AICPA Business Environment and Concepts (BEC) CPA Business Environment and Concepts Exam Questions in PDF

Free AICPA CPA Business Environment and Concepts Dumps Questions (page: 8)

Eller, Fort and Owens are members of Venture Associates, LLC. Trent Corp. brought a breach of contract suit against Venture for a contract executed by Eller as an agent of the LLC. If Trent prevails, Trent will generally be able to collect the judgment from:

  1. The LLC's assets only.
  2. The personal assets of Eller, Fort and Owens jointly.
  3. Eller's personal assets only after LLC assets are exhausted.
  4. Eller's personal assets only.

Answer(s): A

Explanation:

Choice "a" is correct.
Rule: Members of an LLC are not personally liable for the LLC's obligations. Moreover, an agent is not liable on a contract the agent enters into on behalf of a disclosed principal. Here, the contract was entered into by Eller on behalf of Venture, an LLC, and Eller disclosed that he was acting only as an agent of Venture. Thus, Trent Corp. can collect from the LLC'S assets only. Choices "b", "c", and "d" are incorrect, per the above rule.



Tim, Peter, and Rick want to form a limited liability company.
What document must they file with the state?

  1. Operating Agreement.
  2. Articles of Incorporation.
  3. Bylaws.
  4. Articles of Organization.

Answer(s): D

Explanation:

Choice "d" is correct. The Articles of Organization must be filed with the secretary of state. Choice "a" is incorrect. An operating agreement is an agreement between the members containing provisions relating to management, profit sharing, transferring interests, etC. and does not need to be filed with the state.
Choices "b" and "c" are incorrect. Articles of incorporation and bylaws are documents relating to corporations, and they are not required to be filed with the state.



The articles of organization for a limited liability company must contain everything, except the following:

  1. The name of the entity that includes some indication it is a LLC.
  2. The name and address of the registered agent.
  3. Number of shares authorized and issued.
  4. If the company is to be manager managed, a statement to that effect.

Answer(s): C

Explanation:

Choice "c" is correct. Limited liability companies do not issue "shares" held by shareholders like in a corporation. Instead, members (the owners) are said to have "interests" in the LLC. Choices "a", "b", and "d" are incorrect. These are all required to be included in the articles of organization.



Unless there is an agreement to the contrary, the voting power of members in a limited liability company is determined by:

  1. Each member's salary.
  2. Each member's share of profits.
  3. When the member was admitted to the company.
  4. Each member's capital contribution.

Answer(s): D

Explanation:

Choice "d" is correct.
Rule: Absent an agreement otherwise, all members generally participate in management, and their voting strength is determined in proportion to ownership interest. This is calculated by comparing each member's capital contribution to that of the other members. Choices "a", "b", and "c" are incorrect, per the above rule.



Heather, Erika, and Shelby are members in HES LLC. Heather works 40 hours per week and Erika and Shelby work 20 hours per week. Heather contributed $30,000 to the LLC and Erika and Shelby contributed $60,000 each. Erika and Shelby have each originated 45% of the LLC's business and Heather has originated the other 10%. Absent an agreement to the contrary among the owners, who controls the management of the HES LLC?

  1. Heather, because she works the most.
  2. Erika and Shelby equally because they contributed the most.
  3. Heather, Erika, and Shelby in proportion to their ownership interests.
  4. Erika and Shelby, because they originate most of the work.

Answer(s): C

Explanation:

Choice "c" is correct.
Rule: Absent an agreement to the contrary, the members' voting strength is proportionate to their contributions.
Choices "a", "b", and "d" are incorrect, per the above rule.



Heather, Erika, and Shelby are members in HES LLC. Heather dies. Absent an agreement to the contrary, what is the result?

  1. The LLC must dissolve.
  2. The LLC ceases to exist.
  3. The LLC is dissolved unless the other members consent to continue.
  4. The LLC continues as though nothing happened.

Answer(s): C

Explanation:

Choice "c" is correct. Absent an agreement to the contrary, if a member of an LLC dies, the LLC is dissolved unless the other members consent to continue.
Choice "a" is incorrect, because the LLC does not have to dissolve upon the death of a member. Choice "b" is incorrect, because the LLC does not cease to exist immediately. Choice "d" is incorrect, because the LLC does not continue unless the members consent to continue.



Heather, Erika, and Shelby are members in HES LLC. Heather works 40 hours per week and Erika and Shelby work 20 hours per week. Heather contributed $30,000 to the LLC and Erika and Shelby contributed $60,000 each. Erika and Shelby have each originated 45% of the LLC's business and Heather has originated the other 10%. Absent an agreement to the contrary, how will the LLC's $120,000 profits be divided among the members?

  1. Option A
  2. Option B
  3. Option C
  4. Option D

Answer(s): D

Explanation:

Rule: Absent an agreement to the contrary, the LLC's profits will be divided among the members in proportion to their contributions. Here, Heather's, Erika's and Shelby's contributions were $30,000, $60,000, and $60,000, respectively. Thus, the profits will be divided in a 1:2:2 ratio (20% of $120,000 to Heather; 40% of $120,000 to Erika; and $120,000 to Shelby).
Choice "d" is correct.
Heather Erika Shelby
D. $24,000 $48,000 $48,000
Choices "a", "b", and "c" are incorrect, per the above rule.



A member of a limited liability company may generally do all of the following, except:

  1. Transfer his membership in the company without the consent of the other members.
  2. Participate in the management of the company absent an agreement to the contrary.
  3. Have limited liability.
  4. Order office supplies for the company.

Answer(s): A

Explanation:

Choice "a" is correct. The transfer of a member interest requires the consent of the other members. Members may not assign their interest without the other members' consent. Choice "b" is incorrect. Unless the members have agreed to operate as a manager managed limited liability company, all members have the power to participate in management. Choice "c" is incorrect. Members in a limited liability company all have limited personal liability. Choice "d" is incorrect. Unless otherwise agreed, members have the right to manage the every day operations of a limited liability company. This can include the ordering of office supplies.



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