Law exam

Joe Hearse owns a funeral home but does not operate it under his own name. What business organization model does this describe?

franchise

What is a corporation according to the IRS definition?

A corporation is a legal entity that is separate and distinct from its owners.

What is a Subchapter S Corporation?

A corporation in which shareholders are taxed like a partnership (no double taxation) while retaining corporate status.

What is a Limited Liability Company (LLC)

A hybrid business form combining features of both corporations and partnerships.

What are the two primary types of partners?

General partners and silent partners.

Which partner takes no active part in management

Silent partner.

Who is responsible for partnership debts in a general partnership?

Both partners are liable for the debts of the business.

How are partnerships taxed?

Profits and losses pass through to the owners and are reported on their personal tax returns.

What is a Board of Directors?

The body elected by shareholders to establish and define corporate policy.

How often do shareholders generally meet?

Once a year at the annual shareholders' meeting.

What is a proxy?

Authority granted by a shareholder for another person to act on their behalf at a corporate meeting.

What are the two classes of capital stock?

Common stock and preferred stock.

Which shareholders have rights and options not always available to common stockholders?

Preferred shareholders.

What is a Fee Simple Estate?

The broadest form of ownership in real property that provides unconditional ownership.

What can an owner do with property held in fee simple?

Build on it, sell it, transfer it, or leave it to heirs.

Is a fee simple estate perpetual?

YES

What is real property

Land and anything permanently attached to it.

What is NOT real property?

Personal property.

What is personal property?

Movable items that are not permanently attached to land.

What is a deed?

A legal document that transfers property or rights from one person to another.

What is Joint Tenancy

Ownership by two or more people with equal shares and the right of survivorship.

What is the right of survivorship?

When one owner dies, their share automatically passes to the surviving owner(s)

What is Periodic Tenancy?

A lease that automatically renews at the end of each period unless either party gives notice.

A tenant leases a room indefinitely and the lease automatically renews. What tenancy is this?

Periodic Tenancy.

What is Tenancy at Sufferance?

When a tenant remains on the property after the lease expires without the landlord's permission.

A tenant refuses to leave after the lease expires. What tenancy is this?

Tenancy at Sufferance.

What is a bailment

Delivery and transfer of possession, but not ownership, of personal property under an agreement.

Who is the Bailor?

The person who gives possession of the property.

Who is the Bailee?

The person who receives possession and control of the property.

In a funeral home scenario, who is usually the bailee?

The funeral director.

In a funeral home scenario, who is usually the bailor?

The person delivering the property.

What is a High or Extraordinary Duty of Care bailment?

A bailment that benefits only the bailee.

Example of a High or Extraordinary Duty of Care?

Borrowing a neighbor's snowblower without providing compensation.

Who has the high duty of care in the snowblower example?

The borrower (bailee).

What is an insurance policy?

A contract where the insured transfers the risk of financial loss to an insurance company for a fee.

What is General Liability Insurance?

Insurance that covers claims involving personal injury or property damage.

What is a Term Life Insurance Policy?

Coverage for a specific period of time with no cash value.

What is a Whole Life Insurance Policy?

Lifetime coverage that accumulates cash value.

Who is the insured?

The person whose life is covered by the insurance policy.

Who is the beneficiary?

The person designated to receive the insurance proceeds when the insured dies.

What is a beneficiary?

The person the insurance company agrees to pay upon the insured's death.

Broadest ownership interest in real property?

Fee Simple Estate.

Ownership by two or more people with survivorship rights

Joint Tenancy.

Lease automatically renews?

Periodic Tenancy.

Tenant stays after lease expiration?

Tenancy at Sufferance.

Possession transferred but ownership remains with original owner?

Bailment.

Person giving possession in a bailment

Bailor.

Person receiving possession in a bailment?.

Bailee

Insurance covering personal injury/property damage claims?

General Liability Insurance.

Life insurance with no cash value

Term Life Insurance.

Life insurance with cash value accumulation?

Whole Life Insurance.

Shareholder representative at a meeting?

Proxy.

Shareholders with additional rights over common shareholders?

Preferred Shareholders.

Partner who does not participate in management?

Silent Partner.

Legal document transferring property?

Deed

Separate legal entity from its owners?

Corporation.