1. Limited liability companies and S-Corporations both enjoy pass-through tax treatment. Which of the following describes how each business entity obtains that status?

Each must have its board of directors authorize an amendment to its articles of incorporation.

Each must submit the appropriate form to the IRS before the end of its fiscal year.

The operating agreement of limited liability companies must eliminate certain corporate characteristics and the directors or officers of the S-Corp must ensure that Form 2553 is timely filed with the IRS.

Pass-through treatment is designated automatically upon the filing of their business charter.

1. Which of the following is a true statement about how a business entity governs it s affairs?

The shareholders of a corporation do not have the power to eliminate its board of directors.

Only members of a limited liability company can be responsible for its management.

In a written shareholders agreement, authority to exercise the corporate powers can be transferred to one shareholder.

Only general partners can elect the board of directors of the partnership.

Bear-Den, LP owns and operates a wellness emporium that provides nutrition and mental health wellness services to college students. A certificate of limited partnership was filed and accepted. Its partnership agreement gives a forty percent (40%) interest each to partner Smok E. Bear and partner Gungh A. Den. The partnership agreement does not include either the name or interest of a limited partner, but its records show that Dorothy Toto Gale made a capital contribution within two weeks after the partnership was formed. Bear-Den has first-year profits of $1,000,000 from its $4,500,000 of earnings. It makes distributions in the following manner:

$400,000 to Partner Smok E. Bear

$400,000 to Partner Gungh A. Den

$200,000 to Dorothy Gale

Which of the following best expresses prima facie evidence that Bear-Den is a valid limited partnership?

. Bear-Den, LP owns and operates a wellness emporium that provides nutrition and mental health wellness services to college students. A certificate of limited partnership was filed and accepted. Its partnership agreement gives a forty percent (40%) interest each to partner Smok E. Bear and partner Gungh A. Den. The partnership agreement does not include either the name or interest of a limited partner, but its records show that Dorothy Toto Gale made a capital contribution within two weeks after the partnership was formed. Bear-Den has first-year profits of $1,000,000 from its $4,500,000 of earnings. It makes distributions in the following manner:

$400,000 to Partner Smok E. Bear

$400,000 to Partner Gungh A. Den

$200,000 to Dorothy Gale

Which of the following best expresses prima facie evidence that Bear-Den is a valid limited partnership?

The partnership agreement that lists the name of each of the general partners.

The issuance of the certificate of limited partnership by the Secretary of State.

All of the actions taken by the general partners indicate their intent to function as a limited partnership.

The receipt of a share of the profits by Dorothy Gale.

1. L-E-B-22, Inc. has three (3) owners. Each shareholder has an equal equity interest in the company. Shareholder B does not want to either manage the business or actively participate in its day-to-day business operations. After the initial meeting of the shareholders, it is agreed that Shareholder L will serve as President and Shareholder E will serve as Vice President in charge of operations and corporate Treasurer. Ten months after its establishment, the shareholders reach an agreement that Shareholder L will assume the authority to exercise the corporate powers and manage the business and affairs of L-E-B-22.

Using the facts above, have the LEB22, Inc. shareholders exceeded their powers?

1. L-E-B-22, Inc. has three (3) owners. Each shareholder has an equal equity interest in the company. Shareholder B does not want to either manage the business or actively participate in its day-to-day business operations. After the initial meeting of the shareholders, it is agreed that Shareholder L will serve as President and Shareholder E will serve as Vice President in charge of operations and corporate Treasurer. Ten months after its establishment, the shareholders reach an agreement that Shareholder L will assume the authority to exercise the corporate powers and manage the business and affairs of L-E-B-22.

Using the facts above, have the LEB22, Inc. shareholders exceeded their powers?

Yes, every corporation by law must have a board of directors.

No, as long as the action was the unanimous vote of the shareholders.

No, if the agreement is in writing and it is referenced on the certificate of outstanding shares of the corporation.

Yes, because shareholders do not have the authority to eliminate its board of directors.