Exam 26: Sole Proprietorships and Partnerships

Mike, James and Mary, advertizing consultants, enter into a partnership called "Sensational Adverts". About a year a year after the partnership is established, Mike and Mary have an argument and Mike tells the other partners that he will soon be leaving the partnership. A week later, "Sensational Adverts" is invited to submit a bid to produce an advert for a local beer company. Mike, who is the member of the partnership in charge of beer adverts, sees this as an opportunity to start his own business. Mike resigns from "Sensational Adverts" , starts his own company, and then submits a bid. Mike's bid is accepted. There is nothing wrong with Mike's conduct.

Fred is a partner in a land development partnership. He has learned independently of an opportunity to pursue a land development project with Nelly. Nelly refuses to be involved in business with Fred if he associates his partnership in the project. Nellie will do business with Fred only if he is independent of his partners. Fred will have no liability to his partners if:

Why is it practical to think of a partnership as having its own separate personality rather than just the collective rights and duties of all the partners?

Joan and Ann started a small pie shop located just inside the side entry of The Diamond Restaurant. All the working capital and equipment was supplied by Joan, but they both worked at the business full time for five months. Neither one took any wages and when they finally liquidated Joan claimed Ann ought to pay half of the remaining indebtedness. Ann, after consulting with her lawyer, claims she won't pay any of the business debts because

Explain how a partnership can be formed by implication?

Partners have a fiduciary duty one to another. This might take the form of

A partnership is treated as a separate entity as far as

In 1890, the British Parliament passed the Partnership Act. This Act

You do not trust your partners and are concerned about liabilities you may incur if you continue to associate with them in business. To ensure that you are safe from any future liability toward third parties that did business with the partnership while you were a partner, you should:

For a partnership to bring a liability suit against a client, it would need to sue or conversely, it might be sued by the client .

Which one of the following statements is TRUE regarding partnerships?

A partnership is a business relationship between two or more persons, but not all business relationships between two or more persons are partnerships.

The court may upon an application by one or more partners order the partnership dissolved under which circumstance?

A Partnership has no independent existence in law.

A share of gross receipts is an indication of partnership.

Which of the following is NOT true about partnerships?

Helen and George formed an equal partnership for the raising of flowers to sell at the county fair. After three seasons of mediocre results, George lost interest and only came around to "see how things were going". However, the fourth summer went very well for Helen and she made a large profit. Can George now claim half the profits?

Johnson, Michael & Associates is a partnership of accountants. One evening, Bosco, the truck driver for the firm, during the course of performing his duties, gets into an accident with James. James is injured and later commences a personal injury action against the partnership. James obtains judgment of $250,000 against the partnership. The partnership is not insured and has only $150,000 in its account. James may recover the balance of $100,000 from the personal assets of any of the individual partners.

Bill and Joe agreed to form a partnership to carry on their goal of distributing food to the needy as a charitable endeavor. Is this a true partnership?

Two years ago the Citizens Bank lent The Carlin & Hickel Partnership two million dollars. Now the firm is defaulting on their monthly payments. Which of the following partners will be liable on this loan?