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Exam 32: Limited Liability Companies and Special Business Forms

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Question 21

True/False

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The beneficiaries of a business trust are personally liable for the trust's debts and obligations.

A) True
B) False

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Question 22

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Rural Development Company and Suburban Real Estate Corporation form a joint stock company. This firm can be formed for, at the most,

A) an implied duration of not more than six months.
B) a perpetual existence.
C) a single activity or transaction.
D) an express duration of not more than one year.

E) A) and D)
F) None of the above

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Question 23

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A limited liability company that operates in more than one state may not receive consistent treatment. This is because, according to the principle that in most states determines the law that applies to a foreign limited liability company, one state's courts must

Business Media, a partnership, publishes periodicals, including Cycle Review. DangerZoners, also a partnership, publishes Extreme Sports. Business Media and DangerZoners agree to pool their resources in a one-time deal to print and market a book, Future Runs. In contracting with Geo Cache, Inc., for supplies to print the book, Business Media commits fraud. In contracting with Host Articles Agency for materials to use in Extreme Sports, DangerZoners commits fraud. Geo Cache and Host Articles file suits against Business Media and DangerZoners. What type of business organization has Business Media and DangerZoners formed? To whom, if anyone, is Business Media liable? To whom, if anyone, is DangerZoners liable?

As in a partnership, a limited liability company may pay no taxes-profits can be passed through to the members, who pay personal taxes on the profits.

If a joint venturer secretly profits from a project that was supposed to be a venture-related deal, the other joint venturers may be awarded damages for the breach of loyalty.

The members of a limited liability company should protect their interests by creating a written operating agreement.

The operating agreement of a limited liability company cannot provide for the calculation of a buyout price on a member's dissociation because the event has not yet occurred.

Like a partner in a partnership, the member of a limited liability company has the power to dissociate from the firm at any time, but may not have the right.

The operating agreement of a limited liability company and a state's LLC statute can be applied together to determine the outcome of a dispute between the firm's members.

The members of a limited liability company have considerable flexibility in managing the business of the firm.

Loren, Marie, and Nina form a syndicate to buy a professional soccer franchise. This syndicate could be set up as

Among the states, the law governing limited liability companies is far from uniform because

Valu Food Market is an incorporated cooperative. Like other incorporated cooperatives, Valu Food distributes profits to its owners on the basis of

When the member of a limited liability company engages in fraud on the firm's behalf, the member is not likely to be held personally liable.

Overseas Shipping Corporation and Port Storage Company transfer their assets to Quality Operations, Inc., which manages the assets and distributes the profits to the beneficiaries. This form of business organization is

If the members of a limited liability company do not stipulate in their operating agreement how voting rights will be apportioned, in most states, only the member-managers will be entitled to vote.

As the promoter of Glassworks LLC, Hans enters into a contract with Interstate Transport Company. Once formed, Glassworks can

GMO Grain Corporation and Hybrid Yields, Inc., form a joint stock company. The ownership of this company is represented by

When a member of a limited liability company guarantees payment of a loan to the firm, the member is personally liable for the obligation.