Worksheet 17.1: The Limited Liability Company

1. Because risk is associated with the potential for higher profits, businesspersons are motivated to choose organizational forms that limit their liability while allowing them to take risks that may lead to greater profits.

a. True

2. A limited liability company (LLC) combines the tax characteristics of:

a. a partnership with the liability of a corporation.

3. One of the benefits of LLCs, and one that helps promote investment, is the fact that:

a. foreign investors are allowed to become LLC members.

4. LLCs are uniform across the states.

b. False

5. When a group of members join to form an LLC, the name of the organization must:

c. include the words "limited liability company" or the letters LLC.

6. LLCs are legal entitles apart from their owners and as such can sue or be sued, enter into contracts, and hold title to property.

a. True

7. An LLC that has ___ can choose to be taxed either as a partnership or as a corporation.

two or more members

8. An LLC's members may want to reinvest the profits in the business, rather than distribute the profits to members. In that situation, the members prefer that the LLC be taxed as a ___ .

corporation

9. An LLC that has ___ member(s) cannot be taxed as a partnership.

one

10. Norman wants to start a new company with different partners to explore real estate opportunities in several states. When discussing the LLC form, Norman's attorney mentions that one of the biggest disadvantages of the LLC form is that:

c. there is no uniform law governing LLCs in the United States.