Exam 17: Governance and Structure: Forms of Doing Business

All owners in an LLP have limited liability.

Explain when a shareholder has a right to see the books and records of a corporation.

Any shareholder can demand access to the corporate books and records.

Allied Van Lines has structured its company by giving its franchisees stock ownership in the company.On the stock is the following language:??NOTE: Restrictions apply to ownership of this stock.Only franchisees and employees of Allied Van Lines can own this stock.In the event of a franchise or employment termination,the stock must first be offered to the Allied Board for purchase.Is the restriction valid?

Parent corporations can never be held liable for the environmental clean-up costs of subsidiaries.

Becca Franklin and Suzanne Peterson formed an LLC as co-owners and managers.The LLC made $275,000 after expenses last year.There are no provisions in their operating agreement on how profits are to be split.​ -What amount would Becca declare on her income tax returnif Becca and Suzanne had formed a general partnership and there was no provision in their partnership agreement on how profits are to be split?

Becca Franklin and Suzanne Peterson formed an LLC as co-owners and managers.The LLC made $275,000 after expenses last year.There are no provisions in their operating agreement on how profits are to be split.​ -What amount would Becca declare on her income tax returnif Becca and Suzanne had formed aSubchapter S corporationand there was no provision in theiragreement on how profits are to be split?

Partnership property:

Appraisal rights are given only to dissenting shareholders.

Which of the following is true about the composition of boards of corporations covered by Sarbanes-Oxley?​

Limited partners' profits and losses are allocated equally.

An S corporation is created as an LLC.

Jack Weston,the CEO of Evans,Inc.,along with Evans' CEO,Jason Stiller,used non-GAAP numbers to develop the earnings statements for Evans for 2016.The result was that the earnings for Evans were 16% higher in the financial reports than they actually were.Executive compensation at Evans is tied to earnings,and Jack and Jason's bonuses for 2016 were 26% higher than in 2015 because of the jump in earnings that were later discovered to be fabricated using non-GAAP methods.Which of the following is correct?​

For income tax purposes,a partnership:

A LLP can be created by implication.

Under Sarbanes-Oxley,current employees are not considered independent for purposes of board structure.

It is fraud to form a corporation to avoid personal liability.

Partners' personal assets can be reached by partnership creditors.

Grace Owen formed a corporation with three of her friends for purposes of operating a catering company.Grace used her own checking account to deposit the client payments and to make distributions of the corporation's profits to her three friends,who together owned 50% of the shares,with Grace owning the remainder of the shares.Grace promised her friends "no meetings,no formalities,we'll just run the catering business." Several wedding guests at a reception Grace's company catered became ill.Grace had not purchased insurance.The guests brought suit to recover their medical bills and other damages from Grace and her three friends.Grace says she has no personal liability for the bad food that resulted in their illness.

ABC partnership owns and operates a potato farm in Idaho.A,B,and C are the partners/owners.C is having significant personal financial problems.Savoy Stores has obtained a judgment against C in the amount of $l2,341.Savoy knows that ABC is about to harvest its potatoes.When the ABC potatoes are being transported for processing,Savoy takes one-third of the potatoes to satisfy the debt.A and B object.C claims he is using the partnership property to satisfy a debt.Can C do this?