TEST 3 REVIEW

Chapters 25 – 27, 31, 32

MULTIPLE CHOICE

Which of the following is not subject to double

taxation?

a) S corporation

b) Corporation

c) LLC

d) All of the above

MULTIPLE CHOICE

Which of the following is not a director duty?

a) deciding salary for officers

b) determine basic policy

c) deemed legally responsible for the corporation

due to negligent or willful acts that cause a loss

d) delegate tasks to officers that keep the company

running smoothly

MULTIPLE CHOICE

What document contains the basic facts of the

‘would be’ corporation?

a) articles of incorporation

b) corporate charter

c) bylaws

d) shares of stock

MULTIPLE CHOICE

A partner who invests more capital, brings in more

business, or works harder and longer than his or her

associates is entitled to

a) a larger percentage of the business

b) a larger share of the profits

c) extra pay

d) no extra compensation unless all

partners agree

MULTIPLE CHOICE

A corporation has the power

a) of perpetual succession

b) to make its own bylaws

c) to use any legal means to conduct

authorized business

d) all of these

MULTIPLE CHOICE

Shareholders do not have the right to

a) inspect corporate books of account

b) possess any corporate property

c) transfer shares

d) shareholders have the right to all of

these

MULTIPLE CHOICE

The bankruptcy law that involves liquidation of

nonexempt property is

a) Chapter 7

b) Chapter 11

c) Chapter 12

d) Chapter 13

MULTIPLE CHOICE

The last to be paid from the proceeds of liquidation

would be

a) administrative expenses

b) certain unpaid taxes

c) secured creditors

d) stockholders

MULTIPLE CHOICE

What enables shareholders to protect their

proportionate voting power and interest in past and

future profits?

a) Proxy

b) Preemptive Right

c) Minority Position

d) Cumulative Voting

MULTIPLE CHOICE

A partnership agreement does NOT need to be in

writing unless required by which item below?

a) Stare Decisis

b) Preemptive Right

c) Statute of Fraud

d) Federal Trade Commission

SHORT ANSWER

What is double taxation?•When a corporation is taxed on corporate income and corporate shareholder owners taxed on dividends

SHORT ANSWER

What is a dividend?•Distributions of corporate earnings

SHORT ANSWER

What is one advantage and one

disadvantage to corporate form?• ADV – Perpetual life, limited

liability, easy transfer of owner interest• DISADV – double taxation, cost to

create, extensive regulation

SHORT ANSWER

What is a Subchapter S

Corporation?•A tax status (not a corporate form), exempt from double taxation

SHORT ANSWER

Leonardo, Kevin, and Lonny operate a snow

removal business during the winter months.

Leonardo plows snow for their clients. Kevin clears

snow from sidewalks and also drives the company’s

salt truck. Lonny spends five hours a week keeping

the partnership’s records. Who should receive the

largest share of profits? Explain your answer.

SHORT ANSWER

Dr. Shasheen Rathi recently converted Rathi Vision

Associates to an LLP form of business. Her partners

include three other optometrists and one ophthalmologist.

Dr. Stanislaw is a new partner who has just performed a

laser vision correction procedure on Alan Wildman’s right

eye. Alan claims his cornea was scratched during the

surgery, and he is suing Rathi’s for malpractice. Can Dr.

Rathi be held liable in this malpractice suit? Explain

SHORT ANSWER

The board of directors for the GreenTree

Corporation decided to sell 1,000 new shares of

stock to generate additional capital. The stock was

sold to outside investors. Andres, an original

shareholder, protested this decision. Is Andres

acting within his rights as a shareholder? Explain

your answer.