Exam 20: Forms of business organizations

A ________ is created when two or more persons agree to place their money,labor,or skills in a business and to share the profits and losses.

An S corporation cannot have more than one class of stock.

In a ________ merger,the shares in the disappearing corporation are automatically converted into shares in the surviving corporation.

The intention of one party alone cannot create a partnership.

In a ________ a stock purchase is financed by debt.

Corporations must incorporate in the state where their headquarters are located.

The rules that govern the internal operation of a corporation are called the

State laws usually permit a ________ to significantly depart from corporate formalities.

A staggered term for a board of directors supports the purpose of cumulative voting.

Fact pattern 20-2 Maxine and Vince verbally agree to form a dog grooming partnership called "Groomers R Us." They file nothing with the state.Maxine puts up 80% of the capital needed for the partnership,and Vince supplies 20%.Maxine assumed that Vince would do extra work to account for the small amount of capital contributed by him,but that did not occur.Maxine found herself grooming more than 60% of the animals on her own.Maxine told Vince that he was only entitled to 40% of the profits because he was only doing 40% of the work.Vince disagreed,and a heated argument occurred.Not surprisingly,Maxine and Vince decided to end the partnership.While winding up affairs,Maxine discovers that Vince paid an excessive amount for some dog shampoo.She thought he bought it from a certain supplier,just so he could flirt with the receptionist there.She told him that paying for the shampoo was entirely his responsibility because she had not agreed to the purchase.Maxine and Vince also became aware of a lawsuit filed by the owner of a Welsh Pembroke Corgi complaining that the dog developed a skin rash following bathing by Vince in the expensive shampoo he had purchased,and that the owner lost money because the dog could not be entered into shows.Maxine told Vince that the litigation was entirely his responsibility and that she disavowed any liability to the plaintiff. -Refer to fact pattern 20-2.Is Maxine,Groomers R Us,or Vince responsible for payment of the shampoo purchased by Vince?

Most general partnerships pay income taxes as a separate entity.

________ is the process by which a corporation is formed.

________ of a general partnership occurs when all the affairs are wound up and the partners' authority to act for the partnership is completely extinguished.

Fact pattern 20-2 Maxine and Vince verbally agree to form a dog grooming partnership called "Groomers R Us." They file nothing with the state.Maxine puts up 80% of the capital needed for the partnership,and Vince supplies 20%.Maxine assumed that Vince would do extra work to account for the small amount of capital contributed by him,but that did not occur.Maxine found herself grooming more than 60% of the animals on her own.Maxine told Vince that he was only entitled to 40% of the profits because he was only doing 40% of the work.Vince disagreed,and a heated argument occurred.Not surprisingly,Maxine and Vince decided to end the partnership.While winding up affairs,Maxine discovers that Vince paid an excessive amount for some dog shampoo.She thought he bought it from a certain supplier,just so he could flirt with the receptionist there.She told him that paying for the shampoo was entirely his responsibility because she had not agreed to the purchase.Maxine and Vince also became aware of a lawsuit filed by the owner of a Welsh Pembroke Corgi complaining that the dog developed a skin rash following bathing by Vince in the expensive shampoo he had purchased,and that the owner lost money because the dog could not be entered into shows.Maxine told Vince that the litigation was entirely his responsibility and that she disavowed any liability to the plaintiff. -Refer to fact pattern 20-2.Which of the following is true regarding liability on the lawsuit brought by the Corgi owner?

During the winding up of a partnership,the partners' fiduciary duties to each other are suspended.

A ________ corporation is owned by a limited number of shareholders.

A person who shares in the profits of the business but not in its ________ is not a partner.

A corporation can conduct business as a ________ in states other than its state of incorporation.

C corporations are taxed as a pass-through entity.

Describe in detail the steps necessary to form a corporation.