REG mod 25d Flashcards
What are the shareholder requirements related to a Professional Corporation?
The only individuals that may be a shareholder are licensed professionals.
Absent a partnership agreement, how are profits shared between partners?
Profits are shared EQUALLY
What is the effect on a partner’s basis when the partnership’s liabilities increase?
The basis of the partners’ is increased proportionately. Decreases in liabilities have the opposite effect.
The cash basis cannot be used by a partnership if one of the partner’s is a corporation. True / False
TRUE
The assignment of a partner’s interest permits the assignee to inspect the partnership’s books and records. True / False
False. The assignment of a partner’s interest permits the assignee to receive the partner’s share of the partnership’s profit and nothing else.
In general, what is the fiscal year end for an S Corporation? When may the fiscal year end be unique?
Generally, S Corporations have a fiscal year end of December 31. This can change if a valid business purpose is accepted by the Internal Revenue Service.
What is the partnership’s basis in an asset contributed by a new partner?
The partnership’s basis is the same as when it was owned by the new partner. The basis simply transfers from the individual to the partnership with no change in basis.
The merger of two corporations requires the approval of the significant creditors of both corporations. True / False
FALSE
What is a withdrawing partner’s liability on the general partnership’s debt obtained while he was a partner?
The withdrawing partner continues to have joint and several liability, until the creditors grant novation.
What type of decision requires unanimous consent of the partners?
Fundamental Changes, which include admitting a new partner, any action that is outside of the general scope of the business, and any amendments to the partnership agreement.
Describe the advantages of a Corporation.
Shareholders are not personally liable for the corporation’s debt because the corporation is considered to be a separate legal entity. The shareholders risk only losing their investment. Corporations have a continuous life. Significant amounts of capital can be gained by selling different classes of stock.
Describe the roles of the general partner and the limited partner in a limited partnership.
The general partner has unlimited liability and manages the limited partnership. The limited partner is essentially an investor. The limited partner does not participate in management.
Which type of entity may continue past the shareholders death?
A corporation
Describe the liability of partners when operating under a Limited Liability Partnership.
All of the partners have limited liability. Please Note: a person is always responsible for their own negligence.
What are the advantages of a sole proprietorship?
“Simplicity – no need to file with the state
The one owner ‘Calls the Shots’
Profits are taxed only once”
