BUL 3310 Revision Exam Questions And Already Passed Answers.
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Course
BUL 3310
Institution
BUL 3310
Which of the following statements about LLC's is false?
LLC's are a relatively new form of business organization.
There is an extensive body of law based on court decisions governing LLC's.
Shareholders have no personal liability for the debts of the LLC.
The LLC is not a taxabl...
BUL 3310 Revision Exam Questions And
Already Passed Answers.
Which of the following statements about LLC's is false?
LLC's are a relatively new form of business organization.
There is an extensive body of law based on court decisions governing LLC's.
Shareholders have no personal liability for the debts of the LLC.
The LLC is not a taxable entity. - Answer There is an extensive body of law based on court decisions
governing LLC's.
Investors favor using Limited Partnerships to invest in commercial real estate because they can use the
depreciation of the property as a tax loss.
T or F - Answer True
Professional corporations are business entities organized under state law.
T/F? - Answer True
Allfam is a closely held family corporation, many of whose shareholders are employees of the
corporation. In an attempt to reduce its taxes, Allfam paid its shareholder-employees enormous salaries
and deducted the salaries as a corporate expense. Is Allfam permitted to do this?
Yes, this is a legitimate way for closely held corporations to reduce their taxes.
,No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends.
No, the shareholder-employees will have do return the excess portion of their salaries to the
corporation.
No, the IRS will disallow the deductions for this year, but will allow the corporation to treat them as
carry-forward losses for next year. - Answer No, the IRS will disallow the deductions for unreasonably
high salaries and tax them as dividends
Which of the following statements about the limited partner in a limited partnership is FALSE?
Limited partners may participate fully in the management of the partnership.
There must be at least one limited partner.
Limited partners must approve any changes to the partnership agreement.
Limited partnerships that invest in real estate are typically good tax shelters for the limited partners. -
Answer Limited partners may participate fully in the management of the partnership.
Vic and Thom bought an antique Corvette at auction with the intent of restoring it and selling it for a
profit, which they will share equally. Vic and Thom have formed a professional association.
T/F? - Answer False
Members of professional associations and professional corporations are eligible under the Tax Code to
participate in pension and profit-sharing plans.
T/F? - Answer True
In a Limited Liability Company, the losses and profits pass through to the shareholders.
,T/F? - Answer True
The partnership must pay interest each year on the capital contributions of the partners.
False - Answer False
If a partnership agreement does not say how losses will be shared, they will be shared
Equally among the partners
Proportionately according to the capital contribution of each partner.
In whatever way the profits are shared.
Equally among those partners who have not made loans to the partnership - Answer In whatever way
the profits are shared
Partnerships typically buy life insurance policies on each partner in order to fund the required purchase
of the partner's interest in the partnership when the partner dies.
T/F? - Answer True
An incoming partner has unlimited personal liability for the already existing debts of the partnership.
T/F? - Answer False
Which of the following statements is true about a partnership name?
, (The name is an asset of the partnership that may be sold or assigned.
The name must include the word "company" in it.)
The partnership must comply with the state's assume name provisions.
Both a and c - Answer Both a and c
The surviving partner is entitled to compensation for winding up the affairs of the partnership.
T/F? - Answer True
If a personal creditor of Partner A wants to attach A's partnership interest in satisfaction of the debt, he
would do so through a marshalling order.
T/F? - Answer False
Jim and Sid are partners in Widget Manufacturing. Jim read a letter from one of Widget's buyers asking
for adequate assurances that Widget would be able to meet an upcoming contractual obligation. The
demand was proper and, under Article 2, the buyer could treat the contract as breached if Widget did
not respond to the demand within 3 months. Jim forgot to tell Sid about the demand and did not
respond to it himself. Widget is now being sued by Buyer for 4,000 in damages for breach of contract. Sid
contends that the partnership is not liable because only one partner was aware of the demand. Is Sid
correct?
Yes, as an equal owner of the business Sid was entitled to equal notice.
No, Sid did not receive the notice because of his own negligence in attending to partnership
correspondence.
No, the partnership is liable under the doctrine of respondeat superior
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