Fact Pattern 21-2 Alice and Her General Partner, Greg, Own Several Businesses. Alice

question 24

Multiple Choice

Fact Pattern 21-2
Alice and her general partner, Greg, own several businesses. Alice is very interested in salt water aquariums and decides that a good venture for the partnership would be the development of a business to raise tropical fish. She plans to issue stock to start the fish business with the idea that she and Greg will purchase a majority of the stock. She has a friend, Tony, a plastic surgeon with a good practice, who has expressed interest in the venture because he believes that the presence of fish in waiting rooms reduces anxiety and encourages patients to spend more money. Alice does not want to go to the expense and trouble of a formal registration under the 1933 Act and seeks advice on how to avoid that process should the partnership issue securities.
-Refer to fact pattern 21-2. As far as Greg is concerned,which of the following is true?

• A) Selling to Greg would not trigger registration requirements because his status as a general partner results in him being considered an accredited investor.
• B) Selling to Greg would not trigger registration requirements so long as he purchases at least 10% of outstanding stock.
• C) Selling stock to Greg would not trigger registration requirements because he is a tombstone investor.
• D) Selling stock to Greg would trigger registration requirements.

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Definitions:

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing maintenance costs or causing wear and tear on its production assets.

Fixed Assets

Long-term tangible assets held for business use and not expected to be converted to cash in the upcoming fiscal year, such as buildings, machinery, and equipment.

Full Capacity

The maximum level of output that a company can sustain over a long period without increasing its production resources or incurring excessive stress on its production processes.

Region of Residence

Refers to the specific geographic area where an individual currently lives or resides.