B-Law: Chapter 17 Study Questions

Because risk is associated with the potential for higher profits, businesspersons are motivated to choose organizational forms that limit their liability while allowing them to take risks that may lead to greater profits. - True or False?

A limited liability company (LLC) combines the tax characteristics of:

One of the benefits of LLC's, and one that helps promote investment, is the fact that:

LLC's are created by state statute and are uniform across the states. - True or False

LLCs share many characteristics with corporations, such as they must be formed and operated in compliance with state law. - True or False

When a group of members join to form an LLC, the name of the organization must:

LLCs are legal entitles apart from their owners and as such can sue or be sued, enter into contracts, and hold title to property. - True or False

Which of the following is NOT typically a part of the contents of an LLC's articles of organization filed with the central state agency? a.) the name of the business b.) the business' principal address c.) the name and address of a registered agent d.) the members' names e.) the hours of operation f.) how the LLC will be managed g.) it is taxed like a partnership, unless the member choose differently. h.) its members pay no taxes i.) there is no uniform law governing

An LLC that has ______________ can choose to be taxed either as a partnership or as a corporation.

An LLC's members may want to reinvest the profits in the business rather than dispute the profits to members. In that situation, the members prefer that the LLC be taxed as a ______________ .

An LLC that has only _______ member(s) cannot be taxed as a partnership.

One of the biggest disadvantages of creating an LLC with partners in different states is that:

The members of an LLC have little flexibility in operating or managing a business. - True or False

What are the options that exist for management of an LLC? a.)_______________ b.)________________

In a Manager-Managed LLC: a.) a state-appointed receiver manages the firm b.) the managers must be certified public accountants c.) the managers may be members, nonmembers, or combinations of both. d.) members may not participate in management of the LLC.

Under the Uniform Limited Liability Company Act (ULLCA), managers in a manager-managed LLC owe fiduciary duties, such as the duty of loyalty and the duty of care, to the LLC and its members just as corporate directors and officers owe fiduciary duties to the corporation and its shareholders. - True or False

Fill in blanks a.) Management and how future 1.) _____________ will be chosen or removed. b.) How 2.) __________ will be divided. c.) How membership 3.) _________ may be transferred. d.) Whether the 4.) ___________ of a member, such as by death or departure, will trigger dissolution of the LLC. e.) Whether 5.) _________ members' meetings will be held. f.) How voting 6.) _________ will be appointed. - dissolution, informal, disputes, managers, profits, interests, members, dissociation, formal, rights

A member of an LLC has the 1.) _____________ to dissociate from the LLC at any time, but he or she may not have the 2.) ____________ to dissociate.

The events causing a member to be dissociated from the LLC include voluntary withdrawal, expulsion by members or by court order, incompetence, and death. - True or False

If a member dies of otherwise dissociates from an LLC, the LLC _______________________________.

When a member dissociates from an LLC he or she loses the right to participate in management. - True

In what order are proceeds from the sale of an LLC's assets distributed?

Upon dissolution of an LLC, all assets must be sold immediately. - True or False

If a member wrongfully dissociated from the LLC, he or she may still participate in the winding up process. - True or False