chapter 38

Question 1

Limited liability company (LLC)

Answer 1

A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership
- governed by state statutes

Question 2

Members

Answer 2

The term used to designate a person who has an ownership interest in a limited liability company

• the owners of an LLC
• shielded from personal liability

Question 3

Liability under alter ego theory

Answer 3

When a corporation is deemed to be merely an alter ego of the shareholder-owner, a court will piece the corporate veil and hold the shareholder/owner personally liable

Question 4

articles of organization

Answer 4

The document filed with a designated state official by which a limited liability company is formed

• name of business
• principal address
• members names, name and address of agent
• some states permit one member LLCs, most require two members

Question 5

Advantages of the LLC

Answer 5

Limited liability
Flexibility in taxation
Management and foreign investors

Question 6

Disadvantage of the LLC

Answer 6

state LLC statutes are not uniform

Question 7

Management of an LLC

Answer 7

Membermanaged
or
Manager managed

Question 8

Operating agreement

Answer 8

In a LLC, an agreement in which the members set forth the details of how the business will be managed and operated

Question 9

Operating agreements contain

Answer 9

1. How management will be chosen or removed
   2 how profits will be divided
2. How membership interest may be transferred
3. Whether the dissociation of a member, will trigger the dissolution of the LLC
4. Whether formal members meetings will be held
5. How voting rights will be apportioned

Question 10

If agreement does not cover a topic

Answer 10

State statutes fill in the gaps

• if state statute doesn’t say courts will apply partnership law

Question 11

events that trigger a dissociation

Answer 11

voluntary withdrawal
Expulsion by other members or court order
Incompetence
Death (but usually other members can carry on)

Question 12

Wrong dissociation

Answer 12

If dissociation violates the operating agreement they can be held liable for damages

Question 13

winding up

Answer 13

Collecting, liquidating and distributing the LLC’s assets

- any members who did not dissociate may participate

Question 14

Joint venture

Answer 14

A joint undertaking of a specific commercial enterprise by an association of persons. A joint venture is normally not a legal entity and is treated like a partnership for federal income tax purposes

• can be held personally liable
• have less authority than a partnership

Question 15

syndicate

Answer 15

An investment group of persons or firms brought together for the purpose of financing a project that they would not or could not undertake independently

Question 16

Joint stock company

Answer 16

A hybrid form of business organization that combines characteristics of a corporation and a partnership.
Usually it is regarded as a partnership for tax and other legally related purposes

Question 17

joint stock companies characteristics of a corporation

Answer 17

1. It’s ownership is represented by transferable shares of stock
2. It is managed by directors and officers of the company
3. It can have a perpetual existence

Question 18

Business trust

Answer 18

A voluntary form of business organization in which investors transfer cash or property to trustees in exchange for trust certificates that represent their investment shares. Management of the business and trust property is handled by the trustees for the use and benefit of the investors. The certificate holders have limited liability and share the trusts profits

Question 19

cooperative

Answer 19

An association that is organized to provide an economic service to its members. An incorporated cooperative is a nonprofit corporation. It will make distributions of dividends, or profits, to its owners on the basis of their transactions with the cooperative rather than on the basis of the amount of capital they contributed.

Question 20

Requirements for all business forms

Answer 20

1. Business name registrstion
2. Occupational lisensing
3. State tax registration
4. Health and environmental permits
5. Zoning and building codes
6. Import/export regulations

Question 21

Protecting intellectual property

Answer 21

Trademarks

Trade secrets

Question 22

Financial capital

Answer 22

Loans
Venture capital
Crowdfunding

Question 23

Venture capital

Answer 23

A person or entity that seeks out promising entrepreneurial ventures and funds them in exchange for equity stakes

Question 24

Business plan

Answer 24

A document describing a company, its products, and its anticipated future performance. Creating a business plan is normally the first step in obtaining loans or venture capital funds for a new business enterprise

Question 25

crowdfunding

Answer 25

A cooperative activity in which people network and pool funds and other resources via the interest to assist a cause (such as disaster relief) or invest in a venture (business)