Which of the following entities does not have limited liability?

Select one:

a. General partnership.

b. LLC taxed as a disregarded entity.

c. S corporation.

d. All of the above have limited liability.

Question 13

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Which of the following entities has limited liability, flow through of income, and flexibility regarding allocation of income and loss?

Select one:

a. General partnership.

b. LLC.

c. C Corporation.

d. S Corporation.

Question 14

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Which, if any, of the following statements is (are) correct?

1. Excess distributed income over reasonable compensation is treated as self-employment income, in an LLC, for an LLC manager.

2. Excess distributed income over reasonable compensation is treated as dividend income in an S corporation.

Select one:

a. 1 only.

b. 2 only.

c. Both 1 and 2.

d. Neither 1 nor 2.

Question 15

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Which, if any, of the following statements is (are) correct?

1. C corporations offer limited liability.

2. Sole proprietorships offer limited liability.

Select one:

a. 1 only.

b. 2 only.

c. Both 1 and 2.

d. Neither 1 nor 2.

Question 16

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Your client, who is wealthy and in the top marginal income tax bracket, is interested in purchasing a franchise with some of his friends. After carefully reviewing the proposal, you have determined that apart from a large up-front investment, the business will not need to retain income and income generated in future years will be paid out to the investors.

Further, your client wants to be assured that after investing so large an amount, the business would not be disrupted if one of his partners lost interest, encountered personal financial reversals or died.

What legal form of business meets the requirements of your client given these circumstances?

Select one:

a. A limited partnership.

b. A general partnership.

c. A C corporation.

d. An LLC.

A minority non-employee shareholder in an S corporation:

1. Receives compensation when the corporation declares a dividend.

2. Votes for the Board of Directors at the annual shareholders meeting.

3. Receives a K-1 annually in order to prepare a personal income tax return.

4. Reports on a personal income tax return a pro-rata share of corporate profits or losses.

Select one:

a. 1 and 3.

b. 2 and 4.

c. 1, 2, and 3.

d. 1, 2, 3, and 4.