerships, or nonresident aliens.
LLCs can also have ditterent classes of members. Unlike corporations, LLCs are
not required to hold annual meetings or maintain a minute book.
15. LLC Transferabili- Members can transfer their right to receive a check from the LLC, but not their
ty of Interest right to participate in decision-making.
16. LLC Duration Most state laws and the ULLCA provide that an LLC has perpetual existence and
continues in operation even after a member withdraws. This is the case unless the
operating agreement states otherwise.
17. LLC Going Public - Once an LLC goes public it loses its favorable tax status and is taxed as a
corporation.
