A. Be paid by the borrower for any expenses it incurs while acting in its capacity as a surety.

B. Exercise any rights that the lender might have had against the original borrower in the event that the surety is made to pay the lender.

C. Recover from any co-sureties in the event that one surety pays more than its fair share of the debt.

D. Avoid liability on the debt if the lender agrees to release some pledged collateral without the surety’s consent.

12

A. A lien forces the debtor to turn over its own property, whereas a garnishment forces a third-party to turn over the debtor’s property it’s holding.

B. A lien forces a third-party to turn over the debtor’s property it’s holding, whereas a garnishment forces the debtor to turn over its own property.

C. A lien forces a third-party to turn over its own property, whereas a garnishment forces a debtor to turn over a third-party’s property it’s holding.

D. A lien forces the debtor to turn over a third-party’s property it’s holding, whereas a garnishment forces a third-party to turn over its own property.

18

A. It can be traded on an open market.

B. It provides a guaranteed rate of return for investors.

C. It is a form of security.

D. It gives the debt holder a vote on company matters.

20

A. File a civil lawsuit

B. File a criminal lawsuit

C. Repossess the collateral

D. Obtain a court order for garnishment

23

A. The one whose security interest attached first.

B. The one whose security interested was perfected first.

C. The one who advanced the loan proceeds first.

D. The one who loaned the most funds.

15

A. Counseling

B. Filing a petition

C. Convening a meeting of the creditors

D. Marshaling all of the debtor’s assets

22

A. BigCorp’s creditors will sue the company for making a fraudulent transfer.

B. BigCorp will be forced to pay the fair market value of the patent to the estate.

C. The asset will be returned to the estate because it was a preference payment.

D. The Trustee will sue the company to void the transfer of the patent and have it returned to the estate.

15

A. New collection actions against the debtor to stop, while existing court cases may continue.

B. Collection actions against the debtor for debts in excess of $10,000 to cease.

C. Collection actions against the debtor for unsecured debts to cease.

D. All collection actions against the debtor to stop.

16

A. The plan is feasible for the debtor.

B. The plan is proposed in good faith.

C. The plan will pay creditors at least 50% of the total amount owed.

D. The creditors get at least as much as they would in a Chapter 7 liquidation.

13

Tyler’s hot dog business is wildly successful and he decides to cash out and sell the business to his friend Janet. Janet doesn’t know much about business law, though, so Tyler tries to tell her about his sole proprietorship. Which of the following is not a benefit of sole proprietorships that Tyler should tell Janet?

A. Control of the business is simple because only one person makes all the decisions.

B. No approval from anyone else is necessary to make changes to the business’s operations.

C. Maintaining a sole proprietorship is inexpensive.

D. The income tax rate for the business is much lower than the income tax rate for individuals.

15

In addition to their work at BigCorp, Inez and Paulo have a hobby of “flipping” homes, where they purchase homes in disrepair, fix them up, and sell them for a profit. Inez and Paulo form a general partnership to flip houses for a profit. One day while driving around, Inez sees a house that was recently listed for sale that would be a perfect house to flip. She immediately buys it herself and doesn’t tell Paulo. She fixes it up and sells it for a profit, which she keeps. Has she violated any duties to Paulo?

A. Yes, she has usurped partnership business and violated the duty of loyalty.

B. Yes, she has engaged in self-dealing and violated the duty of loyalty.

C. Yes, she has failed to obey their partnership agreement and violated the duty of obedience.

D. No, she has not breached any duty.

18

California permits engineers to organize their businesses as limited liability partnerships. Assume Tyler, Inez, and Paulo are all licensed engineers and form their business as an LLP. They each contribute $10,000 in capital to the partnership. A former employee sues the business and wins a judgment in the amount of $100,000. If the former employee seeks to recover the amount of the judgment from Paulo, how much will Paulo be required to pay out of pocket?

A. $0

B. $10,000

C. $100,000, but he can then seek indemnification from Tyler and Inez.

D. $33,333.33

20

Tyler and Paulo decide to form BigCorp as a corporation under the business corporation statute of South Carolina. Within the state of South Carolina, BigCorp would be known as a ___________ corporation, but in all other states, BigCorp would be a(n) _____________ corporation.

A. Domestic; alien

B. Domestic; foreign

C. Foreign; domestic

D. Foreign; alien

27

Inez is the sole shareholder in TIP Technologies, Inc., a C-corp. TIP Tech has a banner year and makes $1,000,000 in profit. The company decides to re-invest most of this profit into the continued growth of the business, but it pays Inez a distribution of $100,000. How much total tax is paid to the federal government? (Assume a corporate tax rate of 35% and an individual tax rate of 20%.)

A. $550,000

B. $370,000

C. $350,000

D. $200,000

19
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