Question 1

A partner's ownership interest is called _____.

Accepted Answer

A)  a partnership interest 
B)  a shareholder interest 
C)  a partnership liability 
D)  a charging order 
A)  a partnership interest 
B)  a shareholder interest 
C)  a partnership liability 
D)  a charging order

Question 2

Which of the following forms of business always imposes double taxation on the earnings of the business?

Accepted Answer

A)  A corporation 
B)  A limited liability company 
C)  A limited liability partnership 
D)  A sole proprietorship 
A)  A corporation 
B)  A limited liability company 
C)  A limited liability partnership 
D)  A sole proprietorship

Question 3

Loans made by partners to a partnership are partnership capital.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is true of a corporation?

Accepted Answer

A)  A corporation is not a tax-paying entity for federal income tax purposes. 
B)  A corporation does not have a life separate from its owners and its managers. 
C)  A corporation has the ability to attract capital, more than the limited partnership. 
D)  A corporation is owned by partners who have founded the business and have the right to manage it. 
A)  A corporation is not a tax-paying entity for federal income tax purposes. 
B)  A corporation does not have a life separate from its owners and its managers. 
C)  A corporation has the ability to attract capital, more than the limited partnership. 
D)  A corporation is owned by partners who have founded the business and have the right to manage it.

Question 5

An S corporation:

Accepted Answer

A)  must have at least 100 shareholders. 
B)  may have only one class of shares. 
C)  has the ability to attract capital, more than the limited partnership. 
D)  has the disadvantage of its shareholders being double taxed at the federal tax level. 
A)  must have at least 100 shareholders. 
B)  may have only one class of shares. 
C)  has the ability to attract capital, more than the limited partnership. 
D)  has the disadvantage of its shareholders being double taxed at the federal tax level.

Question 6

A sole proprietorship is a legal entity separate from its owner.

Accepted Answer

A) True 
 B)False

Question 7

A mining partner's interest is not freely transferable.

Accepted Answer

A) True 
 B)False

Question 8

An order charging all or part of the partner's transferable partnership interest with payment of the unsatisfied amount of the judgment is called a(n) _____.

Accepted Answer

A)  interim charge 
B)  redeeming order 
C)  charging order 
D)  redeeming the charge order 
A)  interim charge 
B)  redeeming order 
C)  charging order 
D)  redeeming the charge order

Question 9

A partnership is an income tax-paying entity for federal income tax purposes.

Accepted Answer

A) True 
 B)False

Question 10

If a partnership leases a building that belongs to one of the partners, the property is said to be owned by the partnership.

Accepted Answer

A) True 
 B)False

Question 11

Dr. Matt Fornfeld, a physician practicing as a sole proprietor, falls behind in his payments to First Bank, a creditor to whom he owes $275,000. First Bank agrees to take reduced payments from Matt, but wants more money if Matt's practice becomes more profitable. Matt agrees to pay First Bank at least $4,000 per month up to a maximum of 15 percent of his profits. Does this agreement make First Bank a partner with Matt?

Accepted Answer

No. First Bank is sharing profits as a c

Question 12

In many public meetings, John has proclaimed himself to be an equal partner of Chan's partnership business. Chan's business ran into financial difficulties. John and Chan approached a creditor to obtain loan. The creditor gave the loan based on a false presumption that John was a partner in the business too. Can John be made liable for the loan?

Accepted Answer

A)  Yes, because John is a close acquaintance of Chan; thus it is his ethical duty to help Chan during her financial trouble. 
B)  Yes, because John is a purported partner; public representations of his partner status make him personally liable for the debt. 
C)  No, because he is not legally a partner; the creditor should have checked the partnership agreement before advancing the loan. 
D)  No, because John did not participate in the business; he was thus not a member of the partnership business. 
A)  Yes, because John is a close acquaintance of Chan; thus it is his ethical duty to help Chan during her financial trouble. 
B)  Yes, because John is a purported partner; public representations of his partner status make him personally liable for the debt. 
C)  No, because he is not legally a partner; the creditor should have checked the partnership agreement before advancing the loan. 
D)  No, because John did not participate in the business; he was thus not a member of the partnership business.

Question 13

A limited partnership:

Accepted Answer

A)  dissolves when a limited partner dies. 
B)  may not have a corporation as a general partner. 
C)  may be taxed either as a partnership or as a corporation. 
D)  may be created by default. 
A)  dissolves when a limited partner dies. 
B)  may not have a corporation as a general partner. 
C)  may be taxed either as a partnership or as a corporation. 
D)  may be created by default.

Question 14

The _____ is the preferred form of business for professionals and is especially good for consultants and auditors, allowing them management flexibility while insulating them mostly from personal liability.

Accepted Answer

A)  S Corporation 
B)  LLLP 
C)  LLC 
D)  LLP 
A)  S Corporation 
B)  LLLP 
C)  LLC 
D)  LLP

Question 15

According to the RUPA:

Accepted Answer

A)  partners have no liability for the obligations of the partnership. 
B)  a partnership cannot sue or be sued in its own name. 
C)  a partnership does not have a life apart from its owners. 
D)  partnerships have continuity of existence. 
A)  partners have no liability for the obligations of the partnership. 
B)  a partnership cannot sue or be sued in its own name. 
C)  a partnership does not have a life apart from its owners. 
D)  partnerships have continuity of existence.

Question 16

If a third party deals with a person who appears to be the partner of another person, and the third party is harmed, it may recover damages under:

Accepted Answer

A)  the doctrine of purported partners. 
B)  the general law for joint ventures. 
C)  the doctrine of direct liability. 
D)  the doctrine of respondeat superior. 
A)  the doctrine of purported partners. 
B)  the general law for joint ventures. 
C)  the doctrine of direct liability. 
D)  the doctrine of respondeat superior.

Question 17

Which of the following is an advantage of a sole proprietorship?

Accepted Answer

A)  Owners of sole proprietorships can raise a lot of capital quickly for expansion purposes. 
B)  The owner of a sole proprietorship has complete control over the business. 
C)  The sole proprietorship's existence does not depend entirely upon the sole proprietor. 
D)  The owner of a sole proprietorship has no liability. 
A)  Owners of sole proprietorships can raise a lot of capital quickly for expansion purposes. 
B)  The owner of a sole proprietorship has complete control over the business. 
C)  The sole proprietorship's existence does not depend entirely upon the sole proprietor. 
D)  The owner of a sole proprietorship has no liability.

Question 18

A mining partner's interest is:

Accepted Answer

A)  nontransferable. 
B)  freely transferable. 
C)  partially transferable. 
D)  dissolved and later, transferred. 
A)  nontransferable. 
B)  freely transferable. 
C)  partially transferable. 
D)  dissolved and later, transferred.

Question 19

Which of the following is not a necessary element of the definition of partnership according to the RUPA?

Accepted Answer

A)  Co-ownership of the assets used by the business 
B)  Association of two or more persons 
C)  Limited liability of partners 
D)  Carrying on of a business 
A)  Co-ownership of the assets used by the business 
B)  Association of two or more persons 
C)  Limited liability of partners 
D)  Carrying on of a business

Question 20

Which of the following is true about a limited partnership?

Accepted Answer

A)  A limited partnership has difficulties raising large amounts of capital. 
B)  A limited partnership can be created only by complying with a state statute permitting limited partnerships. 
C)  A limited partnership cannot be transferred to another person. 
D)  Limited partners are liable for the obligations of the limited partnership after making their capital contributions. 
A)  A limited partnership has difficulties raising large amounts of capital. 
B)  A limited partnership can be created only by complying with a state statute permitting limited partnerships. 
C)  A limited partnership cannot be transferred to another person. 
D)  Limited partners are liable for the obligations of the limited partnership after making their capital contributions.

Exam 37: Introduction to Forms of Business Andformation of Partnerships

A partner's ownership interest is called _____.

Which of the following forms of business always imposes double taxation on the earnings of the business?

Loans made by partners to a partnership are partnership capital.

Which of the following is true of a corporation?

An S corporation:

A sole proprietorship is a legal entity separate from its owner.

A mining partner's interest is not freely transferable.

An order charging all or part of the partner's transferable partnership interest with payment of the unsatisfied amount of the judgment is called a(n) _____.

A partnership is an income tax-paying entity for federal income tax purposes.

If a partnership leases a building that belongs to one of the partners, the property is said to be owned by the partnership.

A limited partnership:

The _____ is the preferred form of business for professionals and is especially good for consultants and auditors, allowing them management flexibility while insulating them mostly from personal liability.

According to the RUPA:

If a third party deals with a person who appears to be the partner of another person, and the third party is harmed, it may recover damages under:

Which of the following is an advantage of a sole proprietorship?

A mining partner's interest is:

Which of the following is not a necessary element of the definition of partnership according to the RUPA?

Which of the following is true about a limited partnership?

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

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