R6 M4 - Business Structures: Part I

Question 1

Question 2

What advantage does an LLC has over a partnership?

Answer 2

An LLC maybe able to participate in management while protecting its assets (limited personal liability).

Question 3

Noll Corp. and Orr Corp. are contemplating entering into an unincorporated joint venture. Such a joint venture:

A.	Must file a certificate of limited partnership with the appropriate state agency.
B.	Must be dissolved upon the completion of a single undertaking.
C.	Will be treated as an association for federal income tax purposes and taxed at the prevailing corporate rates.
D.	Will be treated as a partnership in most important legal aspects.

Answer 3

Choice “D” is correct. A joint venture is treated as a partnership for most legal purposes.

Choice “A” is incorrect because like a partnership, a joint venture need not file with the state.

Choice “B” is incorrect because a joint venture may be for more than a single venture; it may be for a series of transactions.

Choice “C” is incorrect because a joint venture, like a partnership, is not taxed as a separate entity.

Question 4

Which of the following rights would a general partner in a general partnership not have?

A.	The right to inspect partnership books and records.
B.	The right to be indemnified for liability incurred in a suit brought by a third party while acting on behalf of the partnership.
C.	The right to be compensated for the fair market value of services performed on behalf of the partnership.
D.	The right to be reimbursed for loans made to the partnership.

Answer 4

Choice “C” is correct. Partners have no right to compensation other than profits unless otherwise agreed.

Choices “B”, “D”, and “A” are incorrect. Partners do have the right to be indemnified, the right to be reimbursed for loans and the right to inspect books and records.

Question 5

Which of the following partnership decisions must be approved by all the partners (unanimous consent) of a partnership?

Answer 5

What would be considered a unanimous consent in a partnership?

• Admitting a new person
• Making fundamental changes to the partnership
• Confessing wrong in court (contractual liability in a lawsuit)