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Legal Aspects of Business (Final Exam) questions well answered to pass
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Legal Aspects of Business (Final Exam) questions well answered to pass
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Legal Aspects of Business (Final Exam)entity theory - correct answer ✔✔economic activity of business is separate from that of its owners;
owners aren't personally responsible for company's loans and liabilities
aggregate theory - correct answer ✔✔a business is nothing more than a collection of its owners; all
partners individually report their respective shares of income and deductions
check the box regulation - correct answer ✔✔IRS lets you choose how you want to be taxed
sole proprietorship - correct answer ✔✔owned and run by one person; no legal distinction between
owner and business (unlimited personal liability); one level of taxation
general partnership - correct answer ✔✔2 or more partners conducting a business jointly have unlimited
liability (which means their personal assets are liable to the partnership's obligations); no formalities or
registration with state; may be oral, written, or implied, one level of taxation
LLC (limited liability company) - correct answer ✔✔mix; can pick to be taxed once; owners are called
members; register with state; all profits and losses are "passed through" the business to each member;
members report profits and losses on their personal federal tax returns; liable for losses but members
aren't liable beyond their capital contribution
C-corporation - correct answer ✔✔most common form; separate entity from shareholders (owners);
limited liability of shareholders; double taxation
S-corporation - correct answer ✔✔separate entity from shareholders (owners); limited liability of
shareholders; single taxation; no more than 100 SH; can only have one class of stock; register with state
difference between general partnership and limited partnership - correct answer ✔✔limited partnership
has limited partners with limited liability (not liable beyond their capital contributions) and must have a
general partner who is personally liable; limited also must be administratively dissolved, is taxed one
time, and not a default entity
, partnership agreement - correct answer ✔✔contract between partners; written agreement that differs
from default rules; can agree to almost any terms
rights of partners - correct answer ✔✔1- right to participate in management/ each partner has equal
vote
2- right to equal share in profits and losses
3- rights to info
4- right of return of loans and capital (get what they paid back)
5- right to compensation
6- right to indemnification (or for partner to be reimbursed for expenses incurred on behalf of
partnership)
duties of partners - correct answer ✔✔1- duty of loyalty
2- duty of care
3- duty to inform
4- duty of obedience
duty of loyalty (pship) - correct answer ✔✔always act in best interest of partnership
1- no self dealing
2- no usurping opportunities
3- no competition with the partnership
4- no secret profits made from partnership business
5- no breach of confidentiality
6- no misuse of partnership property (i.e. personal use)
duty of care (pship) - correct answer ✔✔must use same level of care and skill that a reasonable business
manager in same position would use; breach is considered negligence
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