Question 1

The manager does not owe a duty of loyalty to the limited liability company as he or she is not a member of the LLC.

Accepted Answer

A) True 
 B)False

Question 2

The existence of a Limited liability company (LLC) begins when the articles of organization are filed.

Accepted Answer

A) True 
 B)False

Question 3

Articles of organization are documents that are an evidence of a member's ownership interest in a limited liability company.

Accepted Answer

A) True 
 B)False

Question 4

A member's ownership interest in an LLC is called a ________.

Accepted Answer

A)  certificate of interest 
B)  distributional interest 
C)  collateral interest 
D)  creditor's interest 
A)  certificate of interest 
B)  distributional interest 
C)  collateral interest 
D)  creditor's interest

Question 5

Gerard and Tony organize an LLC by investing $55,000 and $45,000 respectively. The operating agreement states that profits are to be shared in the ratio of 55:45 between Gerard and Tony and makes no mention of sharing losses. The LLC incurs a loss of $100,000 in its first year. How is this loss shared?

Accepted Answer

A)  Both Gerard and Tony have to pay $50,000 each. 
B)  Gerard pays $55,000, while Tony pays $45,000. 
C)  Gerard pays $45,000, while Tony pays $55,000. 
D)  Gerard and Tony are not liable for the losses of the LLC. 
A)  Both Gerard and Tony have to pay $50,000 each. 
B)  Gerard pays $55,000, while Tony pays $45,000. 
C)  Gerard pays $45,000, while Tony pays $55,000. 
D)  Gerard and Tony are not liable for the losses of the LLC.

Question 6

Partners of LLPs are personally liable for the LLPs' debts, obligations, and liabilities.

Accepted Answer

A) True 
 B)False

Question 7

Mary, Harold, Harvey, and William form an LLC by contributing $20,000, $50,000, $55,000, and $150,000, respectively. The LLC is designated to be member-managed. When a decision is put to vote, Mary, Harvey, and Harold vote "yes," whereas William votes "no." Which of the following is true in this context?

Accepted Answer

A)  William's decision prevails as he has invested the maximum capital. 
B)  No conclusion can be derived as the vote is not unanimous. 
C)  Mary, Harvey, and Harold's decision prevails due to simple majority. 
D)  The decision is put to vote among the employees of the company. 
A)  William's decision prevails as he has invested the maximum capital. 
B)  No conclusion can be derived as the vote is not unanimous. 
C)  Mary, Harvey, and Harold's decision prevails due to simple majority. 
D)  The decision is put to vote among the employees of the company.

Exam 39: Limited Liability Companies and Limited Liability Partnerships

The manager does not owe a duty of loyalty to the limited liability company as he or she is not a member of the LLC.

The existence of a Limited liability company (LLC) begins when the articles of organization are filed.

Articles of organization are documents that are an evidence of a member's ownership interest in a limited liability company.

A member's ownership interest in an LLC is called a ________.

Partners of LLPs are personally liable for the LLPs' debts, obligations, and liabilities.

Legal Heritage and the Digital Age

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Intentional Torts and Negligence

Product and Strict Liability

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Nature of Traditional and E-Contracts

Agreement

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Genuineness of Assent and Undue Influence

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Third-Party Rights and Discharge

Remedies for Breach of Traditional and E-Contracts

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Formation of Sales and Lease Contracts

Title to Goods and Risk of Loss

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Holder in Due Course and Transferability

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