Ch 11: Entities for Ownership Flashcards
A limited partner may NOT:
a. Share in the profits
b. Retain limited liability
c. Demand an accounting
d. Participate in management
d. Participate in management
When a limited partner participates in the management of the partnership the limited liability shield will be lost.
A corporate officer’s authority to make an offer can be checked in the:
a. Corporation code
b. Corporate bylaws
c. State Department of Corporation regulations
d. Corporate charter
b. Corporate bylaws
The authority of a corporate office is generally set forth in the corporate by-laws. An escrow officer in closing a real estate transaction will generally request that the officer provide a certified resolution of the Board of Directors stating that the officer is authorized to execute any documents related to that transaction.
A limited partner is ALWAYS:
a. Limited as to liability
b. Limited as to profits received
c. Liable for debts in excess of his investment
d. An active partner
a. Limited as to liability
A limited partner’s risk is limited, but only if he or she does not participate (inactive) in the management of the partnership; meaning that his or her liability is limited to the limited partner’s investment.
Which of the following creates the GREATEST liability for the investor?
a. General partnership
b. Corporation
c. Limited partnership
d. Subchapter S corporation
a. General partnership
A general partnership involves an association of two or more persons who share in the management, operation of the business and in the profits and losses. Each partner has unlimited liability for all the debts and obligations of the partnership.
An incorporated developer wants to raise capital for improvements without creating any liens or incurring new debt. The developer could:
a. Use a blanket encumbrance
b. Become a Subchapter S corporation
c. Sell bonds
d. Sell stock
d. Sell stock
Selling stock in the corporation is bringing in additional owners of the entity and is known as equity capital. The increase in equity capital is not an increase in the debt of the entity but a change in the ownership equity.
All of the following are reasons for selecting a real estate investment entity to be treated as a partnership for income tax purposes, EXCEPT:
a. A partnership entity does not file an income tax return.
b. The entity does not pay taxes on its taxable income.
c. Taxable income and cash distributions to the individual partners are taxed only one time.
d. Entity losses are allocated to partners for inclusion on their individual tax returns
a. A partnership entity does not file an income tax return.
The partnership does file an income tax return, but any taxable income or loss is passed through to the individual partners. The partnership does not pay any income tax so there is not double taxation.
A syndicate for real estate purposes would MOST LIKELY be a:
a. Unincorporated association
b. Corporation
c. Limited partnership
d. General partnership
c. Limited partnership
The syndicate is a group joining together for a common purpose. A limited partnership is the most likely selection from the answer choices given in this question because the limited partnership provides liability protection for the investor and eliminates the double taxation of a corporation. In recent years real estate syndicates are primarily formed using the Limited Liability Company.
A limited liability company provides a real estate investor all of the following, EXCEPT:
a. Limited personal liability exposure
b. Organization without filing with the Arizona Corporation Commission
c. Full management participation and control
d. Partnership income tax benefits
b. Organization without filing with the Arizona Corporation Commission
A Limited Liability Company is formed by filing Articles of Organization with the Arizona Corporation Commission.
The maximum number of shareholders allowed in a subchapter S corporation is:
a. 50
b. 75
c. 35
d. 100
d. 100
To be able to elect under Subchapter S the corporation must have 100 or fewer shareholders.
To avoid paying corporate income tax, a REIT must maintain the following percentage of its assets in real estate:
a. 25 percent
b. 75 percent
c. 50 percent
d. 95 percent
b. 75 percent
Seventy-five percent of the assets must be in real estate
A limited liability company provides a real estate investor all of the following, EXCEPT:
a. Organization without filing with the Arizona Corporation Commission
b. Full management participation and control
c. Partnership income tax benefits
d. Limited personal liability exposure
a. Organization without filing with the Arizona Corporation Commission
A Limited Liability Company is formed by filing Articles of Organization with the Arizona Corporation Commission.
Which of the following WOULD apply to a Limited Liability Company?
a. Stockholders
b. Unlimited liability
c. Unlimited duration
d. Members
d. Members
The owners of a limited liability company are known as MEMBERS.
Which of the following types of ownership is LEAST likely to be subject to securities regulations?
a. Joint venture
b. Joint tenancy
c. Subchapter S corporation
d. Limited partnership
b. Joint tenancy
As a general rule, securities regulations relate to the sale of securities, which are defined as investments in which the investor depends on others for the successful return on the investment. Ownership as joint tenants would not be transferring any management of the investment to others, as it would most likely be a general partnership.
What form of financing is controlled by the Federal Securities Law:
a. R.E.I.T.
b. ARMLS
c. GPM
d. ARM
a. R.E.I.T.
A Real Estate Investment Trust (REIT) is generally subject to federal security laws since there must be a minimum of 100 owners.
It always takes a minimum of 100 people to form a:
a. Corporation
b. Real Estate Investment Trust
c. Limited partnership
d. Real estate syndicate
b. Real Estate Investment Trust
There must be 100 hundred owners in order to take advantage of the favorable tax provisions of a Real Estate Investment Trust (REIT).
