01 May Question1. A Massachusetts business has the name The Coffee & Tea House. W
Question
1. A Massachusetts business has the name The Coffee & Tea House. Will the state allow someone to use The Coffee House Cafe as a name for their business also to operate in Massachusetts? A. It depends. The state will have to determine whether or not the two names are B. Yes, because the names aren’t identical. C. If the Coffee House is a foreign corporation, the state has absolutely no control over them of any kind. D. Yes,ifthebusinessesareorganizedasdifferenttypes of entities. 79
2. Partnerships must file an annual informational income tax return. Why isn’t any income tax payment due with this return? A. Because the partnership entity pays income tax in installments B. Because the Senate doesn’t require it C. Because partnerships don’t pay income tax. All the partnership income is reported on the personal tax returns of the partnersds. D. Because the House of Representatives doesn’t require it
3. You’re a paralegal at a law firm. You learn through work that one of the firm’s corporate clients is going to declare a stock split that will likely increase the value of their stock. You mention this to your spouse. He or she promptly goes out and buys the stock. A. Your spouse has probably committed “outsider trading.” B. There’s no problem because you weren’t working for this corporate client personally. C. There’s no problem because the information wasn’t divulged to a business competitor of your firm’s client. D. You’ve violated the ethical rules on client matter confidentiality.
4. Businesses in which the owners’ personal assets aren’t generally at risk include A. corporations. B. general partnerships. C. general partnership and sole proprietorships. D. franchises.
5. Buy-sell provisions in shareholder agreements may be activated when the stockholder A. sells his or her house. C. gets another job. B. files for bankruptcy. D. has an illness.
6. Gina gets an offer from Tim, a nonshareholder, to buy her stock. The shareholder agreement contains a right of first refusal provision. Gina must A. refuse to sell the stock to any outsider including Tim. B. obtain a fair appraisal and charge Tim full market value for the stock. C. first offer the stock to the existing shareholders. D. not sell, but only if the sale is due to bankruptcy or divorce.
7. A certain business organization has a separate legal existence from its owners. It doesn’t itself pay taxes. This business organization is a A. corporation. C. LLC. B. partnership. D. franchise. 80 Examination
8. Generally, the most important provision in a shareholder agreement is the A. prohibition against the limited partner participating in management of the entity. B. buy-sell arrangements, because having an outsider become an owner can be very disruptive. C. buy-sell arrangements, because otherwise shareholders may charge too high a price to outsiders who don’t have inside information about the actual value of the business. D. quorum requirements, because the state statute is silent on this issue.
9. A corporation is in disarray because of widespread theft in the sales force and shipping department. Firing the guilty parties is most properly the responsibility of the corporate A. officers. C. board of directors. B. shareholders. D. tax accountants.
10. A corporate agent is A. someone sent to spy on the competition. B. an employee or subcontractor who deals with third parties such as the public on behalf of the corporation. C. any fiduciary. D. a shareholder who doesn’t work for the corporation.
11. Which of the following is true of corporations? A. The directors must approve the hiring and firing of all employees. B. The shareholders hire the officers. C. The shareholders elect the directors. D. The officers appoint the directors.
12. Martha and Lewis form a business. They are governed by articles, bylaws, boards of directors and corporate officers. However, they do not have shareholders. Their organization is a(n) A. limited partnership. B. nonprofit corporation. C. for-profit corporation. D. LLC.
13. Shareholders can A. hire employees. B. hire and fire officers of the corporation. C. be board members or corporate officers. D. never vote on major company issues.
14. Certain entities don’t pay taxes; instead, the owners report their share of the entity’s income on their own personal income tax return. These entities are A. limited liability corporations, S corporations, and D corporations. B. corporations. C. S corporations, LLCs, partnerships, sole proprietorships, and nonprofit corporations. D. S corporations, LLCs, partnerships, and sole proprietorships.
15. The Uniform Partnership Act, or UPA, is a A. model statute that states have adopted that provides rules on how general partnerships are run. B. model federal law governing the creation and operation of partnerships, identical to the federal law governing the creation and operation of corporations. C. uniform act that replaces partnership agreements. D. uniform act governing nonmarital domestic partnerships—including rules of property division when an unmarried couple separates.
16. Each partner in a general partnership must have a(n) A. equal share of any profits and losses. B. equal share of control over the partnership. C. share of any profits and losses. D. right to compete with the partnership, even if that violates the partner’s fiduciary duty.
17. Which of the following is true? A. A shareholder meeting is the same as a board of directors meeting. B. A common quorum requirement is that more than half of those entitled to vote at a meeting must be present at the meeting. C. An agent for service of process can’t accept a complaint pleading for a lawsuit against his principal. D. Special meetings of shareholders or directors don’t require notice to be sent, but notice is required for regular meetings.
18. The certificate of formation for an LLC includes A. material similar to what’s found in a corporation’s bylaws. B. material similar to what’s found in a corporation’s articles of incorporation, such as name, term, and agent for service of process. C. material similar to what’s found in a corporation’s articles of incorporation, such as a description of the amount of capital contribution, and rules for appraising the value of the entity. D. the identity of any limited partners. 82 Examination
19. Sean and William, who own a corporation together, want to open a branch office in a neighboring state. In this situation a paralegal would most likely help them A. obtain a certificate of authority. B. obtain tax-exempt status. C. The paralegal and the law firm can’t help them because Sean and William’s interests clearly conflict in this matter. D. obtain a corporate minute book.
20. Larry wants to help his son’s partnership. However, he doesn’t want to risk more than the Christmas bonus he received last year of $11,000. He can A. do nothing—there’s no way to accomplish his objective. B. become a limited partner, or a creditor who loans the money to the partnership. C. contribute the $11,000 as a general partner. D. contribute the $11,000 as a limited partner but keep an eye on his investment by insisting on being elected the managing partner.
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