BUL 3130 REVIEW TIPS QUESTIONS AND ANSWERS
SET A+
✔✔false - ✔✔In a sole proprietorship, the business is considered a separate legal entity
from the proprietor. True or False?
✔✔true
(doing business as) - ✔✔The designation of d.b.a. refers to the description for a
business that is operating under a trade name. True or False?
✔✔false
(fully and personally liable for business debts) - ✔✔A sole proprietor has limited
personal liability. True or False?
✔✔true
(not a separate entity, so all taxes are reported and paid on individual owner's return.) -
✔✔A sole proprietorship does not does not pay taxes at the business level. True or
False?
✔✔true
(Share of profits indicates ownership as partners/a partnership) - ✔✔Receipt of a share
of business profits is prima facie evidence of a general partnership. True or False?
✔✔true
(Taxes are passed through to the individual partners (no tax is paid on the entity level). -
✔✔General partnerships do not pay federal income taxes. True or False?
✔✔false
(All partners are liable for debts of the partnership upon dissolution, and incoming
partners are liable for debts after becoming a partner.) - ✔✔The dissolution of a general
partnership discharges the liability of an outgoing partner for existing partnership debts
and obligations. True or False?
,✔✔true
(profits paid last) - ✔✔Upon dissolution, profits are paid out to partners only after
creditors and capital contributions have been satisfied. True or False?
✔✔false
(Limited partners are not liable beyond the amount of their contribution.) - ✔✔Limited
partners have unlimited personal liability for the debts and obligations of the limited
partnership. True or False?
✔✔no state government approval is required - ✔✔Which of the following is true of
creating a sole proprietorship?
-No state government approval is required.
-Federal taxation is levied upon sole proprietorship
-No licenses are required to do business within a city or state
-Special permission must be obtained to receive a sole proprietorship status.
-None of the above
✔✔the proprietor's personal income tax filing - ✔✔The earnings and losses from a sole
proprietorship are reported on ________.
-the federal income tax filing document for the business
-the business license that is renewed each year
-the proprietor's personal income tax filing
-the state income tax filing document
-Federal estate and gift taxation form
✔✔False
(LLCs are created under state law) - ✔✔Limited liability companies are created by
federal law. True or False?
✔✔true - ✔✔True or False? A member is the owner of an LLC.
✔✔true - ✔✔True or False? The income or losses of an LLC "flow through" to the
members' individual income tax returns which avoids double taxation.
✔✔False
(All members have agency authority to bind the LLC into contracts) - ✔✔Agents of an
LLC are not permitted to enter into contracts on behalf of the LLC. True or False?
✔✔true - ✔✔T or F? Generally, the liability of LLC members for debts of the LLC is
limited to the extent of their capital contribution and therefore they are not personally
liable for the LLC's debts, obligations, and liabilities beyond their contribution.
, ✔✔An LLC is regarded a separate legal entity from its members. - ✔✔Which of the
following is true of an LLC?
-An LLC is a creature of federal law.
-An LLC is regarded a separate legal entity from its members.
-An LLC cannot hold title to property.
-The owners of an LLC are called general partners or specific partners.
-All of the above.
✔✔An LLC is not taxed at the entity level. but income and losses flow through member's
individual returns. - ✔✔Which of the following is true of LLC taxation?
-An LLC is taxed as a corporation in all general cases.
-Income or losses of an LLC do not flow through to the members' individual income tax
returns.
-Members of an LLC are subject to double taxation.
-An LLC is not taxed at the entity level. but income and losses flow through member's
individual returns.
-An LLC pays both entity level and personal level taxes.
✔✔Articles of Organization - ✔✔___________________ refer to the formal documents
that must be filed at the secretary of state's office of the state of organization of an LLC
to form the LLC.
-Operating Agreements
-Certificates of interest
-Articles of Organization
-Articles of amendment
-By laws
✔✔False
(For a corporation, liability is limited to the amount a shareholder pays for its shares.) -
✔✔T or F? Shareholders have unlimited liability for the debt and obligations of a
corporation.
✔✔true - ✔✔To form a corporation, articles of incorporation must be filed with the
secretary of state of the state of incorporation. T or F?
✔✔False
(They own the corporation but cannot act on its behalf or bind the corporation.) - ✔✔T
or F? Shareholders of a corporation act as agents of the corporation
✔✔The number of shares the corporation is authorized to issue - ✔✔Which of the
following must be included in the articles of incorporation?
-The minutes of the first organizational meeting of the board of directors.
-The number of shares the corporation is authorized to issue.
-The dissolution terms of the corporation.
-The corporate seal must be used in the articles of incorporation.
SET A+
✔✔false - ✔✔In a sole proprietorship, the business is considered a separate legal entity
from the proprietor. True or False?
✔✔true
(doing business as) - ✔✔The designation of d.b.a. refers to the description for a
business that is operating under a trade name. True or False?
✔✔false
(fully and personally liable for business debts) - ✔✔A sole proprietor has limited
personal liability. True or False?
✔✔true
(not a separate entity, so all taxes are reported and paid on individual owner's return.) -
✔✔A sole proprietorship does not does not pay taxes at the business level. True or
False?
✔✔true
(Share of profits indicates ownership as partners/a partnership) - ✔✔Receipt of a share
of business profits is prima facie evidence of a general partnership. True or False?
✔✔true
(Taxes are passed through to the individual partners (no tax is paid on the entity level). -
✔✔General partnerships do not pay federal income taxes. True or False?
✔✔false
(All partners are liable for debts of the partnership upon dissolution, and incoming
partners are liable for debts after becoming a partner.) - ✔✔The dissolution of a general
partnership discharges the liability of an outgoing partner for existing partnership debts
and obligations. True or False?
,✔✔true
(profits paid last) - ✔✔Upon dissolution, profits are paid out to partners only after
creditors and capital contributions have been satisfied. True or False?
✔✔false
(Limited partners are not liable beyond the amount of their contribution.) - ✔✔Limited
partners have unlimited personal liability for the debts and obligations of the limited
partnership. True or False?
✔✔no state government approval is required - ✔✔Which of the following is true of
creating a sole proprietorship?
-No state government approval is required.
-Federal taxation is levied upon sole proprietorship
-No licenses are required to do business within a city or state
-Special permission must be obtained to receive a sole proprietorship status.
-None of the above
✔✔the proprietor's personal income tax filing - ✔✔The earnings and losses from a sole
proprietorship are reported on ________.
-the federal income tax filing document for the business
-the business license that is renewed each year
-the proprietor's personal income tax filing
-the state income tax filing document
-Federal estate and gift taxation form
✔✔False
(LLCs are created under state law) - ✔✔Limited liability companies are created by
federal law. True or False?
✔✔true - ✔✔True or False? A member is the owner of an LLC.
✔✔true - ✔✔True or False? The income or losses of an LLC "flow through" to the
members' individual income tax returns which avoids double taxation.
✔✔False
(All members have agency authority to bind the LLC into contracts) - ✔✔Agents of an
LLC are not permitted to enter into contracts on behalf of the LLC. True or False?
✔✔true - ✔✔T or F? Generally, the liability of LLC members for debts of the LLC is
limited to the extent of their capital contribution and therefore they are not personally
liable for the LLC's debts, obligations, and liabilities beyond their contribution.
, ✔✔An LLC is regarded a separate legal entity from its members. - ✔✔Which of the
following is true of an LLC?
-An LLC is a creature of federal law.
-An LLC is regarded a separate legal entity from its members.
-An LLC cannot hold title to property.
-The owners of an LLC are called general partners or specific partners.
-All of the above.
✔✔An LLC is not taxed at the entity level. but income and losses flow through member's
individual returns. - ✔✔Which of the following is true of LLC taxation?
-An LLC is taxed as a corporation in all general cases.
-Income or losses of an LLC do not flow through to the members' individual income tax
returns.
-Members of an LLC are subject to double taxation.
-An LLC is not taxed at the entity level. but income and losses flow through member's
individual returns.
-An LLC pays both entity level and personal level taxes.
✔✔Articles of Organization - ✔✔___________________ refer to the formal documents
that must be filed at the secretary of state's office of the state of organization of an LLC
to form the LLC.
-Operating Agreements
-Certificates of interest
-Articles of Organization
-Articles of amendment
-By laws
✔✔False
(For a corporation, liability is limited to the amount a shareholder pays for its shares.) -
✔✔T or F? Shareholders have unlimited liability for the debt and obligations of a
corporation.
✔✔true - ✔✔To form a corporation, articles of incorporation must be filed with the
secretary of state of the state of incorporation. T or F?
✔✔False
(They own the corporation but cannot act on its behalf or bind the corporation.) - ✔✔T
or F? Shareholders of a corporation act as agents of the corporation
✔✔The number of shares the corporation is authorized to issue - ✔✔Which of the
following must be included in the articles of incorporation?
-The minutes of the first organizational meeting of the board of directors.
-The number of shares the corporation is authorized to issue.
-The dissolution terms of the corporation.
-The corporate seal must be used in the articles of incorporation.
