TBCh20F - CHAPTER 20 Forms of Business Organizations...

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C H A P T E R 2 0 Forms of Business Organizations T RUE -F ALSE Q UESTIONS 1. Corporations must incorporate in the state where their headquarters are located. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 2. A joint venture is a perpetual partnership of two or more persons for a specific purpose. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 3. General partners of a limited partnership remain jointly and severally liable for partnership obligations. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 4. An S corporation cannot have more than one class of stock. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 5. If the owners of a limited liability entity are active in the operation of the business, they can be held directly liable for their own tortious acts. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 6. The intention of one party alone cannot create a partnership. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 7. A partnership requires a minimum amount of capital in order to be formed. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 8. A staggered term for a board of directors supports the purpose of cumulative voting. 27
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28 MANAGERS AND THE LEGAL ENVIRONMENT ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 9. A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 10. C corporations are taxed as a pass-through entity. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 11. A shareholder’s right of appraisal only applies to transactions that were initially subject to shareholder approval. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 12. Partners owe each other a duty of care but not a duty of loyalty. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 13. States may not impose a higher fiduciary duty upon partners than that set forth in the Revised Uniform Partnership Act. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 14. The liabilities and obligations of the partners do not end at dissolution. ANSWER: True SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 15. An outside director is a director who lives outside the state of incorporation. ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 16. Cumulative voting allows a greater control by the management interests of a corporation.
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CHAPTER 20 FORMS OF BUSINESS ORGANIZATIONS 29 ANSWER: False SKILL LEVEL: AACSB Analytic OBJECTIVE: AICPA Legal 17. During the winding up of a partnership, the partners’ fiduciary duties to each other are suspended. ANSWER:
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TBCh20F - CHAPTER 20 Forms of Business Organizations...

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