BUS 391 FINAL EXAM MASTER REVIEW 2026
QUESTIONS WITH VERIFIED ANSWERS
◉ Chan wants to file a lawsuit. What will be the first stage of
litigation for him?
a: discovery
b: pretrial conference
c: pleadings
d: all of the answer choices are correct, as pleadings and discovery
happen during the pretrial conference, which is in the initial phase
of the litigation process. Answer: c: pleadings
◉ the bylaws of a corporation
a. establish its internal rules
b: set the price of an initial public offering of stock
c: are filed with a state filing official and are a matter of public
record
d: establish nothing, the bylaws of corporations are purely
ceremonial documents. Answer: a. establish its internal rules
,◉ piercing the corporate veil is the process of
a: filing a lawsuit against a corporation
b: allowing parties to sue the shareholders of a corporation for their
negligence
c: allowing parties to reach the personal assets of the shareholders
of a corporation
d: liquidating a corporation. Answer: c: allowing parties to reach the
personal assets of the shareholders of a corporation
◉ Yan and Joel form an S corporation. Each of them owns 50% of the
stock. After their first year of doing business, the corporation has
made a profit of $50,000. Yan and Joel set aside $15,000 for a cash
reserve, and split the remaining $35,000 equally. Which of the
following best describes the income tax liabilities from this
situation?
a: no income tax is required, because S corporations are tax exempt
b: Yan and Joel will each have to pay taxes on $25,000, one-half of
the profits
c: Yan and Joel will each have to pay taxes on the $17,500 they each
received
d: The corporation will pay taxes on the $15,000 retained, and Yan
and Joel have to pay taxes on the $17,500 they each received.
,Answer: b: Yan and Joel will each have to pay taxes on $25,000, one-
half of the profits
◉ which of the following statements is correct
a: corporations are governed by federal law and are created by filing
with a federal agency
b: the most common type of corporation in the US is a publicly held
corporation
c: the obligations of a corporation are distinct from the obligations of
its principles
d: corporations may not file lawsuits. Answer: c: the obligations of a
corporation are distinct from the obligations of its principles
◉ when is a limited liability company (LLC) exempt from federal tax
a: it is exempt if it would qualify as a Subchapter S corporation if it
were incorporated
b: an LLC is never tax exempt, but it pays tax at a lower rate
c: it is always exempt unless the LLC elects to be taxed as a
corporation
d: only if it is formed for a charitable purpose. Answer: c: it is always
exempt unless the LLC elects to be taxed as a corporation
, ◉ True/False: corporate bylaws are public documents that must be
filed with the appropriate state corporation office. Answer: False
◉ True/False: To qualify for Subchapter S status, a supermajority of
the shareholders must consent to the Subchapter S designation.
Answer: False
◉ true/false: Shareholders are the owners of the corporation, and
part of their responsibility as such us to elect and remove corporate
officers. Answer: false
◉ an operating agreement in a limited liability corporation (LLC) is
a/an
a: standard form document with provisions set strictly by federal
law to govern the operation of the entity
b: contract between the LLC and clients or customers
c: agreement of the parties to the LLC that covers the internal rules
for the actual operation of the entity
d: state-established set of default rules that governs LLCs. Answer: c:
agreement of the parties to the LLC that covers the internal rules for
the actual operation of the entity
QUESTIONS WITH VERIFIED ANSWERS
◉ Chan wants to file a lawsuit. What will be the first stage of
litigation for him?
a: discovery
b: pretrial conference
c: pleadings
d: all of the answer choices are correct, as pleadings and discovery
happen during the pretrial conference, which is in the initial phase
of the litigation process. Answer: c: pleadings
◉ the bylaws of a corporation
a. establish its internal rules
b: set the price of an initial public offering of stock
c: are filed with a state filing official and are a matter of public
record
d: establish nothing, the bylaws of corporations are purely
ceremonial documents. Answer: a. establish its internal rules
,◉ piercing the corporate veil is the process of
a: filing a lawsuit against a corporation
b: allowing parties to sue the shareholders of a corporation for their
negligence
c: allowing parties to reach the personal assets of the shareholders
of a corporation
d: liquidating a corporation. Answer: c: allowing parties to reach the
personal assets of the shareholders of a corporation
◉ Yan and Joel form an S corporation. Each of them owns 50% of the
stock. After their first year of doing business, the corporation has
made a profit of $50,000. Yan and Joel set aside $15,000 for a cash
reserve, and split the remaining $35,000 equally. Which of the
following best describes the income tax liabilities from this
situation?
a: no income tax is required, because S corporations are tax exempt
b: Yan and Joel will each have to pay taxes on $25,000, one-half of
the profits
c: Yan and Joel will each have to pay taxes on the $17,500 they each
received
d: The corporation will pay taxes on the $15,000 retained, and Yan
and Joel have to pay taxes on the $17,500 they each received.
,Answer: b: Yan and Joel will each have to pay taxes on $25,000, one-
half of the profits
◉ which of the following statements is correct
a: corporations are governed by federal law and are created by filing
with a federal agency
b: the most common type of corporation in the US is a publicly held
corporation
c: the obligations of a corporation are distinct from the obligations of
its principles
d: corporations may not file lawsuits. Answer: c: the obligations of a
corporation are distinct from the obligations of its principles
◉ when is a limited liability company (LLC) exempt from federal tax
a: it is exempt if it would qualify as a Subchapter S corporation if it
were incorporated
b: an LLC is never tax exempt, but it pays tax at a lower rate
c: it is always exempt unless the LLC elects to be taxed as a
corporation
d: only if it is formed for a charitable purpose. Answer: c: it is always
exempt unless the LLC elects to be taxed as a corporation
, ◉ True/False: corporate bylaws are public documents that must be
filed with the appropriate state corporation office. Answer: False
◉ True/False: To qualify for Subchapter S status, a supermajority of
the shareholders must consent to the Subchapter S designation.
Answer: False
◉ true/false: Shareholders are the owners of the corporation, and
part of their responsibility as such us to elect and remove corporate
officers. Answer: false
◉ an operating agreement in a limited liability corporation (LLC) is
a/an
a: standard form document with provisions set strictly by federal
law to govern the operation of the entity
b: contract between the LLC and clients or customers
c: agreement of the parties to the LLC that covers the internal rules
for the actual operation of the entity
d: state-established set of default rules that governs LLCs. Answer: c:
agreement of the parties to the LLC that covers the internal rules for
the actual operation of the entity
