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LLC

1) If a member of LLC executes a personal guarantee for the debt of an LLC, which of the following is true.
(A) The personal guarantee would result in personal liability of the member for any obligation of the LLC.
(B) Because of the member's apparent authority, the personal guarantee would create liability for all other member if the LLC is member-managed LLC
(C) the personal guarantee would be unenforceable because it would circumvent the limited liability of the member
(D) the member will have personal liability according to the terms of the guarantee, but would not be personally liable for any other obligation of the LLC.

2) A limited liability company with more than one member is taxed as a partnership:
(A) in all circumstances
(B) only if no more than four of six listed attribute are present in the limited liability company
(C) only if four of six listed attribute are present in the limited liability company
(D) if limited liability company has not elected to be taxed as a corporation

3) An issuer of securities subject to resale restriction must do each of the following except
(A) place a legend on the stock certificate describing the restriction
(B) require each purchaser to sign an affidavit acknowledging the resale restriction
(C) notify the transfer agent to not record a transfer that would violate the restriction
(D) include a description of the restriction in the registration statement

4) Which of the following is not a correct description of a defensive strategy to tender offer?
(A) Selling a crown jewel refers to a sale by target corporation of asset that was particularly attractive to tender offeror
(B) under a standstill agreement, shareholder holding a large number of shares of Target Corporation agrees that none of them will sell to tender offeror, even if the tender offeror raises the offer price
(C) a white knight merger with a different purchaser that is friendlier toward management than the company that made the tender offer.
(D) a greenmail payment, usually at greater than fair market value, made by the target corporation to the tender offeror for shares already owned by the tender offeror in exchange for the tender offeror dropping the tender offer.
(E) A poison is strategy built into contracts, bylaws and so forth, that can make any purchase of the corporation more expensive, such as leases that automatically expire upon the purchase and would require renegotiation likely a higher price

5) Solicitation of proxies is regulated under:
(A) Proxy Solicitation Act of 1968
(B) Securities Act of 1933
(C) Williams Act.
(D) Uniform Commercial Code
(E) Securities Exchange Act of 1934

6) Richard wants to franchise his pasty business. However he has no knowledge of what laws govern franchise. Richard comes to you for advice. What laws govern franchises of this type?
(A) Federal Agency law (B) State statutes covering franchises (C) State contract law (D) A, B, and C (E) Band C only
7) Under the 1933 Securities Act, a person responsible may be held liable for
A) a material omission or misstatement
(B) failure to file a registration statement or deliver a prospectus as required by law
(C) intentional fraud
(D) A, B, and C (E) B and C only.

8) Which of the following terms need not be disclosed under the truth-in-lending Act?
(A) Amount of payment
(B) the cash price of the product
(C) the annual % rate (APR)
(D) total finance charge
(E) the term available from competitor

9) JKL Corporation has acquired 7% of Target Corporation in a hostile takeover attempt. Target is opposed to the takeover, so target offers to purchase the 7% of its shares owned by JKL for $40 per share. The actual fair market value of that is $25 per share. JKL accepts the offer. This is an example of:
(A) A poison pill and is legal
(B) golden parachute and is legal
(C) greenmail and is legal
(D) greenmail and is illegal
(E) golden parachute and is illegal

10) In order for a party to be liable for false and deceptive advertising. It must be shown that:
(A) the advertisement is likely to mislead a reasonable consumer
(B) the plaintiff in the lawsuit was deceived by it
(C) the advertisement could possibly mislead some consumers
(D) at least some person have been deceived by it
(E) the advertisement has deceived a majority of the person who has seen it.

11) Rachel has a business that she has franchised to hundreds of franchisees over the last twenty years. In seeking additional franchisees, which if the following is true about financial disclosures to potential new franchisees.
(A) she can choose whether to include actual income statements and balance sheets of existing franchisees or use hypothetical example but she must do one or another
(B) she is not required to make any financial disclosure about franchisees, but if she chose to make disclosures, she can make them in any way she choose
(C) she must include income statement and balance sheets for each existing franchisee
(D) she must include income statement and balance sheets for each franchisee that has been operating for 3 years or more, and if none, she must use hypothetical examples.
(E) she is not require to make any financial discloser about franchisees, but if she chooses to make such disclosures, she must make certain additional disclosure with the specific required disclosure depending on whether she provides actual results of existing franchisees or hypothetical examples.

12) What action can the SEC take against a violator of the Securities Exchange Act of 1934?
(A) it may seek a court order requiring defendants to disgorge illegal profits.
(B) it may enter into consent order with defendants
(C) it may seek injunctions in federal districts court
(D) it may seek civil penalties up to three times the illegal profits from insider trading
(E) All of the above.

13) What is required in order for a merger to be conducted under the short-form merger procedure?
(A) Approval by the Security and Exchange Commission to use the short form procedure
(B) Agreement by both boards of directors to use the short form procedure
(C) An increase of less than 20% in the number of outstanding shares of the surviving corporation
(D) The sale, prior to merger by the nonsurviving corporation of all its noncash assets
(E) Ownership by the surviving parent corporation of at least 90 percent of the shares of the nonsurviving (subsidiary) corporation prior to the merger

14) If an LLC fails to follows formalities such as keeping minutes of meetings then:
(A) only the party or parties responsible for the failure will lose limited liability.
(B) all members will lose their limited liability
(C) only the manager of a manger-managed LLC will lose limited liability
(D) this failure will not result in imposing personal liability on any member,
(E) the managers of a manager-managed LLC and all member of a member-managed LLC will lose limited liability

15) Under the national pollutant discharge elimination system:
(A) old permits to discharge pollutant into water are being phased out
(B) permits to discharge pollutants into water can be brought, sold or traded.
(C) permits are granted by the EPA to discharge pollution in water
(D) no new permits are granted to discharge pollutant into water.

Solution Preview

1) If a member of LLC executes a personal guarantee for the debt of an LLC, which of the following is true.
A) The personal guarantee would result in personal liability of the member for any obligation of the LLC. (B) Because of the member's apparent authority, the personal guarantee would create liability for all other member if the LLC is member-managed LLC (C) the personal guarantee would be unenforceable because it would circumvent the limited liability of the member (D) the member will have personal liability according to the terms of the guarantee, but would not be personally liable for any other obligation of the LLC.
A member can make himself liable in his personal capacity either as an endorser or a guarantor.(D) the member will have personal liability according to the terms of the guarantee, but would not be personally liable for any other obligation of the LLC.

2) A limited liability company with more than one member is taxed as a partnership:
A)in all circumstances (B) only if no more than four of six listed attribute are present in the limited liability company(C) ) only if four of six listed attribute are present in the limited liability company(D) if limited liability company has not elected to be taxed as a corporation
If an LLC explicitly elects to be taxed as a C Corporation, then it will be taxed as such.(D) if limited liability company has not elected to be taxed as a corporation

3) An issuer of securities subject to resale restriction must do each of the following except
A) place a legend on the stock certificate describing the restriction (B) require each purchaser to sign an affidavit acknowledging the resale restriction (C) notify the transfer agent to not record a transfer that would violate the restriction (D) include a description of the restriction in the registration statement
This is not included in the list of things that the issuer should do (B) require each purchaser to sign an affidavit acknowledging the resale restriction

4) which of the following is not a correct description of a defensive strategy to tender offer?
A) Selling a crown jewel refers to a sale by target corporation of asset that was particularly attractive to tender offeror (B) under a standstill agreement , shareholder holding a large number of shares of target corporation agree that none of them will sell to tender offeror, even ...

Solution Summary

LLC tax advantages and disadvantages are discussed.

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