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.
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.
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?
C. $100,000, but he can then seek indemnification from Tyler and Inez.
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
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. McDonald’s Restaurants Ltd.
B. Silver Dollar Ventures, LLP
C. Widget Specialists Company
D. Tyler, Inez, and Paulo Investments
LittleCorp, Inc., has started to create a lot of buzz in the technology industry. BigCorp has indicated some interest in purchasing LittleCorp. LittleCorp has three shareholders: Tyler, Inez, and Paulo. Tyler and Inez both want to sell to BigCorp, but Paulo doesn’t want to. Thus, Tyler and Inez hatch an ingenious plan: they will call a special meeting of LittleCorp’s shareholders. They send out a notice to all of the shareholders stating that the purpose of the special meeting is to consider expanding the number of directors from three to four, knowing that Paulo doesn’t care about that issue. When the meeting comes, Paulo doesn’t show up, and Tyler and Inez vote to sell LittleCorp to BigCorp. When Paulo finds out what happened, he sues in court to stop the sale. Who wins?
A. Paulo wins because he did not consent to the sale of LittleCorp to BigCorp.
B. Tyler and Inez win because Paulo failed to show up for a properly called special meeting of shareholders, so he must accept the consequences of that meeting.
C. Tyler and Inez win because they hold more shares, and thus more votes, than Paulo.
D. Paulo wins because Tyler and Inez took an action at a special shareholders meeting that was not listed on the notice of meeting.
A. Decide upon the long-term strategy of the company
B. Approve important corporate decisions such as whether to merge with another company
C. Manage the day-to-day operations of the company
D. Decide upon the compensation packages for the company’s top executives
A. BigCorp and LittleCorp release products that directly compete with one another.
B. BigCorp and LittleCorp both operate in the same general industry.
C. BigCorp offers Paulo a job, which means he would have to leave his job at LittleCorp.
D. LittleCorp decides to merge with a company in a different industry than both BigCorp and LittleCorp.
Little LLC, was formed under Oregon’s limited liability company statute, which provides that all Oregon LLCs must maintain sufficient cash on hand to pay any employee injury claims (Oregon’s statute doesn’t actually say that, but suppose it does for now). Despite being organized in Oregon, Little LLC does almost all of its business in neighboring Washington. Washington’s LLC statute does not require LLCs to maintain any cash reserves. One of Little LLC’s employees is injured on the job in Seattle, Washington, and sues Little LLC, claiming that it is in violation of the law by not having enough cash on hand to pay the employee’s injury claim. Little LLC defends itself by saying that it isn’t required to maintain a cash reserve because it's operating in Washington and Washington doesn’t require it. Who wins?
A. The employee wins because Little LLC is an Oregon LLC and therefore Oregon’s LLC statute applies, even when Little LLC is operating outside of Oregon.
B. Little LLC wins because, even though it is an Oregon LLC, it is doing business in Washington and therefore Washington’s LLC statute applied.
C. The employee wins because it would be unfair to allow Little LLC off the hook for the employee’s job-related injury.
D. Little LLC wins because it is against public policy to require an employer to pay for its employees’ job-related injuries.