Deck 18: Limited Liability Companies and Limited Partnerships

Question 1

In a limited partnership,limited partners have essentially the same right as general partners to participate in management.

Answer 1

False

Question 2

When a limited liability company is dissolved,any member who did not wrongfully dissociate may participate in the winding up process.

Answer 2

True

Question 3

Limited liability companies (LLCs)are governed by a federal LLC statute.

Answer 3

False

Question 4

In a limited liability limited partnership,the liability of a general partner is the same as the liability of a limited partner.

Question 5

For federal income tax purposes,one-member limited liability companies are automatically taxed as sole proprietorships.

Question 6

If there is no limited liability company (LLC)agreement covering a topic under dispute,the state LLC statute will govern the outcome.

Question 7

A member of a limited liability company (LLC)has the power and the right to dissociate from the LLC at any time.

Question 8

Generally,a dissociated member of a limited liability company (LLC)has the right to have his or her interest in the LLC bought out by the other members.

Question 9

A limited liability company can sue or be sued,enter into contracts,and hold title to property.

Question 10

Most states apply their limited liability company (LLC)statutes to an LLC formed in another state.

Question 11

The members of a limited liability company (LLC)are personally liable for the wrongful acts or omissions of the LLC.

Question 12

The owners of a limited liability company enjoy limited liability.

Question 13

In a limited partnership,a general partner has full responsibility for the partnership and for all its debts.

Question 14

A limited liability company must be managed by its members.

Question 15

State law governs the formation of a limited partnership.

Question 16

Most limited liability company statutes specify how members' voting rights must be apportioned.

Question 17

Some states have passed laws prohibiting the withdrawal of general partners from a limited partnership.

Question 18

A limited liability company is a citizen of every state in which it does business.

Question 19

A limited liability partnership may exempt its partners from personal liability for any partnership obligation.

Question 20

In a limited partnership,a general partner's dissociation from the firm may lead to dissolution.

Question 21

Fact Pattern
Brad is a general partner,and Carlos and Dora are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
Refer to Fact Pattern 18-1B.Brad's dissociation from the firm results in

A)nothing with respect to Eastside's existence.
B)the maturity of Eastside's debts.
C)the suspension of Eastside's business.
D)the termination of Eastside's legal existence.

Question 22

Homer's Remodeling,LLC,is a limited liability company.Among the members,a dispute arises that their operating agreement does not cover.No statute applies.The dispute is governed by the principles of

A)corporate law.
B)partnership law.
C)sole proprietorship law.
D)franchise law.

Question 23

Bret is a general partner in Capitol Realty,LLLP,a limited liability limited partnership,which cannot pay its debts.Bret is personally liable for the debts

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution.
D)to the full extent.

Question 24

Jessica's Jumpin' Jelly Beans,LLC,is a limited liability company.Unless indicated otherwise on Jessica's federal tax form,the firm will be taxed as

A)a cooperative.
B)a corporation.
C)a person.
D)a partnership.

Question 25

Fact Pattern
Brad is a general partner,and Carlos and Dora are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
Refer to Fact Pattern 18-1B.Carlos's assignment of his interest in Eastside to Good Credit Corporation results in

A)nothing with respect to Eastside's existence.
B)the maturity of Eastside's debts.
C)the suspension of Eastside's business.
D)the termination of Eastside's legal existence.

Question 26

Kris is a member of Laboratory Services,LLC,a limited liability company.Kris can participate in the firm's management

A)only to the extent that she assumes liability for the firm's debts.
B)only to the extent of her investment in the firm.
C)to any extent.
D)to no extent.

Question 27

Gizelle,Haya,and Ivy do business as Janitorial Services,Limited Partnership.After Gizelle's relationship to the firm ends,Haya and Ivy agree not to continue the business.This is

A)dissociation.
B)dissolution.
C)gross negligence.
D)simple misconduct.

Question 28

Farm2Fork,LLC,is a limited liability company.Rather than distribute its profits to its members,Energy wants to reinvest the profits in its business.For this reason,Energy may prefer to be taxed as

A)a corporation.
B)a partnership.
C)a sole proprietorship.
D)a person.

Question 29

Connie,Drew,and Ellen are the general partners of Foreign Auto Repair,a limited partnership.Connie dies.The partnership can

A)continue only after a distribution of its assets.
B)continue only as a general partnership.
C)continue only if Drew and Ellen consent.
D)not continue because Connie's death dissolves the firm.

Question 30

China Bank is a foreign entity-a firm owned and operated by investors in a foreign country.With respect to an LLC in the United States,China Bank can

A)act as a creditor,but cannot otherwise invest or participate.
B)become a member.
C)not become a member,but can participate in its operations.
D)not become a member or otherwise participate in its operations.

Question 31

Dunn and Etta are limited partners in Fancee Fashion Stores,a limited partnership.In terms of the firm's books,Dunn and Etta are entitled to

A)access in proportion to their participation in managing the firm.
B)access to the books directly related to their capital contributions.
C)no access.
D)total access.

Question 32

Fact Pattern
Brad is a general partner,and Carlos and Dora are limited partners,in Eastside Physicians,a medical clinic and limited partnership.
Refer to Fact Pattern 18-1B.Eastside is dissolved and its assets are collected,liquidated,and distributed.This results in

A)nothing with respect to Eastside's existence.
B)the maturity of Eastside's debts.
C)the suspension of Eastside's business.
D)the termination of Eastside's legal existence.

Question 33

Hugh is a limited partner and Ida is a general partner in HI Volume,a limited partnership.Joy is one of HI Volume's creditors.On HI Volume's dissolution,the party whose rights have the first priority to the firm's assets is

A)Hugh and Ida.
B)Hugh only.
C)Ida only.
D)Joy only.

Question 34

Chocolate Sundry LLC's members and managers are Devlin,Effie,and Flavia.After Devlin's relationship to the firm ends,Effie and Flavia agree to discontinue the business.This is

A)illegal.
B)optional.
C)required.
D)wrongful.

Question 35

Lars is considering forms of business organization for his auto repair firm.Like most states,Lars's state requires that to form a limited liability company,he must file with a central state agency

A)articles of certification.
B)articles of formation.
C)articles of organization.
D)no specific documents.

Question 36

Genetic Innovations,LP,is a limited partnership.The partners sign an agreement purporting to state how the firm's profits and losses are to be divided.The profits and losses of the firm will be divided

A)according to the agreement.
B)equally,despite the agreement.
C)in proportion to capital contributions,despite the agreement.
D)in proportion to each partner's participation in the firm's management,despite the agreement.

Question 37

Rick and Sandy are limited partners in Terrific Profit Enterprises,a limited partnership.To avoid personal liability for partnership obligations,they must not

A)acquire an interest in the firm.
B)contribute property to the firm.
C)engage in activities independent of the firm's business.
D)participate in the firm's management.

Question 38

Fay is a member of Garden Groves LLC.Like other members of limited liability companies,Fay's liability for Garden Groves's obligations resembles the liability of

A)a limited partner who manages a limited partnership.
B)an owner of a sole proprietorship.
C)a general partner of a limited partnership.
D)a shareholder of a corporation.

Question 39

Mit-E Mart LLC was formed in New Jersey.Mit-E Mart's members are Odel,who is a citizen of New Jersey,and Pola,who is a citizen of New York.For federal diversity jurisdictional purposes,Mit-E is a citizen of

A)all states.
B)New Jersey and New York.
C)New Jersey only.
D)no state.

Question 40

High Pointe LLC's members include Irvin.For purposes of holding title to property,High Pointe is

A)an aggregate of Irvin and the other members.
B)a natural person in the members' "family."
C)a legal entity apart from the owners.
D)a non-participating third party.

Question 41

Ron is a limited partner,and Steve is a general partner of Total Financial Management,a limited partnership.Steve manages the firm.Ron has some expertise in the area and believes that he could do a better job than Steve at managing,but he abstains from becoming actively involved.Why might he choose to keep away from management activities?

Question 42

Jack and Keri want to form Local Motion,LLC,a limited liability company,to offer metro delivery and transport services.With respect to the management of Local Motion,what are the members' options?