Business Associations
SAL Spring 2020
Final Exam
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Time: Three (3) hours
Materials: You may consult one side of A4 paper only.
Format: Write your answers directly onto the page or type onto a document.
Grading: Be short and clear. No extra credit for long answers.
STUDENT NAME: ______________________
1. There are two kinds of businesses that can be created by facts and circumstances (or by accident) without filing any documents with the Secretary of State. What businesses are they — just list them?
2. What is the major difference between a General Partnership (GP) and a Limited Liability Partnership (LLP)?
3. What is the major difference between a General Partnership (GP) and a Limited Partnership (LP)?
4. The “owners” of an LLC are its __________________.
The owners of a Corporation are its ________________.
5. Give an example where an Agent violates a duty of loyalty to a Principal?
6. In “flow through” taxation – circle the correct answer:
a) An owner must pay taxes every year on income allocated to him even if he does not receive any actual money that year;
OR
b) The owner must pay taxes only on income that he actually receives from the company in cash.
7. A, B, and C are a general partnership that runs a food truck. A contributes $5000 capital, B puts in $3000 capital, and C puts in $2000 capital. The partners all work on the truck making and selling food and the partnership makes $1000 in income. There is no agreement on how to share profits and losses. On default rules, how will the $1000 income be allocated to the partners?
A =
B =
C =
8. A driver for Uber injures a person who is crossing the street. The driver’s has no assets and his car insurance is low, so the injured person wants to sue Uber the company. Can he win?
9. List the 3 situations where a court can “pierce the corporate veil” of a corporation to hold the owners personally with unlimited liability?
10. A woman wants to sell handmade dresses on the street. She thinks that she should create a corporation. Her lawyer tells her to be a sole proprietor. Please tell me why her lawyer might be correct?
11. What is the most that a limited partner can lose in a Limited Partnership (LP)?
12. In a General Partnership, each Partner is an _________ for the other Partners and the Partnership, and can bind them by making a contract on behalf of the General Partnership.
13. A company that is created in Delaware wants to do business in Illinois. What document does it file with the Illinois Secretary of State?
14. What is thebusiness judgment rule for corporations?
15. Which business association is the “best”?
16. When is meant in English by saying “the default rule of law?”
17. I pay $3000 to become a salesman for Women’s Skin Products, and they give me some products so I sell makeup to women. I also sign up new people to also be salesmen, and for each person I sign up, they have to give me 20% of their profit. And if they sign up another person, that person has to give me 10% of their profit. Soon there are thousands of salesmen and the money is flowing upwards. Is this a “security” under the Howey test?
18. Why are so many corporations based in Delaware?
19/20. My friend loves to make coffee. I give him $2000, and he buys a machine and coffee to sell on the street. I don’t do anything else. We agree that if the business is profitable, he must pay me back $2500 in two years, plus I get 25% of profits during those two years. If he does not make any profit, he only has to pay me back $500 after two years. Unfortunately, my friend makes a mistake and a customer gets poisoned from the coffee and dies.
What is the maximum amount of loss that I can suffer — e.g., is there a limit to my liability? Explain your reasoning.
The post There are two kinds of businesses that can be created by facts and circumstances (or by accident) without filing any documents with the Secretary of State. What businesses are they — just list them? appeared first on Ink Essays.
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