Question

1. Though they may elect a different structure, for tax purposes, LLCs are typically treated as

A) nonprofit organizations.                                         B) hybrid entities.

C) corporate tax entities.                                           D) pass-through entities.

2. Han wants to start a personal training business. He should choose a sole proprietorship entity if he seeks

A) limited liability.

B) perpetual existence for the new company.

C) the ability to raise capital by selling equity in the business.

D) the ability to avoid management conflict.

3. Because it is not a taxable entity, an LLP

A) needs to file only a federal tax return.                   B) files an information tax return.

C) does not need to file a tax return.                           D) needs to file only a state and local tax return.

4. With regard to taxation, LLPs are treated as

A) pass-through entities.                                             B) hybrid entities.

C) corporations.                                                          D) nonprofit organizations.

5. When an LLP is formed, who files the initial paperwork?

A) The principal in a sole proprietorship already in operation.

B) An individual representing two or more persons desiring to start a new business.

C) A limited partnership already in operation.

D) A general partnership already in operation.

6. Section 16 of the 1934 Act defines an insider as an officer, director, or shareholder who owns ________ or more of the company's total stock.

A) 10 percent                                                              B) 15 percent

C) 20 percent                                                               D) 5 percent

7. Currently, LLPs are often used to protect family businesses as they provide a way to resolve

A) issues of family fiduciary duties and rights to represent and bind the business.

B) issues regarding transition from one generation to another.

C) capitalization disputes.

D) management disputes.

Answer 1

1. Though they may elect a different structure , for tax purposes ,LLCs are typically treated as pass-through entities. Hence,option(D) is correct.

2. Han wants to start a personal training business . He should choose a sole proprietorship entity if he seeks the ability to avoid management conflict. , the sole proprietorship has a single decision maker. Hence,option(D) is correct.

3. Because it is not a taxable entity ,an LLP files an information tax return that informs federal and state tax authorities of the profits and losses of the LLP. Hence, option(B) is correct.

4. With regard to taxation, LLPs are treated as pass-through entities. Hence,option(A) is correct.

5. When an LLP is formed ,a general partnership already in operation files an the initial paperwork . Hence,option(D) is correct.

6. Section 16 of the 1934 act defines an insider as an officer , director or shareholder who owns 10 percent or more of the company's total stock. Hence,option(A) is correct.

7. Currently, LLPs are often used to protect family businesses as they provide a way to resolve issues regarding transition from one generation to another. Hence,option(B) is correct.