Question 1

The sole proprietor has the right to deduct business losses on his individual tax return.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is true about the effect of purported partnerships?

Accepted Answer

A)  Purported partners share profits of the business. 
B)  A purported partner does not have authority to make contracts for the partnership. 
C)  A purported partner is liable on contracts entered into by third parties on their belief that he was a partner. 
D)  A purported partner is not liable for the torts committed in the course of relationships entered by third parties who believed he was a partner. 
A)  Purported partners share profits of the business. 
B)  A purported partner does not have authority to make contracts for the partnership. 
C)  A purported partner is liable on contracts entered into by third parties on their belief that he was a partner. 
D)  A purported partner is not liable for the torts committed in the course of relationships entered by third parties who believed he was a partner.

Question 3

Which of the following is incorrect concerning a joint venture?

Accepted Answer

A)  Joint ventures are limited to single projects. 
B)  Joint venturers are personally liable for its debts. 
C)  Joint ventures are created much like partnerships. 
D)  Joint venturers have more implied and apparent authority than do partners in a partnership. 
A)  Joint ventures are limited to single projects. 
B)  Joint venturers are personally liable for its debts. 
C)  Joint ventures are created much like partnerships. 
D)  Joint venturers have more implied and apparent authority than do partners in a partnership.

Question 4

A limited partner in a limited partnership has the right to manage the limited partnership business.

Accepted Answer

A) True 
 B)False

Question 5

A _____ has one or more general partners and one or more limited partners.

Accepted Answer

A)  limited liability partnership 
B)  professional corporation 
C)  limited partnership 
D)  limited liability company 
A)  limited liability partnership 
B)  professional corporation 
C)  limited partnership 
D)  limited liability company

Question 6

Jane and Ridge are partners in a computer animation firm. Jane retires from the firm, but tells Ridge it is OK to leave his name on the entrance door to the firm and in the telephone listing. Alex, a new client, visits the firm after telephoning the firm. Alex has seen Jane's name listed in the phone book along with Ridge's and the firm's names. He also sees Jane's name on the entrance door to the firm. Believing Jane is a partner with Ridge, Alex contracts to have the firm develop animation for his upcoming film. Ridge, however, never performs the contract. Alex sues Ridge and Jane. Is Jane liable to Alex?

Accepted Answer

Yes. Jane and Ridge are purported partne

Question 7

Although not required, a partnership agreement is highly desirable for the same reasons that written contracts are generally preferred.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true about a sole proprietorship?

Accepted Answer

A)  A sole proprietorship is a legal entity. 
B)  A sole proprietorship cannot sue or be sued. 
C)  A sole proprietorship as form of business can be transferred to someone else. 
D)  A sole proprietorship has a life of its own apart from its owner. 
A)  A sole proprietorship is a legal entity. 
B)  A sole proprietorship cannot sue or be sued. 
C)  A sole proprietorship as form of business can be transferred to someone else. 
D)  A sole proprietorship has a life of its own apart from its owner.

Question 9

Which of the following is true about a partnership?

Accepted Answer

A)  It is not a tax-paying entity for federal income tax purposes. 
B)  Business losses are deductible based on the limit on a partner's individual tax return. 
C)  It does not have a life apart from its owners. 
D)  Partners in partnership do not assume personal liability for obligations of the business. 
A)  It is not a tax-paying entity for federal income tax purposes. 
B)  Business losses are deductible based on the limit on a partner's individual tax return. 
C)  It does not have a life apart from its owners. 
D)  Partners in partnership do not assume personal liability for obligations of the business.

Question 10

Under the doctrine of purported partners, a third party may hold liable persons who purport to be partners.

Accepted Answer

A) True 
 B)False

Question 11

Ann and Susan want to enter into a partnership business, having a term of five years, of selling used cars. They have to prepare a partnership agreement in writing to be enforceable under the statute of frauds.

Accepted Answer

A) True 
 B)False

Question 12

John is a partner of Aegon Services, a limited liability partnership firm. He committed fraud and embezzled $1 million from a client. The other partners would not be personally liable for John's malpractice.

Accepted Answer

A) True 
 B)False

Question 13

Generally, professional shareholders are personally liable for the obligations of the professional corporation.

Accepted Answer

A) True 
 B)False

Question 14

A partner's contribution is also called _____.

Accepted Answer

A)  partnership property 
B)  partnership liability 
C)  partnership cash flow 
D)  partnership capital 
A)  partnership property 
B)  partnership liability 
C)  partnership cash flow 
D)  partnership capital

Question 15

One of the most important factors in establishing co-ownership of the business is:

Accepted Answer

A)  making profits. 
B)  sharing management. 
C)  encouraging voluntary relationships. 
D)  creating joint ventures. 
A)  making profits. 
B)  sharing management. 
C)  encouraging voluntary relationships. 
D)  creating joint ventures.

Question 16

Which of the following is NOT a consequence of being a partner of a partnership?

Accepted Answer

A)  Partner's are not liable for each other's torts. 
B)  Partners are agents of each other. 
C)  Each partner owns a portion of the value of the business. 
D)  Each partner owes fiduciary duties to the partnership and to the other partners. 
A)  Partner's are not liable for each other's torts. 
B)  Partners are agents of each other. 
C)  Each partner owns a portion of the value of the business. 
D)  Each partner owes fiduciary duties to the partnership and to the other partners.

Question 17

Abe and Carlos want to form a general partnership. What must they do in order to create this legal form of business?

Accepted Answer

A)  They must get a partnership license from the secretary of state. 
B)  They must sign a written agreement and file it with the secretary of state. 
C)  They must first orally agree to become partners and then formulate a contract. 
D)  They can start a partnership without any formalities. 
A)  They must get a partnership license from the secretary of state. 
B)  They must sign a written agreement and file it with the secretary of state. 
C)  They must first orally agree to become partners and then formulate a contract. 
D)  They can start a partnership without any formalities.

Question 18

The charging order creditor is a lien creditor and is entitled to receive only the partner's share of the partnership distributions.

Accepted Answer

A) True 
 B)False

Question 19

Regarding the formation of a general partnership, which of the following is not a legal requirement but has been described as "highly desirable"?

Accepted Answer

A)  A formal, written partnership agreement 
B)  An oral agreement 
C)  An exchange of mutual consideration 
D)  An agreement limiting the liability of the partners 
A)  A formal, written partnership agreement 
B)  An oral agreement 
C)  An exchange of mutual consideration 
D)  An agreement limiting the liability of the partners

Question 20

A _____ is a partnership whose partners have elected limited liability status.

Accepted Answer

A)  limited liability company 
B)  professional corporation 
C)  professional partnership 
D)  limited liability partnership 
A)  limited liability company 
B)  professional corporation 
C)  professional partnership 
D)  limited liability partnership

Exam 37: Introduction to Forms of Business Andformation of Partnerships

The sole proprietor has the right to deduct business losses on his individual tax return.

Which of the following is true about the effect of purported partnerships?

Which of the following is incorrect concerning a joint venture?

A limited partner in a limited partnership has the right to manage the limited partnership business.

A _____ has one or more general partners and one or more limited partners.

Although not required, a partnership agreement is highly desirable for the same reasons that written contracts are generally preferred.

Which of the following is true about a sole proprietorship?

Which of the following is true about a partnership?

Under the doctrine of purported partners, a third party may hold liable persons who purport to be partners.

Ann and Susan want to enter into a partnership business, having a term of five years, of selling used cars. They have to prepare a partnership agreement in writing to be enforceable under the statute of frauds.

John is a partner of Aegon Services, a limited liability partnership firm. He committed fraud and embezzled $1 million from a client. The other partners would not be personally liable for John's malpractice.

Generally, professional shareholders are personally liable for the obligations of the professional corporation.

A partner's contribution is also called _____.

One of the most important factors in establishing co-ownership of the business is:

Which of the following is NOT a consequence of being a partner of a partnership?

Abe and Carlos want to form a general partnership. What must they do in order to create this legal form of business?

The charging order creditor is a lien creditor and is entitled to receive only the partner's share of the partnership distributions.

Regarding the formation of a general partnership, which of the following is not a legal requirement but has been described as "highly desirable"?

A _____ is a partnership whose partners have elected limited liability status.

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

Crimes

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Security Interests in Personal Property

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, Limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Agencies

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

Filters