Unit 2

Question 1

a business with a only ONE owner is a ______

Answer 1

sole proprietorship 991

Question 2

A sole proprietor has a _____ form of liability, thus sole proprietorship is a _____ form of business.

Answer 2

high, risky 991

Question 3

2 reasons why someone might start a sole proprietorship?

Answer 3

1. simple and inexpensive to startup

2. most people don’t consider the business form decision 991

Question 4

legally, a sole proprietorship _____ be transferred to another person …..

Answer 4

cannot, the buyer of the soul proprietorship business and must create his own form of business to continue the business. 991

Question 5

a _____ has two or more owners called _____.

Answer 5

partnership, partners 991

Question 6

like a sole proprietorship, a partnership is not a ________ entity

Answer 6

tax-paying, The partners must claim the business income under their individual federal income tax returns 991

Question 7

Identical to a partnership except that an ______ partner has no liability for most obligations; however, an ______ partner retains unlimited liability for his own wrongful acts, such as malpractice liability to a client.

Answer 7

Limited liability partnership (LLP) 992

Question 8

A ______ has one or more general partners and one or more limited partners. ______ partners generally have _____ to manage the business, but are also insulted from unlimited liability.

Answer 8

Limited partnership, Limited, No 992

Question 9

_________ is a limited partnership who’s partners have elected limited liability status for all the partners. A _____ is created by making a filing with the _________

Answer 9

Limited liability limited partnership (LLLP), LLLP, secretary of state. 993

Question 10

a ______ is owned by shareholders who elect a board of directors to manage the business

Answer 10

Corporation 993

Question 11

The _____ has the ability to attract the largest amount of capital because shareholders avoid ______ and shares are easily _____/____

Answer 11

corporation, unlimited liability, transferred/liquidated 993

Question 12

By electing _______ , the corporation and its shareholders are taxed nearly entirely like a _______: income and losses of the business are reported on the shareholders’ individual federal income tax returns.

Answer 12

S Corporation status, partnership 993

Question 13

S Corporation status is limited to ______, thus ability to raise capital is ______

Answer 13

100 shareholders, severely limited 993

Question 14

The _______ permits professionals such as accountants, physicians, and dentists to incorporate their professional practices

Answer 14

Professional corporation 993

Question 15

while professional shareholders have no personal liability for the obligations of the professional Corporation, they retain ________ to their clients for their ___________

Answer 15

Unlimited liability, professional malpractice 994

Question 16

The ____ is the body of law that governs partnerships absent a written contract.

Answer 16

The Revised Uniform Partnership Act (RUPA) 996

Question 17

The RUPA defines a partnership as an “______________”

Answer 17

1) Association of 2 or more persons ….
2) …carrying on a business…
3) …co-ownership….
4) …for profit 997

Question 18

2 factors in determining co-ownership

Answer 18

1. Sharing of profits

2. Sharing of management of the business 998

Question 19

A _______ maybe found when a court is reluctant to call an arrangement a partnership because the purpose of the arrangement is not to establish an ongoing business involving many transactions but instead is limited to a single project

Answer 19

Joint venture 999

Question 20

three elements of a purported partner

Answer 20

1. a person purports to be or consents to being represented as a partner of another person or partnership.
2. a third-party relies on the representation.
3. the third-party transacts with the actual or purported partnership 1001

Question 21

a ______ is an order charging all or part of the partners transferable partnership interest with payment of the unsatisfied amount of the judgment

Answer 21

Charging order 1006

Question 22

A partner’s partnership interest are these 2 main things

Answer 22

1. the partners’ transferable interest

2. the partners’ management and other rights 1006

Question 23

a partner who transfers some or all of their interests _______ their management and other rights within the partnership.

Answer 23

doesn’t lose 1007

Question 24

In a _______ a _____ must not act in competition of the _____ nor can they personally profit from the _____ without consent of the ______

Answer 24

partnership, partner, partners 1012

Question 25

the ______ requires a partner to undertake his share of responsibility for running the day-to-day operations of the partnership business

Answer 25

duty to serve 1014

Question 26

The _______ requires a partner make decisions that they believe are in the best interest of the partnership

Answer 26

duty of care 1014

Question 27

partners have a ______ for their use or disposal of partnership funds and partnership property, as well as their receipt of any property, benefits, or profit, without the consent of the other partners.

Answer 27

duty to account 1014

Question 28

a partner has a right to be ______ for payments made from personal funds and for personal liabilities incurred during the ordinary conduct of the business.

Answer 28

indemnified 1014

Question 29

unless there is an agreement, partners share partnership profits ______, according to the ______, and not their __________.

Answer 29

equally, number of partners, capital contributions 1015

Question 30

In a partnership or limited liability partnership, every partner has ______ as a _______ and may make contracts that bind the partnership.

Answer 30

implied authority, general manager of the business 1018

Question 31

A partners express and implied authority together constitute their _______

Answer 31

actual authority 1018

Question 32

a _______ has an inventory; that is, its regular Business is buying and selling merchandise, such as retailing, wholesaling, importing, or exporting.

Answer 32

trading partnership

Question 33

a partner for trading partnership has ______ and _______ to _____ for the partnership.

Answer 33

implied and apparent authority, borrow money 1019

Question 34

a _________ has no substantial inventory and is usually engaged in providing services.

Answer 34

nontrading partnership 1019

Question 35

a partner for a nontrading partnership has _________ or _____ to borrow money for the partnership.

Answer 35

no implied or apparent authority 1019

Question 36

because it is sometimes difficult to determine trading from nontrading partnerships, the most important thing to distinguish is whether the partner's borrowing was done _________.

Answer 36

within the normal course of business. 1019

Question 37

the RUPA requires that any partnership not in the ordinary not in the course of ordinary business be _________, absent a contrary agreement.

Answer 37

approved by all partners 1020

Question 38

an innocent partner of an LLP has ________ for the professional malpractice of his partners.

Answer 38

no liability 1023

Question 39

The LLP itself ______ for the tort of a wrongdoing partner or employee under the doctrine of respondeat superior.

Answer 39

is liable 1023

Question 40

partners are _____ and ____ liable for partnership obligations, whether based in contract or tort.

Answer 40

jointly, severally 1024

Question 41

for LLP partners, only the ____ is liable on contractual obligations, and only the ____ may be sued on such a claim.

Answer 41

LLP 1024

Question 42

for tort allegation only the ____ as well as the _____ are liable.

Answer 42

LLP, partner who committed the tort 1024

Question 43

Early American corporations received _______ from state legislatures, however, few were granted these because incorporation was considered a privilege.

Answer 43

Special Charters 1071

Question 44

Most business corporations are _________. These business forms issue stock to their shareholders, who invest in the corporation with the expectation that they will earn a profit on their investment.

Answer 44

for-profit corporations 1071

Question 45

General Electric is an example of a ___________ because it's shares are generally available to public investors

Answer 45

publicly held corporation 1071

Question 46

Corporations with very few shareholders who's shares are not available to the general public are called ___________

Answer 46

close corporations 1072

Question 47

A _________ or S corporation, is a special type of close corporation in that it is treated nearly like a partnership for federal income tax purposes. It's shareholders report the earnings or losses of the business on their individual income tax returns.

Answer 47

subchapter S corporation 1072

Question 48

S corporations benefit with taxes because they avoid the ________ penalty.

Answer 48

double tax (double because typical corporations are taxed and then the individual shareholders are also taxed) 1072

Question 49

The IRS requires S Corporations to limit their shareholder to ______ or fewer shareholders.

Answer 49

One Hundred 1072

Question 50

__________ do not issue and do not expect to make a profit. These corporations have members rather than shareholders, and none of the surplus revenue from their operations maybe distributed to their members.

Answer 50

Not-for-profit corporations 1072

Question 51

___________ perform ________ and business functions. Examples include a municipalities, public school corporations, and water companies.

Answer 51

government-owned corporations, government 1072

Question 52

To become a corporation, a business must incorporate by complying with an _______

Answer 52

incorporation statute 1073

Question 53

The revised version of ____________ is a model statute created by the ABA for adoption by state legislatures and is the basis for corporation law in 29 states and the District of Columbia.

Answer 53

The Model Business Corporation Act (MBCA) 1073

Question 54

Incorporation under state law requires delivering articles of incorporation to the

Answer 54

Secretary of State 1073

Question 55

Most states have statutes governing nonprofit corporations based on the revised ___________.

Answer 55

Model Nonprofit Corporation Act (MNCA) 1073

Question 56

The circumstances under which states may impose their laws on a business incorporated within another state is determined by the law of ________.

Answer 56

foreign corporations 1074

Question 57

A corporation is a _______ in the state that has granted its charter. It is a ______ in all other states in which it does business.

Answer 57

Domestic corporation, foreign corporation 1074

Question 58

A corporation domiciled in one country is an _______ in other countries in which it does business.

Answer 58

alien corporation 1074

Question 59

In the the leading "International Shoe Case" the Supreme Court established that the ________ clause requires that a foreign corporation have sufficient contacts with a state before a state may exercise jurisdiction over the corporation. Under the _______ corporations that avail themselves of the protections of the state laws, should also suffer any reasonable burden that the state imposes.

Answer 59

Due Process, benefit theory 1074

Question 60

Under the _________, the power to regulate interstate commerce is is given to the federal government. A state government may require a corporation to abide by their laws but cannot regulate interstate commerce.

Answer 60

Commerce Clause 1074

Question 61

To aid the courts determination of whether a state may constitutionally impose its laws of a foreign corporation, courts have traditionally used the concept of ______. The 4 determining purposes are _______.

Answer 61

doing business, whether a corporation is subject to...... 1. a lawsuit in a state's courts 2. taxation 3. qualify with the state to carry on its activities 4. state regulation of the corporation's internal affairs. 1074

Question 62

a __________ is a foreign corporation that conducts most of its business in a state other other than the one in which it is incorporated.

Answer 62

pseudo-foreign corporation 1079

Question 63

To promote justice and to prevent inequity, courts will sometimes ignore the separateness of a corporation and its shareholders by _________ thereby taking away the shareholder's limited liability

Answer 63

piercing the corporate veil 1080

Question 64

2 requirements must exist for a court to pierce the corporate veil:

Answer 64

1. domination of a corporation by its shareholders; and 2. use of that domination for an improper purpose 1080 (domination occurs when a shareholder causes a corporation to act for their personal benefit.)

Question 65

Inadequate capitalization called _________, is proved when capitalization is very small in relation to the nature of the business of the corporation and the risks the business necessarily entails

Answer 65

thin capitalization 1080

Question 66

Transfer of corporate assets to shareholders for less than their fair market value, called _______, also defraud creditors

Answer 66

looting 1081