FIU BUL6810 Chapter 19 Quiz

Question 1

1. The _______ is the simplest and most prevalent form of business enterprise in the U.S.

   		S Corporation
   		Partnership
   		Sole proprietorship
   		Joint Venture

5 points

Question 2

1. What does the term "reverse piercing" reference in regard to a corporation and its shareholders?

   		Holding a corporation liable for debts of a shareholder
   		Holding a shareholder liable for debts of a corporation
   		Holding a corporation liable for debts of a shareholder and holding a shareholder liable for debts of a corporation
   		Holding a corporation liable for debts of a shareholder, holding a shareholder liable for debts of a corporation, and holding officers liable for debts of a corporation.

5 points

Question 3

1. _______ refers to a method by which courts hold shareholders individually liable for claims against a corporation.

   		Reverse liability
   		Piercing the corporate veil
   		Upholding the ethical theory
   		Unveiling

5 points

Question 4

1. Which of the following is true regarding taxation of losses of a C corporation?

   		The operating loss is passed on to shareholders, but the corporation itself does not realize any benefit.
   		The operating loss is recognized at the corporate level, and shareholders also receive a tax benefit.
   		The operating loss will be recognized at the corporate level, shareholders receive no tax benefit, and the corporation receives no benefit until it has operating income against which its prior losses can be deducted.
   		The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction, they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10% of the losses per year.

5 points

Question 5

1. Maxine and Vince verbally agree to form a dog grooming partnership called "XYZ Grooming." They file nothing with the state. Maxine puts up 80% of the capital needed for the partnership, and Vince supplies 20%. Maxine assumed that Vince would do extra work to account for the small amount of capital contributed by him, but that did not occur. Maxine found herself grooming more than 90% of the animals on her own. Maxine told Vince that he was only entitled to 10% of the profits because he was only doing 10% of the work. Vince disagreed, and a heated argument occurred. Not surprisingly, Maxine and Vince decided to end the partnership. While winding up affairs, Maxine discovered that Vince paid an excessive amount for some dog shampoo. She thought he bought it from a certain supplier just so he could flirt with the receptionist there. She told him that paying for the shampoo was entirely his responsibility because she had not agreed to the purchase. Maxine and Vince also became aware of a lawsuit filed by the owner of a Welsh Pembroke Corgi complaining that the dog developed a skin rash following bathing by Vince in the expensive shampoo he had purchased, and that the owner lost money because the dog could not be entered into shows. Maxine told Vince that the litigation was entirely his responsibility and that she disavowed any liability to the plaintiff. Which of the following is true regarding liability on the lawsuit brought by the Corgi owner?

   		The partnership is liable and Vince is liable in the event there are insufficient partnership assets to pay any judgment, but Maxine would not be liable on any judgment.
   		The partnership is liable, and so are both Vince and Maxine if insufficient partnership funds exist to pay any judgment.
   		Vince is liable on any judgment, but neither Maxine nor XYZ Grooming would be liable.
   		Since the winding-up process has begun, neither Maxine, Vince, nor XYZ Grooming would be liable on any judgment obtained.

5 points

Question 6

1. What did the court rule on appeal in Estate of Countryman v. Farmers Cooperative Association, the case in the text in which the plaintiffs attempted to hold a 95% owner of an LLC personally liable in tort as a manager when propane gas delivered by the LLC exploded?

   		That only the LLC could be held liable.
   		That the manager was subject to liability along with the LLC regardless of whether it could be established that the manager participated in tortuous conduct in performing his duties.
   		That only the manager, not the LLC, could be held liable.
   		That the manager was not protected from liability if he participated in tortuous conduct in performing his duties.

5 points

Question 7

1. Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

   		Debt resolution
   		Bypassing formalities
   		Termination
   		Winding-up

5 points

Question 8

1. Which of the following is true regarding incorporation?

   		A corporation must be incorporated in the state in which it has its principal place of business.
   		Laws regarding incorporation and the rights and duties of corporations are uniform from state to state.
   		Since the mid-1930's, Delaware has been considered the preeminent state for incorporation.
   		Incorporation may be done pursuant to common law as well as statute.

5 points

Question 9

1. Which of the following statements is not true regarding the advantages and disadvantages of a sole proprietorship?

   		A sole proprietorship can be created without formal agreements or state filings.
   		The proprietor reports income from the business on a personal tax return.
   		The proprietor alone bears liability for the losses.
   		It is usually easy for sole proprietorships to raise capital.

5 points

Question 10

1. In most jurisdictions, there is no quorum unless the holders of at least _______ of the outstanding shares are present in person or by proxy.

   		25%
   		33%
   		50%
   		75%

5 points

Question 11

1. Joan decides to enter into a franchise agreement with XYZ Burgers to sell their burgers in her town. The franchise agreement did not prohibit XYZ Burgers from granting other franchises in the area, but that did not concern Joan because she thought XYZ Burgers would treat her fairly. She did not bother to read the franchise papers, contracts, and disclosures she was provided. Joan's business went very well for the six months. Then, however, another XYZ Burgers franchise opened just down the street from Joan's restaurant. She was very upset and called XYZ Burgers to complain. The CEO brushed off her concerns and told her that there was enough business for everyone. Joan, however, is interested in suing XYZ Burgers. Which of the following is the term used when a franchisor sells a franchisee an outlet in a certain location, and then a few months later, sells another outlet a few blocks away to someone else?

   		Encroachment
   		Fair trace
   		False competition
   		Crowding

5 points

Question 12

1. In a ________ merger, the shares in the disappearing corporation are automatically converted into shares in the surviving corporation.

   		cash out
   		noncash
   		freeze out
   		liquidation

5 points

Question 13

1. A shareholder who cannot be present at a meeting can vote by _______, that is, by a written authorization for another person to vote on his or her behalf.

   		proxy
   		allowance
   		record
   		nomination

5 points

Question 14

1. Which of the following is false regarding decision making in a partnership?

   		Each partner's assets are vulnerable to the poor business decisions of the fellow partners.
   		A partnership is prohibited from placing managerial control of the business in one partner.
   		Unless the partners expressly agree otherwise, partnership law requires unanimous agreement of all partners on all but the most ordinary matters.
   		If the partners in an informal partnership cannot agree on a decision, they may disband the partnership, distribute its assets, and terminate it.

5 points

Question 15

1. The _______ theory applies to the situation in which owners of a corporation have so mingled their own affairs with those of the corporation that the corporation does not exist as a distinct entity.

   		undercapitalization
   		alter ego
   		per se
   		absolute

5 points

Question 16

1. Which of the following is false regarding limited partnerships?

   		General partners of a limited partnership remain jointly and severally liable for partnership obligations.
   		Limited partners assume no liability for partnership debts beyond the amount of capital they contributed.
   		Limited partners are responsible for the management of the partnership.
   		Limited partnerships are often used to raise capital.

5 points

Question 17

1. A ________ is created when two or more persons agree to place their money, labor, or skills in a business and to share the profits and losses.

   		sole proprietorship
   		general partnership
   		S partnership
   		C corporation

5 points

Question 18

1. If incorporators cannot show substantial compliance with statutes regarding incorporation but can show that they were unaware of any defect and acted in good faith, a court may treat the entity as a(n) ________.

   		de jure corporation
   		real corporation
   		de facto corporation
   		equitable corporation

5 points

Question 19

1. A corporation can conduct business as a ________ in states other than its state of incorporation.

   		domestic corporation
   		foreign corporation
   		pass through entity
   		alien

5 points

Question 20

1. In a[n] ________ a stock purchase is financed by debt.

   		cash out merger
   		freeze out acquisition
   		leveraged buyout
   		illegal purchase