ACCT 340 FINAL EXAM QUESTIONS AND
ACCURATE ANSWERS
An LLC can be either a(n) _____-managed LLC or a(n) _____-managed LLC. - ANSWER
member; manager
A(n) _____ is an unincorporated business entity that combines the most favorable
attributes of general partnerships, limited partnerships, and corporations. - ANSWER LLC
Which of the following is an INCORRECT statement regarding a distributional interest in
an LLC? - ANSWER A member's distributional interest in an LLC must be transferred in
whole.
The _____ is a model act that provides comprehensive and uniform laws for the
formation, operation, and dissolution of LLCs. - ANSWER ULLCA
Which of the following is NOT true about a limited liability partnership (LLP)? - ANSWER
In an LLP, all of the partners are personally liable for the debts and obligations of the LLP.
Which of the following is an INCORRECT statement regarding limited liability companies
(LLCs)? - ANSWER LLCs are creatures of federal statue.
Bingo, LLP enters into a contract to lease office space from a landlord for a five-year
,period. Two years later, the LLP fails and is unable to pay for the remaining three years'
rent. The landlord sues both the LLP and the partners for breach of contract. Which of
the following is true? - ANSWER Only the assets of Bingo, LLC can be reached.
Which of the following is an INCORRECT statement regarding members' and managers'
duty of loyalty to a limited liability company (LLC)? - ANSWER A manager of a
manager-managed LLC does not owe a fiduciary duty of loyalty to the LLC, since he or
she is not a member.
Which of the following is NOT true regarding the management of an LLC? - ANSWER All
actions in a manager-managed LLC must be delegated to the managers.
A _____ interest is a member's ownership interest in an LLC that entitles the member to
receive distributions of money and property from the LLC. - ANSWER distributional
A(n) _____ is an agreement entered into among members that governs the affairs and
business of the limited liability company (LLC) and the relations among members,
managers, and the LLC. - ANSWER operating agreement
The fiduciary duty of loyalty includes the following duties EXCEPT? - ANSWER not to
engage in a known violation of the law
Four accountants, Jim Bob, Carlos, Carole, and Serena form a limited liability partnership
(LLP) to provide auditing services. While performing an audit on a small business, Jim
Bob is negligent, resulting in a $1 million judgment against the business. Which of the
,following is true? - ANSWER Both Jim Bob and the LLP are liable, but not Carlos, Carole,
or Serena.
Which of the following is an INCORRECT statement regarding the management of an
LLC? - ANSWER An LLC must be managed by designated management, not by its
members.
Which of the following is an INCORRECT statement regarding agency authority to bind
an LLC to contracts? - ANSWER In a manager-managed LLC, non-manager members can
bind the LLC to contracts.
Managers of LLCs are _____ liable for the debts, obligations, and liabilities of the LLC they
manage. - ANSWER not personally
An LLC is a(n) _____ LLC unless it is designated as a(n) _____ LLC. - ANSWER at-will; term
An LLC is formed by members John, Alicia, and Margaret. They designated the LLC as
manager-managed and appoint Alicia and nonmember Robert as its managers. Who has
the authority to bind the LLC to contracts? - ANSWER Alicia and Robert, because they are
the managers of the LLC
Which of the following is NOT true about the Uniform Limited Liability Company Act
(ULLCA)? - ANSWER All states have adopted the ULLCA as law.
, Which of the following is NOT true about a limited liability partnership (LLP)? - ANSWER
A certificate of limited liability partnership is a private document.
Which of the following is NOT true about the limited liability of a limited liability
partnership (LLP)? - ANSWER An LLP must have at least one general partner who is
personally liable for the debts and obligations of the LLP.
Which of the following is an INCORRECT statement regarding the taxation of limited
liability companies (LLCs)? - ANSWER Under the Internal Revenue Code, for federal
income tax purposes, an LLC is taxed as a corporation unless it elects to be taxed as a
partnership.
Which of the following is an INCORRECT statement regarding members' and managers'
duty of care to a limited liability company (LLC)? - ANSWER A manager of a
manager-managed LLC does not owe a fiduciary duty of loyalty to the LLC, since he or
she is not a member.
Members of an LLC have _____ liability for the debts, obligations, and liabilities of an LLC.
- ANSWER limited
Which of the following is an INCORRECT statement regarding manager-managed LLCs? -
ANSWER All actions concerning the LLC can be delegated to managers.
Which of the following is NOT true about a member's dissociation from a limited liability
company (LLC)? - ANSWER Under no circumstances can a member withdraw from a term
ACCURATE ANSWERS
An LLC can be either a(n) _____-managed LLC or a(n) _____-managed LLC. - ANSWER
member; manager
A(n) _____ is an unincorporated business entity that combines the most favorable
attributes of general partnerships, limited partnerships, and corporations. - ANSWER LLC
Which of the following is an INCORRECT statement regarding a distributional interest in
an LLC? - ANSWER A member's distributional interest in an LLC must be transferred in
whole.
The _____ is a model act that provides comprehensive and uniform laws for the
formation, operation, and dissolution of LLCs. - ANSWER ULLCA
Which of the following is NOT true about a limited liability partnership (LLP)? - ANSWER
In an LLP, all of the partners are personally liable for the debts and obligations of the LLP.
Which of the following is an INCORRECT statement regarding limited liability companies
(LLCs)? - ANSWER LLCs are creatures of federal statue.
Bingo, LLP enters into a contract to lease office space from a landlord for a five-year
,period. Two years later, the LLP fails and is unable to pay for the remaining three years'
rent. The landlord sues both the LLP and the partners for breach of contract. Which of
the following is true? - ANSWER Only the assets of Bingo, LLC can be reached.
Which of the following is an INCORRECT statement regarding members' and managers'
duty of loyalty to a limited liability company (LLC)? - ANSWER A manager of a
manager-managed LLC does not owe a fiduciary duty of loyalty to the LLC, since he or
she is not a member.
Which of the following is NOT true regarding the management of an LLC? - ANSWER All
actions in a manager-managed LLC must be delegated to the managers.
A _____ interest is a member's ownership interest in an LLC that entitles the member to
receive distributions of money and property from the LLC. - ANSWER distributional
A(n) _____ is an agreement entered into among members that governs the affairs and
business of the limited liability company (LLC) and the relations among members,
managers, and the LLC. - ANSWER operating agreement
The fiduciary duty of loyalty includes the following duties EXCEPT? - ANSWER not to
engage in a known violation of the law
Four accountants, Jim Bob, Carlos, Carole, and Serena form a limited liability partnership
(LLP) to provide auditing services. While performing an audit on a small business, Jim
Bob is negligent, resulting in a $1 million judgment against the business. Which of the
,following is true? - ANSWER Both Jim Bob and the LLP are liable, but not Carlos, Carole,
or Serena.
Which of the following is an INCORRECT statement regarding the management of an
LLC? - ANSWER An LLC must be managed by designated management, not by its
members.
Which of the following is an INCORRECT statement regarding agency authority to bind
an LLC to contracts? - ANSWER In a manager-managed LLC, non-manager members can
bind the LLC to contracts.
Managers of LLCs are _____ liable for the debts, obligations, and liabilities of the LLC they
manage. - ANSWER not personally
An LLC is a(n) _____ LLC unless it is designated as a(n) _____ LLC. - ANSWER at-will; term
An LLC is formed by members John, Alicia, and Margaret. They designated the LLC as
manager-managed and appoint Alicia and nonmember Robert as its managers. Who has
the authority to bind the LLC to contracts? - ANSWER Alicia and Robert, because they are
the managers of the LLC
Which of the following is NOT true about the Uniform Limited Liability Company Act
(ULLCA)? - ANSWER All states have adopted the ULLCA as law.
, Which of the following is NOT true about a limited liability partnership (LLP)? - ANSWER
A certificate of limited liability partnership is a private document.
Which of the following is NOT true about the limited liability of a limited liability
partnership (LLP)? - ANSWER An LLP must have at least one general partner who is
personally liable for the debts and obligations of the LLP.
Which of the following is an INCORRECT statement regarding the taxation of limited
liability companies (LLCs)? - ANSWER Under the Internal Revenue Code, for federal
income tax purposes, an LLC is taxed as a corporation unless it elects to be taxed as a
partnership.
Which of the following is an INCORRECT statement regarding members' and managers'
duty of care to a limited liability company (LLC)? - ANSWER A manager of a
manager-managed LLC does not owe a fiduciary duty of loyalty to the LLC, since he or
she is not a member.
Members of an LLC have _____ liability for the debts, obligations, and liabilities of an LLC.
- ANSWER limited
Which of the following is an INCORRECT statement regarding manager-managed LLCs? -
ANSWER All actions concerning the LLC can be delegated to managers.
Which of the following is NOT true about a member's dissociation from a limited liability
company (LLC)? - ANSWER Under no circumstances can a member withdraw from a term
