LES Final Exam questions with 100%
correct answers A+
Limited Partnership - correct answer ✔✔type of partnership in which some partners have unlimited
liability (general liability) and other partners only have their investments at risk in the business (limited
partners); must follow statutory procedures to properly create a limited partnership
Proxy - correct answer ✔✔right (given in written form) to vote another's shares
Limited Liability Company (LLC) - correct answer ✔✔a business entity with limited liability but
management participation permitted by all; created by statute
Partnership by Estoppel - correct answer ✔✔the conduct of two or more parties leads others to believe
a partnership exists; arise when others are led to be there is a partnership
Model Business Corporation Act (MBCA) - correct answer ✔✔uniform law on corporations
Incorporators - correct answer ✔✔individuals who sign the incorporation papers for a newly formed
corporation
Sole Proprietorship - correct answer ✔✔method of business ownership in which one person owns
business, receives profits, and is personally liable for all debts
Uniform Partnership Act (UPA) - correct answer ✔✔uniform law adopted in 49 states that governs the
creation, operation, and termination of general partnerships
Articles of Incorporation - correct answer ✔✔organizational papers of a corporation; list the company's
structure, capitalization, board structure, and so on
Common Stock - correct answer ✔✔types of shares in a corporation that usually have voting rights
,Ratification - correct answer ✔✔a principal's recognition of a contract entered into by an unauthorized
agent
Novation - correct answer ✔✔process of reworking a contract to substitute parties or terms, so that the
old contract is abandoned and the new contract becomes the only valid contract
Dodd-Frank Wall Street Reform and Consumer Financial Protection Act - correct answer ✔✔federal law
over 2000 pages in length that increases and modifies the regulation of financial markets, investment
firms, securities analysts, rating agencies, corporate boards, and consumer credit (including mortgage
disclosures)
Advances - correct answer ✔✔in partnerships, loans by the partners to the partnership; makes the
partner a creditor of the partnership
Alter Ego Theory - correct answer ✔✔theory used for disregarding the corporate protection of limited
liability for shareholders; results when individuals treat the corporation's properties and accounts as
their own and fail to follow corporate formalities
Partnership by Implication - correct answer ✔✔a partnership that exists because the parties agree to
share profits in the absence of a formal agreement
Cumulative Preferred Stock - correct answer ✔✔type of ownership in a corporation that gives the stock
owners preference in the distribution of dividends and also guarantees earnings each year; in the event
those earnings are not paid, they are carried over or accumulate until they can be paid
Publicly Held Corporations - correct answer ✔✔a corporation owned by shareholders outside the
officers and employees of the firm
Watered Shares - correct answer ✔✔share for which par value was not paid; shareholder is liable for the
difference between what was paid and the par value per share
General Partner - correct answer ✔✔partner in a general or limited partnership whose personal assets
are subject to partnership creditors in the event of nonpayment of partnership debts
, Corporate Opportunity Doctrine - correct answer ✔✔a business proposition or investment opportunity
that a corporation would have an interest in pursuing; precludes directors from taking a profit
opportunity when the corporation would have an interest
Dissolution - correct answer ✔✔in partnerships, occurs when one partner ceases to be associated with
the business; in corporations, the termination of the corporate existence
Preferred Stock - correct answer ✔✔usually nonvoting shares of a corporation entitling its holders to
dividend preference above the common shareholders
Revised Uniform Partnership Act (RUPA) - correct answer ✔✔newest uniform revision of law on limited
partnerships
Bylaws - correct answer ✔✔operating rules of a corporation and its board; usually describe the officers
and their roles and authority, along with meeting procedures and notices
Audit Committees - correct answer ✔✔committee of the board responsible for oversight of company
financial statements
Voting Trust - correct answer ✔✔arrangement among shareholders to gain uniform voting and some
power by signing over voting rights on shares to a trustee; shareholders still get dividends, but trustee
votes the shares; must be in writing and recorded with the corporation
Joint Ventures - correct answer ✔✔a partnership for one activity or business venture
Corporate Veil - correct answer ✔✔the personal liability shield; the corporate protection that entitles
shareholders, directors, and officers to limited liability; can be pierced for improper conduct of business
or fraud
Business Judgment Rule - correct answer ✔✔duty of care imposed upon members of corporate boards
that require adequate review of issues and information, devotion of adequate time to deliberations, and
hiring outside consultants as necessary for making decisions; the standard does not require foolproof
judgment, only reasonable care in making the judgment
correct answers A+
Limited Partnership - correct answer ✔✔type of partnership in which some partners have unlimited
liability (general liability) and other partners only have their investments at risk in the business (limited
partners); must follow statutory procedures to properly create a limited partnership
Proxy - correct answer ✔✔right (given in written form) to vote another's shares
Limited Liability Company (LLC) - correct answer ✔✔a business entity with limited liability but
management participation permitted by all; created by statute
Partnership by Estoppel - correct answer ✔✔the conduct of two or more parties leads others to believe
a partnership exists; arise when others are led to be there is a partnership
Model Business Corporation Act (MBCA) - correct answer ✔✔uniform law on corporations
Incorporators - correct answer ✔✔individuals who sign the incorporation papers for a newly formed
corporation
Sole Proprietorship - correct answer ✔✔method of business ownership in which one person owns
business, receives profits, and is personally liable for all debts
Uniform Partnership Act (UPA) - correct answer ✔✔uniform law adopted in 49 states that governs the
creation, operation, and termination of general partnerships
Articles of Incorporation - correct answer ✔✔organizational papers of a corporation; list the company's
structure, capitalization, board structure, and so on
Common Stock - correct answer ✔✔types of shares in a corporation that usually have voting rights
,Ratification - correct answer ✔✔a principal's recognition of a contract entered into by an unauthorized
agent
Novation - correct answer ✔✔process of reworking a contract to substitute parties or terms, so that the
old contract is abandoned and the new contract becomes the only valid contract
Dodd-Frank Wall Street Reform and Consumer Financial Protection Act - correct answer ✔✔federal law
over 2000 pages in length that increases and modifies the regulation of financial markets, investment
firms, securities analysts, rating agencies, corporate boards, and consumer credit (including mortgage
disclosures)
Advances - correct answer ✔✔in partnerships, loans by the partners to the partnership; makes the
partner a creditor of the partnership
Alter Ego Theory - correct answer ✔✔theory used for disregarding the corporate protection of limited
liability for shareholders; results when individuals treat the corporation's properties and accounts as
their own and fail to follow corporate formalities
Partnership by Implication - correct answer ✔✔a partnership that exists because the parties agree to
share profits in the absence of a formal agreement
Cumulative Preferred Stock - correct answer ✔✔type of ownership in a corporation that gives the stock
owners preference in the distribution of dividends and also guarantees earnings each year; in the event
those earnings are not paid, they are carried over or accumulate until they can be paid
Publicly Held Corporations - correct answer ✔✔a corporation owned by shareholders outside the
officers and employees of the firm
Watered Shares - correct answer ✔✔share for which par value was not paid; shareholder is liable for the
difference between what was paid and the par value per share
General Partner - correct answer ✔✔partner in a general or limited partnership whose personal assets
are subject to partnership creditors in the event of nonpayment of partnership debts
, Corporate Opportunity Doctrine - correct answer ✔✔a business proposition or investment opportunity
that a corporation would have an interest in pursuing; precludes directors from taking a profit
opportunity when the corporation would have an interest
Dissolution - correct answer ✔✔in partnerships, occurs when one partner ceases to be associated with
the business; in corporations, the termination of the corporate existence
Preferred Stock - correct answer ✔✔usually nonvoting shares of a corporation entitling its holders to
dividend preference above the common shareholders
Revised Uniform Partnership Act (RUPA) - correct answer ✔✔newest uniform revision of law on limited
partnerships
Bylaws - correct answer ✔✔operating rules of a corporation and its board; usually describe the officers
and their roles and authority, along with meeting procedures and notices
Audit Committees - correct answer ✔✔committee of the board responsible for oversight of company
financial statements
Voting Trust - correct answer ✔✔arrangement among shareholders to gain uniform voting and some
power by signing over voting rights on shares to a trustee; shareholders still get dividends, but trustee
votes the shares; must be in writing and recorded with the corporation
Joint Ventures - correct answer ✔✔a partnership for one activity or business venture
Corporate Veil - correct answer ✔✔the personal liability shield; the corporate protection that entitles
shareholders, directors, and officers to limited liability; can be pierced for improper conduct of business
or fraud
Business Judgment Rule - correct answer ✔✔duty of care imposed upon members of corporate boards
that require adequate review of issues and information, devotion of adequate time to deliberations, and
hiring outside consultants as necessary for making decisions; the standard does not require foolproof
judgment, only reasonable care in making the judgment
