1. Under the law of agency apparent authority arises when:

a. A third party reasonably believes the agent acting has authority to act on behalf of a principal and that belief is traceable to the principal's manifestations.b. The agent reasonably believes, in accordance with the principal's manifestations to the agent, that the principal wishes the agent so to act.

c. A third party is justifiably induced to make a detrimental change in position because the transaction is believed to be on a person's account and either (ii) the person intentionally or carelessly caused such belief, or (ii) had notice of such a belief and that it might induce others to change their positions and did not take reasonable steps to notify them of the facts.

d. When fairness dictates based on the facts in order to prevent harm to innocent third parties.

2. What of the following characteristics IS NOT a requirement to qualify to be taxed under Subchapter S of the Internal Revenue Code?

a. Entity must be a "domestic" entity (e.g., formed in a U.S. state or district).

b. Must have 100 or fewer owners.

c. None of its owners are non-resident aliens.

d. It must have revenues of less than $100 million annually.

e. It only has one class of ownership interests outstanding.

3. Atlas, Beemer, and Chen are starting a bakery business. They will each contribute $10,000 to start the business. Atlas will invest through an LLC in which she is the sole owner. Beemer and Chen will invest directly. Chen will be employed by the business and oversee the day-to-day operations, while Atlas and

Beemer will be passive investors. Atlas, Beemer, and Chen have the following priorities (in order of importance): (1) protect their personal assets against liabilities from the business, (2) attract outside investment capital, and (3) minimize federal income taxes. Which of the choices below is the BEST option for them to achieve these goals:

a. Limited Partnership taxed under Subchapter K

b. Corporation taxed under Subchapter S

c. Corporation taxed under Subchapter C

d. LLC taxed under Subchapter K

e. LLC taxed as a disregarded entity

4. XYZ's Partnership's partnership agreement has no provisions governing the transfer of interests in the partnership. Milo transfers his partnership interest in XYZ Partnership to Kim and, following the transfer, the remaining partners in XYZ consent to Kim's admission to the partnership, and Kim signs the partnership agreement. Thereafter, XYZ has a partnership vote to approve the sale of substantially all of its assets. Would Kim be entitled to participate in that vote?

a. No. As a transferee, Kim is only entitled to receive the a "transferable interest," or the right to receive

the transferring partner's share of profits and losses of the partnership and to receive distributions.

b. No. As transferee, Kim may only vote on matters that uniquely and adversely affect the transferable

interest that he received from Milo.

c. Yes. Because the other partners consented to Kim's admission to the partnership, and Kim signed the

partnership agreement

d. Yes. Because the sale of all or substantially all of the partnership's assets is a matter that requires the

vote of all holders of the partnership interests.

e. Yes. Because there are no restrictions on transfers of a partnership interest.