BA 3301 Midterm Exam Questions And 100% Correct Answers
Through what form of business organization should Bradshaw operate if he is to be
principal but have no personal liability in the business?
Sole proprietorship
General partnership
Corporation
General partnership - ANSWER Corporation
There is no requirement to file any papers with the government to create a general
partnership.
True False - ANSWER True
A limited partnership is formed when the limited partner files a certificate of limited
partnership with the appropriate state government authority.
True False - ANSWER False
You do not have to intend to form a partnership to end up forming one.
True False - ANSWER True
What do the following phrases mean with regard to partnership law?
fiduciary duties
,limited partners owe to act in their own best interests.
customers owe to pay debts to a partnership.
general partners owe to ensure they are acting in the best interest of the partnership.
general partners owe to ensure they are acting in their own best interests. - ANSWER
general partners owe to ensure they are acting in the best interest of the partnership.
If a sole proprietorship loses money, the principal may deduct the losses from her or his
own personal tax liability, if any.
True False - ANSWER True
Sam operating under a sole proprietorship, Sam's Auto Paint Specialties (SAPS), was
hired by Taylo to touch up the original paint of his rare collectible Ferrari. Sam
negligently destroyed the original paint job and as a result decreased the value of the
car by $100,000. Taylor is suing Sam for the entire amount. SAPS has total assets of
only $60,000. Assuming that he wins his case and secures judgment for the full
$100,000,. If Taylor can locate the assets, how much can Taylor collect?
Nothing, because a sole proprietorship provides absolute liability protection.
$40,000, the amount of the total judgment in excess of the amount in assets in the sole
proprietorship.
$100,000, the amount of the total judgment.
Only the $60,000 - ANSWER $100,000, the amount of the total judgment.
Tom, Tufik, and Genna are limited partners in Buck's BarB-Q. The only other partner,
Paul is a general partner. If Paul withdraws from the partnership. What will happen to
Buck's Barbeque?
It will dissolve.
It will automatically continue with Tom, Tufik, and Genna becoming general partners.
,It will automatically continue with Tom, Tufik, and Genna remaining as limited partners.
It will continue if a majority vote of Tom, Tufik, and Genna agree in writing to continue it.
- ANSWER It will dissolve.
What do you need to do to form a limited partnership.
file a certificate of limited partnership with their state government.
file a certificate of limited partnership with the federal government.
have a written limited partnership agreement.
- ANSWER merely evidence an intent to form a limited partnership. file a certificate of
limited partnership with their state government.
A pass-through entity is one in which
the owner(s) have no liability for business debts.
corporate taxes must be paid.
profits are taxed after they are distributed to owner(s).
there is no joint and several liability. - ANSWER profits are taxed after they are
distributed to owner(s).
Kameron, Candice and Leo were members of an LLC, Printing Unlimited, LLC (PU). The
members leased a digital printing press for their company. Press Sales, Incorporated
(PSI), the manufacturer and lessor of the printing press to them, required personal
, guarantees from each of them as a requisite leasing the press. What will be required of
Kameron, Candice and Leo?
They have to pledge personal assets to ensure the payment obligations of PU
They must undertake to pay PSI first out of PU assets
They must guarantee to make good faith efforts to repay the debt when due.
Nothing, because a personal guarantee does not have legal effect on an LLC because it
is a limited liability entity. - ANSWER They need to provide personal assets as collateral
for the payment obligations of PU.
One of the major reasons why a state created the LLP entity?
problem of general partnerships only being allowed to have three or fewer members.
matter of fact that general partnerships do not allow multiple partnership rights among
the various members.
liability for the acts of other general partners or of the debts of the partnership as an
entity
tax consequences associated with general partnerships, in that the partners are taxed
as corporations at higher corporate tax rates. - ANSWER potential liability for the acts of
other general partners or debts of the partnership itself.
Three friends, Sebastian, Gwen and Twila formed an LLC. If each member has the right
to bind the LLC. This LLC is s a/an
member-managed LLC.
manager-managed LLC.
Through what form of business organization should Bradshaw operate if he is to be
principal but have no personal liability in the business?
Sole proprietorship
General partnership
Corporation
General partnership - ANSWER Corporation
There is no requirement to file any papers with the government to create a general
partnership.
True False - ANSWER True
A limited partnership is formed when the limited partner files a certificate of limited
partnership with the appropriate state government authority.
True False - ANSWER False
You do not have to intend to form a partnership to end up forming one.
True False - ANSWER True
What do the following phrases mean with regard to partnership law?
fiduciary duties
,limited partners owe to act in their own best interests.
customers owe to pay debts to a partnership.
general partners owe to ensure they are acting in the best interest of the partnership.
general partners owe to ensure they are acting in their own best interests. - ANSWER
general partners owe to ensure they are acting in the best interest of the partnership.
If a sole proprietorship loses money, the principal may deduct the losses from her or his
own personal tax liability, if any.
True False - ANSWER True
Sam operating under a sole proprietorship, Sam's Auto Paint Specialties (SAPS), was
hired by Taylo to touch up the original paint of his rare collectible Ferrari. Sam
negligently destroyed the original paint job and as a result decreased the value of the
car by $100,000. Taylor is suing Sam for the entire amount. SAPS has total assets of
only $60,000. Assuming that he wins his case and secures judgment for the full
$100,000,. If Taylor can locate the assets, how much can Taylor collect?
Nothing, because a sole proprietorship provides absolute liability protection.
$40,000, the amount of the total judgment in excess of the amount in assets in the sole
proprietorship.
$100,000, the amount of the total judgment.
Only the $60,000 - ANSWER $100,000, the amount of the total judgment.
Tom, Tufik, and Genna are limited partners in Buck's BarB-Q. The only other partner,
Paul is a general partner. If Paul withdraws from the partnership. What will happen to
Buck's Barbeque?
It will dissolve.
It will automatically continue with Tom, Tufik, and Genna becoming general partners.
,It will automatically continue with Tom, Tufik, and Genna remaining as limited partners.
It will continue if a majority vote of Tom, Tufik, and Genna agree in writing to continue it.
- ANSWER It will dissolve.
What do you need to do to form a limited partnership.
file a certificate of limited partnership with their state government.
file a certificate of limited partnership with the federal government.
have a written limited partnership agreement.
- ANSWER merely evidence an intent to form a limited partnership. file a certificate of
limited partnership with their state government.
A pass-through entity is one in which
the owner(s) have no liability for business debts.
corporate taxes must be paid.
profits are taxed after they are distributed to owner(s).
there is no joint and several liability. - ANSWER profits are taxed after they are
distributed to owner(s).
Kameron, Candice and Leo were members of an LLC, Printing Unlimited, LLC (PU). The
members leased a digital printing press for their company. Press Sales, Incorporated
(PSI), the manufacturer and lessor of the printing press to them, required personal
, guarantees from each of them as a requisite leasing the press. What will be required of
Kameron, Candice and Leo?
They have to pledge personal assets to ensure the payment obligations of PU
They must undertake to pay PSI first out of PU assets
They must guarantee to make good faith efforts to repay the debt when due.
Nothing, because a personal guarantee does not have legal effect on an LLC because it
is a limited liability entity. - ANSWER They need to provide personal assets as collateral
for the payment obligations of PU.
One of the major reasons why a state created the LLP entity?
problem of general partnerships only being allowed to have three or fewer members.
matter of fact that general partnerships do not allow multiple partnership rights among
the various members.
liability for the acts of other general partners or of the debts of the partnership as an
entity
tax consequences associated with general partnerships, in that the partners are taxed
as corporations at higher corporate tax rates. - ANSWER potential liability for the acts of
other general partners or debts of the partnership itself.
Three friends, Sebastian, Gwen and Twila formed an LLC. If each member has the right
to bind the LLC. This LLC is s a/an
member-managed LLC.
manager-managed LLC.
