CLA/CP Exam Business Organization Types 3

Question 1

Which entity type requires an S corporation election to be made by filing Form 2553 with the IRS?

Accepted Answer

S corporation

Answer

A corporation must affirmatively elect S corporation status by filing IRS Form 2553, which must be signed by all shareholders.

Question 2

How many shareholders may an S corporation have?

Accepted Answer

No more than 100

Answer

Under current IRS rules, an S corporation may have no more than 100 shareholders, and all must be eligible (U.S. citizens or resident aliens, not corporations or partnerships).

Question 3

A corporation incorporated in Delaware but operating primarily in California is considered a ________ in California.

Accepted Answer

Foreign corporation

Answer

A corporation is 'domestic' in its state of incorporation and 'foreign' in every other state where it transacts business.

Question 4

Which of the following is required to form a corporation in most states?

Accepted Answer

Filing articles of incorporation with the state

Answer

A corporation is formed by filing articles of incorporation (also called a certificate of incorporation) with the appropriate state authority, typically the Secretary of State.

Question 5

In a limited liability partnership (LLP), a partner is generally NOT liable for:

Accepted Answer

Partnership debts arising from another partner's malpractice

Answer

LLPs protect partners from vicarious liability for the negligent acts or misconduct of other partners, though each partner remains personally liable for their own wrongful conduct.

CLA/CP Exam Practice Test

CLA/CP Exam Practice Test

CLA/CP Exam Business Organization Types 3