EXAM 3 STUDY QUESTIONS 1 T F Sole proprietorships must file a tax return 2 T F Ownership in a partnership is not transferrable 3 T F Creditors of a partnership must first seek recovery from partnership assets before going after the personal assets of a partner 4 T F In both a limited partnership and a limited liability partnership the partners are not personally liable for the debts of the partnership 5 T F Venture capitalists often require companies they own to become LLCs before going public 6 Assuming all other requirements are met a corporation may elect to be treated as an S corporation under the Internal Revenue Code if it has a Both common and preferred stockholder b A partnership as a stockholder c 100 or fewer stockholders d The consent of a majority of the stockholders 7 A limited liability partnership a Has ownership interests that cannot be transferred b Protects the partners from liability for the debts of the partnership c Must pay taxes on its income d Permits a limited number of partners 8 A limited liability company a Is regulated by a well established body of law b Pays taxes on its income c May issue stock options d Must register with state authorities e Protects the owners from personal liability for their own misdeeds 9 Joint and several liability means that a A creditor of the partnership must sue all of the partners together b A creditor of the partnership must sue the partnership and all of the partners together c A creditor of the partnership can recover the full amount owed from the partnership or from any partner d A creditor of the partnership can recover the full amount owed from the partnership or from any partner even if this results in the creditor receiving more than his original debt e A creditor of the partnership can recover from the partners individually but not from the partnership 1 10 T F A corporation can be formed in any state or under the federal corporate code 11 T F Shareholders and stockholders are the same thing 12 T F Most companies use a very broad purpose clause in their charter 13 T F Shareholders have the right to manage the corporate business 14 T F A company must include in its proxy materials the names of all shareholder nominees for the board of directors 15 A promoter is liable for any contract he signs on behalf of a corporation before it is formed unless a The corporation adopts the contract b The promoter notifies the other party that the corporation has not yet been formed c The promoter signs the contract on behalf of the corporation d The promoter forms the corporation within 72 hours of signing the contract e The other party agrees to a novation 16 A corporate stockholder is entitled to which of the following rights a Elect officers b Receive annual dividends c Approve dissolution d Prevent corporate borrowing 17 Generally a corporation s articles of incorporation must include all of the following except a The name of the corporation s registered agent b The name of each incorporator c The number of authorized shares d Quorum requirements 18 Generally a corporation s bylaws include all of the following except a Par value of the stock b The date of the shareholders meeting c The number of directors d The titles of the officers e The date of the fiscal year 2 19 Under the duty of care directors will be liable if they a Make a decision that has a rational business purpose b Use the same care as an ordinarily prudent person c Make informed decisions d Engage in illegal behavior that is profitable to the company e Make an informed decision that ultimately harms the company 20 Property that individual debtors can keep for themselves a b c d e 21 Debtors are not liable for money owed before the filing a b c d e 22 Discharge Fraudulent transfer Exempt Property Reaffirmation Voidable preference Debtor s promise to pay a debt after discharge a b c d e 23 Discharge Fraudulent transfer Exempt Property Reaffirmation Voidable preference Discharge Fraudulent transfer Exempt Property Reaffirmation Voidable preference Payment to a creditor immediately before filing a b c d e Discharge Fraudulent transfer Exempt Property Reaffirmation Voidable preference 3 24 Payment made within the year before a petition is filed with the goal of hindering creditors a b c d e Discharge Fraudulent transfer Exempt Property Reaffirmation Voidable preference 25 T F One of the primary goals of the Code is to teach the debtor a lesson 26 T F Each of the Code s Chapters has one of two objectives rehabilitation or liquidation 27 T F A creditor is not permitted to force a debtor into bankruptcy 28 T F The bankruptcy court issues an order for relief to give the debtor a chance to file a petition 29 T F The Code permits individual debtors but no organizations to keep some property to themselves 30 When two parties make no agreement in advance about the duration of their agreement it is called a Term agreement b Apparent authority c Agency at will d A duty of an agent e Implied authority 31 When an agent has authority to perform acts that are necessary to accomplish an assignment it is called a Term agreement b Apparent authority c Agency at will d A duty of an agent e Implied authority 32 When two parties agree in advance on the duration of their agreement it is called a Term agreement b Apparent authority c Agency at will d A duty of an agent e Implied authority 4 33 When behavior by a principal convinces a third party that the agent is authorized even though she is not it is called a Term agreement b Apparent authority c Agency at will d A duty of an agent e Implied authority 34 Duty of loyalty is a Term agreement b Apparent authority c Agency at will d A duty of an agent e Implied authority 35 T F A principal is always liable on a contract whether he is fully disclosed unidentified or undisclosed 36 T F When a contract goes wrong a third party can always recover damage from the agent whether the principal is fully disclosed unidentified or undisclosed 37 T F An agent may receive profits from an agency relationship even if the principal does not know about the profits so long as the principal is not harmed 38 T 39 T F An agent has a duty to provide the principal with all information in her possession that she has reason to believe the principal wants to know even if he does not specifically ask for it 40 Someone painting the outside of a building you own crashed through a window injuring a visiting executive Which of the following questions would your