Business Entities

Which business form is NOT a separate legal entity from its owner? A) Sole proprietorship B) General partnership C) LLC D) Corporation E) A&B

A) Sole proprietorship (owner is the business; a general partnership is a separate entity in most states)

Which business forms impose unlimited liability on ALL owners? A) Sole proprietorship B) General partnership C) Limited partnership D) LLP E) A&B F) A&B&C

E) A&B

Which business form is subject to double taxation? A) Corporation B) LLC C) Limited partnership D) All of the above

A) Corporation

Which forms use pass-through taxation (taxed at the owner level)? A) General partnership B) LLC C) LLP D) Corporation E) A&B&C F) All of the above

E) A&B&C

Which forms can have perpetual existence? A) Corporation B) Multi-member LLC C) Sole proprietorship D) General partnership E) A&B F) A&B&D

E) A&B

Which form is automatically dissolved on the owner's death? A) Sole proprietorship B) Corporation C) LLC D) All of the above

A) Sole proprietorship

Which forms can be created without any state filing? A) Sole proprietorship B) General partnership C) Limited partnership D) LLC E) A&B F) A&B&C

E) A&B

A sole proprietorship is created: A) By filing articles with the state B) At will by the owner C) By agreement of the parties D) By certificate of authority

B) At will by the owner

A general partnership is created: A) By agreement of the parties B) By state authorization C) By filing a statement of qualification D) A&C

A) By agreement of the parties

A corporation is created: A) By agreement of the shareholders B) At will by the founder C) By state authorization under the state's corporation law D) None of the above

C) By state authorization under the state's corporation law

What document is filed to create a limited partnership? A) Articles of organization B) Certificate of limited partnership C) Statement of qualification D) Certificate of authority

B) Certificate of limited partnership

What is required to create an LLC? A) Agreement of the member-owners B) Filing articles of organization C) Charter issued by the state D) All of the above

D) All of the above

What document is filed to create an LLP? A) Certificate of limited partnership B) Articles of incorporation C) Statement of qualification D) Certificate of authority

C) Statement of qualification

A limited partnership must have: A) At least one general partner B) At least one limited partner C) Only limited partners D) A&B

D) A&B

In a limited partnership, who has unlimited liability? A) General partners B) Limited partners C) Both D) Neither

A) General partners

A limited partner's liability is limited to: A) The extent of their capital contributions B) Twice their contribution C) Nothing; it is unlimited D) The general partner's assets

A) The extent of their capital contributions

A limited partner may lose limited liability by: A) Actively participating in management B) Assigning their interest C) Contributing capital D) A&B

A) Actively participating in management

LLC member-owners' liability is: A) Unlimited B) Limited to capital contributions or investments C) Limited only for acts of other members D) Joint and several

B) Limited to capital contributions or investments

Under the Uniform Partnership Act, an LLP partner's liability is limited for: A) Their own acts B) Acts committed by other partners C) All partnership debts in every state D) None of the above

B) Acts committed by other partners

Corporate shareholders are: A) Personally liable for corporate debts B) Not liable for the debts of the corporation C) Liable up to twice their investment D) Liable only if they vote

B) Not liable for the debts of the corporation

Which form gives its owners unlimited liability? A) Corporation (shareholders) B) LLC (members) C) Limited partnership (limited partners) D) None of the above

D) None of the above

Which forms are treated as legal entities? A) Corporation B) Limited partnership C) LLC D) Sole proprietorship E) A&B&C F) All of the above

E) A&B&C

Which form is described as a legal fiction for purposes of owning property and being a party to litigation? A) Corporation B) Sole proprietorship C) General partnership D) LLP

A) Corporation

An LLP's legal position is: A) Same as a corporation B) Generally the same as a general partnership C) Not a separate entity D) Same as a sole proprietorship

B) Generally the same as a general partnership

Which are true of a sole proprietorship? A) The owner is the business B) Unlimited liability C) Owner pays personal taxes on business income D) All of the above

D) All of the above

A general partnership's duration: A) Ends automatically when any partner leaves B) Terminated by agreement of the partners C) Can continue to do business even when a partner dissociates D) B&C

D) B&C

A limited partnership can end: A) By agreement in the certificate B) By termination of the last general partner C) By termination of the last limited partner D) All of the above

D) All of the above

Which LLC may NOT have perpetual existence? A) Multi-member LLC B) Single-member LLC C) Manager-managed LLC D) None of the above

B) Single-member LLC

An LLP remains in existence until: A) The death of any partner B) Cancellation or revocation C) Agreement of the partners only D) 30 years

B) Cancellation or revocation

Which forms have freely transferable ownership interests? A) Corporation B) LLC C) General partnership D) Limited partnership E) A&B F) A&B&C

E) A&B

When a sole proprietor transfers their interest: A) The proprietorship continues unchanged B) The individual's proprietorship ends C) The transfer is prohibited D) The state must approve

B) The individual's proprietorship ends

The assignee of a general partnership interest: A) Gets full rights of a partner B) Does not have full rights of a partner C) Automatically becomes a partner D) A&C

B) Does not have full rights of a partner

For an assignee to become a member of a limited partnership: A) Other partners must consent B) The certificate must be amended C) No action is required D) A&B

D) A&B

An LLP interest can be assigned: A) Freely, like stock B) Same as in a general partnership C) Never D) Only with state approval

B) Same as in a general partnership

How is a corporation managed? A) Shareholders elect directors B) Directors set policy and appoint officers C) Shareholders manage day-to-day directly D) A&B

D) A&B

Default management rule in a general partnership: A) Each partner has a direct and equal voice unless agreed otherwise B) Voting by capital share C) Only the managing partner decides D) Shareholders elect directors

A) Each partner has a direct and equal voice unless agreed otherwise

How can an LLC be managed? A) Members fully participate in management B) Members designate a group of persons to manage on their behalf C) The state appoints managers D) A&B

D) A&B

Sole proprietorship management is: A) Completely at the owner's discretion B) By a board of directors C) Equal voice among owners D) Set by the state

A) Completely at the owner's discretion

In a limited partnership, management is: A) By general partners with equal voice or by agreement B) By limited partners exclusively C) By a board of directors D) By the state

A) By general partners with equal voice or by agreement

Which form is the same as a general partnership in both management and taxation? A) LLP B) LLC C) Corporation D) Sole proprietorship

A) LLP

Which are true about corporate taxation? A) The corporation pays income tax on net profits B) No deduction is allowed for dividends C) Shareholders pay income tax on dividends they receive D) All of the above

D) All of the above

General partners pay income tax: A) Only on profits distributed to them B) On their pro rata share of net profits whether or not distributed C) At the corporate rate D) Never

B) On their pro rata share of net profits whether or not distributed

Which are true about LLC taxation? A) The LLC itself is not taxed B) Members are taxed personally on profits passed through C) Profits are double taxed D) A&B

D) A&B

A limited partnership is generally taxed: A) As a corporation B) As a partnership C) Twice D) Not at all

B) As a partnership

Which form requires ALL organizational fees, annual license fees, and annual reports? A) Corporation B) General partnership C) LP D) Sole proprietorship

A) Corporation

Which forms have no or minimal organizational fees and reporting? A) Sole proprietorship B) General partnership C) LLC D) A&B E) A&B&C

D) A&B

Limited partnership fees: A) None B) Organizational fee required; usually not others C) All fees required D) Set by each state for statements of qualification

B) Organizational fee required; usually not others

LLC fees: A) Organizational fee required; others vary with states B) None or minimal C) All required D) Only annual reports

A) Organizational fee required; others vary with states

LLP fees are set by each state for filing: A) Statements of qualification B) Statements of foreign qualification C) Annual reports D) All of the above

D) All of the above

Which forms must qualify before doing business in another state? A) Corporation B) LLP C) Sole proprietorship D) Limited partnership E) A&B F) A&B&D

E) A&B

To do business in another state, a corporation must: A) Qualify and obtain a certificate of authority B) File a statement of foreign qualification C) Do nothing D) Reincorporate

A) Qualify and obtain a certificate of authority

To do business in another state, an LLP must: A) Obtain a certificate of authority B) File a statement of foreign qualification C) Do nothing D) Amend its certificate

B) File a statement of foreign qualification

General partnerships doing business in other states face: A) No limitation in any state B) Generally no limitation, though a few states require foreign partnerships to qualify C) A required certificate of authority D) A required statement of foreign qualification

B) Generally no limitation, though a few states require foreign partnerships to qualify

LLCs doing business in other states face: A) Generally no limitations, but may vary by state B) Mandatory certificate of authority C) Prohibition D) Same rule as an LLP

A) Generally no limitations, but may vary by state

Which form offers limited liability for all owners, pass-through taxation, AND full owner participation in management? A) LLC B) Corporation C) Limited partnership D) General partnership

A) LLC

Key liability difference between an LP and an LLP: A) LP general partners have unlimited liability; LLP partners are generally shielded from other partners' acts B) Both give unlimited liability C) Both give full limited liability D) LP limited partners have unlimited liability

A) LP general partners have unlimited liability; LLP partners are generally shielded from other partners' acts

Key tax difference between an LLC and a corporation: A) LLC profits pass through and are taxed once; corporate profits are taxed at the entity and again as dividends B) Both are double taxed C) Neither is taxed D) LLC is double taxed

A) LLC profits pass through and are taxed once; corporate profits are taxed at the entity and again as dividends

Which forms share unlimited liability, no-or-minimal fees, and generally no limits on doing business in other states? A) Sole proprietorship B) General partnership C) Corporation D) A&B

D) A&B

Is a general partnership a separate legal entity? A) Never B) Yes, in most states C) Only if it files with the state D) Only for tax purposes

B) Yes, in most states

A limited partnership doing business in other states faces: A) Generally no limitations B) A required certificate of authority C) A required statement of foreign qualification D) A prohibition

A) Generally no limitations

An LLP partner's liability: A) Is always unlimited B) Varies, but under the Uniform Partnership Act is limited for acts of other partners C) Is limited to capital contributions in every state D) Is the same as a general partner's

B) Varies, but under the Uniform Partnership Act is limited for acts of other partners

A sole proprietorship doing business in other states faces: A) Generally no limitation B) A required certificate of authority C) A required statement of foreign qualification D) A&B

A) Generally no limitation

Corporate ownership interests: A) Shares of stock can be transferred B) Cannot be transferred C) Require consent of other shareholders and an amended certificate D) Transfer ends the corporation

A) Shares of stock can be transferred