Question 1

Which of the following best describes an entrepreneur?

Accepted Answer

A)  a person who forms and operates a business 
B)  a person who invests in an existing business 
C)  a person who lends capital to a new business 
D)  a person who operates a state owned enterprise 
A)  a person who forms and operates a business 
B)  a person who invests in an existing business 
C)  a person who lends capital to a new business 
D)  a person who operates a state owned enterprise A

Question 2

A ________ is the obligation partners owe to use the same level of caution and skill that a reasonable person in the same position would use in the same circumstances.

Accepted Answer

A)  call for action 
B)  duty of care 
C)  duty to inform 
D)  duty of obedience 
A)  call for action 
B)  duty of care 
C)  duty to inform 
D)  duty of obedience B

Question 3

How are the assets of a partnership concern distributed upon its dissolution and winding up?

Accepted Answer

The distribution of assets upon the dissolution and winding up of general and limited partnerships is made pursuant to the following rules.
1.Distribution of assets of a general partnership.After a general partnership's assets have been liquidated and reduced to cash,the proceeds are distributed to satisfy claims against the partnership.The ULPA provides the following order of distribution of partnership assets upon the winding up of a general partnership: (1)creditors (except partners who are creditors),(2)creditor-partners,(3)partner's capital contributions,and (4)the remainder of the proceeds.
2.Distribution of assets of a limited partnership.After the assets of a limited partnership have been liquidated,the proceeds must be distributed.The RULPA provides the following order of distribution of partnership assets upon the winding up of a limited partnership: (1)creditors of the limited partnership,including partners who are creditors,(2)partner's capital contributions,and (3)the remainder of the proceeds.
The partners can agree to change the priority of distributions among themselves.After the proceeds are distributed,the partnership automatically terminates.Termination ends the legal existence of the partnership.
If the partnership cannot satisfy its creditors' claims,the general partners of a general partnership and the general partners of a limited partnership are personally liable for the partnership's debts and obligations.

Question 4

Symmetry,Inc.is a general partnership with five partners.On July 1,James is admitted as a new general partner by investing a $200,000 capital contribution.As of July 1,Symmetry,Inc.owes $600,000 of preexisting debt.After James becomes a partner,the general partnership borrows $2 million of new debt.If the general partnership goes bankrupt,then James is ________.

Accepted Answer

A)  personally liable for the preexisting debt of $600,000 
B)  personally liable for the unpaid debt of $2 million 
C)  not required to pay out his capital contribution toward the preexisting debt 
D)  not liable for any debt whether preexisting or borrowed after he joins the partnership 
A)  personally liable for the preexisting debt of $600,000 
B)  personally liable for the unpaid debt of $2 million 
C)  not required to pay out his capital contribution toward the preexisting debt 
D)  not liable for any debt whether preexisting or borrowed after he joins the partnership

Question 5

The ________ requires general partners to adhere to the provisions of the partnership agreement and the decisions of the partnership.

Accepted Answer

A)  duty to inform 
B)  duty of loyalty 
C)  duty of care 
D)  duty of obedience 
A)  duty to inform 
B)  duty of loyalty 
C)  duty of care 
D)  duty of obedience

Question 6

If a partnership agreement provides for the sharing of losses but is silent as to how profits are to be shared,profits are shared in the same proportion as losses.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is an advantage to operating a business as a sole proprietorship?

Accepted Answer

A)  right to receive all of the business's profits 
B)  unlimited access to the capital market 
C)  limited liability 
D)  exemption from tax 
A)  right to receive all of the business's profits 
B)  unlimited access to the capital market 
C)  limited liability 
D)  exemption from tax

Question 8

How long should a general partnership have existed for it to be in writing under the Statute of Frauds?

Accepted Answer

A)  six months 
B)  180 days 
C)  10 weeks 
D)  one year 
A)  six months 
B)  180 days 
C)  10 weeks 
D)  one year

Question 9

A general partner who breaches the duty of loyalty must disgorge any profits made from the breach to the partnership.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following circumstances result in a defective formation?

Accepted Answer

A)  when a certificate of limited partnership is not properly filed 
B)  when a certificate of amendment is not executed or signed 
C)  when the liability of partners extends to debts that cannot be satisfied with the existing capital of the limited partnership 
D)  when a creditor fails to enforce the personal guarantee and recover payment from the limited partner who personally guaranteed the repayment of the loan 
A)  when a certificate of limited partnership is not properly filed 
B)  when a certificate of amendment is not executed or signed 
C)  when the liability of partners extends to debts that cannot be satisfied with the existing capital of the limited partnership 
D)  when a creditor fails to enforce the personal guarantee and recover payment from the limited partner who personally guaranteed the repayment of the loan

Question 11

When a new partner is admitted to a preexisting partnership,the new partner has ________.

Accepted Answer

A)  unlimited liability for obligations of the partnership, both for those arising before he/she joined the partnership, and those arising after joining 
B)  liability to the extent of his/her investment for obligations that arose before joining the partnership, and unlimited liability for those arising afterwards 
C)  no liability for obligations arising from before he/she joined the partnership, and limited liability for those arising afterwards 
D)  no liability for obligations arising from before he/she joined the partnership, and unlimited liability for those arising afterwards 
A)  unlimited liability for obligations of the partnership, both for those arising before he/she joined the partnership, and those arising after joining 
B)  liability to the extent of his/her investment for obligations that arose before joining the partnership, and unlimited liability for those arising afterwards 
C)  no liability for obligations arising from before he/she joined the partnership, and limited liability for those arising afterwards 
D)  no liability for obligations arising from before he/she joined the partnership, and unlimited liability for those arising afterwards

Question 12

The right to share in the profits of the partnership is considered to be the right to share in the earnings from the investment of capital.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true of tort liability of a general partnership?

Accepted Answer

A)  Only the partner who committed the tort is liable. 
B)  Partners who have not committed the tort but had to pay liability cannot indemnify from the partner that committed the tort. 
C)  A partner can be sued even if he or she did not participate in the commission of the tort. 
D)  If one of the partners in the partnership is released, the other partners are discharged of liability. 
A)  Only the partner who committed the tort is liable. 
B)  Partners who have not committed the tort but had to pay liability cannot indemnify from the partner that committed the tort. 
C)  A partner can be sued even if he or she did not participate in the commission of the tort. 
D)  If one of the partners in the partnership is released, the other partners are discharged of liability.

Question 14

Which of the following statements is true about the Uniform Partnership Act?

Accepted Answer

A)  A partnership agreement is generally enforceable, except in situations where its terms differ from the provisions of the act. 
B)  The act can be thought of as a "gap-filling" statute that applies when a partnership has no partnership agreement provision addressing a particular issue. 
C)  The act requires that partnership agreements be in writing in order to be enforceable. 
D)  The act prohibits individuals from varying its terms in partnership agreements. 
A)  A partnership agreement is generally enforceable, except in situations where its terms differ from the provisions of the act. 
B)  The act can be thought of as a "gap-filling" statute that applies when a partnership has no partnership agreement provision addressing a particular issue. 
C)  The act requires that partnership agreements be in writing in order to be enforceable. 
D)  The act prohibits individuals from varying its terms in partnership agreements.

Question 15

The income and losses of partnership flow onto and have to be reported on the individual partners' personal income tax returns.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a right to which every general partner is entitled?

Accepted Answer

A)  right to remuneration 
B)  right to free and open speech 
C)  right to return of capital 
D)  right to legal action 
A)  right to remuneration 
B)  right to free and open speech 
C)  right to return of capital 
D)  right to legal action

Question 17

Why are general partners liable for the debts and obligations of the partnership?

Accepted Answer

While acting on partnership business,a p

Question 18

The sole proprietor has ________ liability.

Accepted Answer

A)  zero personal 
B)  limited organizational 
C)  complete organizational 
D)  unlimited personal 
A)  zero personal 
B)  limited organizational 
C)  complete organizational 
D)  unlimited personal

Question 19

Jonathan Lopez wants to be his own boss and ventures into retailing fruit in the neighborhood after borrowing some money from his mother.While obtaining a license to carry out business in his city,Jonathan mentions the money he borrowed but forgets to specify what type of business undertaking his store will be.Under which of the following major forms of business is Jonathan's store listed by default?

Accepted Answer

A)  a general partnership 
B)  a sole proprietorship 
C)  a limited partnership 
D)  a limited liability corporation 
A)  a general partnership 
B)  a sole proprietorship 
C)  a limited partnership 
D)  a limited liability corporation

Question 20

How is a sole proprietorship created? Analyze the personal liability of a sole proprietor with an example.

Accepted Answer

Creating a sole proprietorship is easy.T

Exam 26: Small Business, Entrepreneurship, and Partnerships

Which of the following best describes an entrepreneur?

A ________ is the obligation partners owe to use the same level of caution and skill that a reasonable person in the same position would use in the same circumstances.

How are the assets of a partnership concern distributed upon its dissolution and winding up?

The ________ requires general partners to adhere to the provisions of the partnership agreement and the decisions of the partnership.

If a partnership agreement provides for the sharing of losses but is silent as to how profits are to be shared,profits are shared in the same proportion as losses.

Which of the following is an advantage to operating a business as a sole proprietorship?

How long should a general partnership have existed for it to be in writing under the Statute of Frauds?

A general partner who breaches the duty of loyalty must disgorge any profits made from the breach to the partnership.

Which of the following circumstances result in a defective formation?

When a new partner is admitted to a preexisting partnership,the new partner has ________.

The right to share in the profits of the partnership is considered to be the right to share in the earnings from the investment of capital.

Which of the following is true of tort liability of a general partnership?

Which of the following statements is true about the Uniform Partnership Act?

The income and losses of partnership flow onto and have to be reported on the individual partners' personal income tax returns.

Which of the following is a right to which every general partner is entitled?

Why are general partners liable for the debts and obligations of the partnership?

The sole proprietor has ________ liability.

How is a sole proprietorship created? Analyze the personal liability of a sole proprietor with an example.

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Holder in Due Course and Liability of Parties

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