LES 305 Final Exam questions with answers

LES 305 Final Exam questions with
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answers


General partnerships are comprised of one or more general
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partners and one or more limited partners. - CORRECT ANSWERS
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✔✔False; this describes a limited partnership. General
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partnerships have general partners. |\ |\ |\




Prima facie evidence of a partnership exists if two or more people
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agree to share profits. - CORRECT ANSWERS ✔✔TRUE; courts can
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infer that a partnership exists - even if the parties that they are
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not partners - because they agreed to share profits
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Anyone who helps a partnership obtain a loan by holding himself
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out as a partner, although he is not a partner, may be liable on
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the loan - CORRECT ANSWERS ✔✔True. The person will be
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considered a partner under the doctrine of partnership by
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estoppel because the person acted like a partner and a lender
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relied on this status
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General partners are liable: |\ |\ |\




for debts of the partnership
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personally for their portion of the partnership's debts.
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,for debts of the partnership only to the extent of their
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contributions to the partnership and only for their portion of the |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


partnership's debts. |\




for all of the partnership's debts personally.
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None of the above. - CORRECT ANSWERS ✔✔for all of the
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partnership's debts personally. |\ |\




This is called joint and several liability
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Partnerships do not have to file any tax returns - CORRECT |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


ANSWERS ✔✔False. They have to file informational tax returns. |\ |\ |\ |\ |\ |\ |\ |\




Each partner may bind a partnership to contracts with third
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parties - CORRECT ANSWERS ✔✔True. Each partner is considered
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to be an agent of the partnership.
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if a partner dies, the partnership property that belonged to the
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deceased partner goes to the partner's estate. - CORRECT |\ |\ |\ |\ |\ |\ |\ |\ |\


ANSWERS ✔✔False. Only the value of the partner's interest goes |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


to the estate.
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When one partner dies, the partnership automatically is dissolved
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by law. - CORRECT ANSWERS ✔✔True. Dissolution occurs by
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operation of law at the death of a partner. Note that dissolution
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and termination are different.
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,Limited partners may manage the business and retain limited
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liability protection - CORRECT ANSWERS ✔✔False. Limited
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partners lose limited liability protection if they engage in
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management.


If limited partnership interests are easily transferable, the
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organization may be treated as a corporation by the IRS - |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


CORRECT ANSWERS ✔✔True. See the Tax Consequences section
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on page 697 and the Transferability of Interests section
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Intel was incorporated in Delaware. It is a domestic corporation
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when it does business in Arizona - CORRECT ANSWERS ✔✔False.
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It is a foreign corporation
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Transfers of stock are usually restricted in S corporations. -
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CORRECT ANSWERS ✔✔True. This serves several practical|\ |\ |\ |\ |\ |\ |\


purposes. First, it is more likely that the IRS will treat you as a
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partnership for tax purposes because you look less like a C |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


corporation. Plus, you may not want strangers to have a say in |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


running your business. Finally, there can be no more than 100
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shareholders in S corporations, so if shares are freely |\ |\ |\ |\ |\ |\ |\ |\ |\


transferrable to multiple parties, you may go over that limit and |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


lose your S status.
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S corporations are subject to double taxation. - CORRECT
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ANSWERS ✔✔False. You need to file a "S Election" form with the
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IRS and the shareholders will be able to avoid double taxation.
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These types of organizations are referred to in your text as "flow-
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through" or "pass-through" entities |\ |\ |\

, Corporations end upon the death or withdrawal of a member - |\ |\ |\ |\ |\ |\ |\ |\ |\ |\ |\


CORRECT ANSWERS ✔✔False. Corporations exist for an unlimited
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duration, unlike partnerships, which dissolve upon the death or
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withdrawal of a partner. |\ |\ |\




Registered agents, also known as statutory agents, may manage
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the business when the members are unavailable - CORRECT
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ANSWERS ✔✔False. They are only authorized to accept service of
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process for the organization
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Common stockholders: |\




have voting rights. |\ |\




are entitled to fixed dividends.
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have the right to a proportionate share of assets upon dissolution
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before creditors are paid.
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receive dividends before preferred shareholders - CORRECT
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ANSWERS ✔✔have voting rights |\ |\ |\




[In most cases, the owners of shares of common stock have
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voting rights. Preferred shareholders usually do not have voting
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rights.


The corporate veil may be pierced when:
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