Question 1

Which of the following statements best describes a partnership?

Accepted Answer

A) Partnership involves two or more persons carrying on business with a view toward profits. 
B) Partnerships are created when two or more persons specifically agree to be in partnership. 
C) Partnerships are like any other form of contract; they can only be created when there is consensus between the parties in the form of offer and acceptance to that effect. 
D) Partnerships involve limited liability. 
E) Partnerships are only created when they have been properly registered with the government. 
A) Partnership involves two or more persons carrying on business with a view toward profits. 
B) Partnerships are created when two or more persons specifically agree to be in partnership. 
C) Partnerships are like any other form of contract; they can only be created when there is consensus between the parties in the form of offer and acceptance to that effect. 
D) Partnerships involve limited liability. 
E) Partnerships are only created when they have been properly registered with the government.

Question 2

If dividends are not paid,preferred shares usually convert to voting shares.

Accepted Answer

A) True 
 B)False

Question 3

Mr.Ace of Oink Inc.,a closely held corporation,is one of three shareholders.After several years of considerable success,the corporation hit hard times.The other shareholders,Mr.Bane and Mr.Curr,in the best interests of the corporation,voted Mr.Ace out as a director and voted not to renew his employment contract.Upset by these events,Mr.Ace wanted to sell his interest and leave the corporation.The other two shareholders,however,refused to buy his shares.Furthermore,when Mr.Ace attempted to sell his shares to his brother,who was interested in the corporation,the other shareholders refused to register the brother as a member.Which of the following is true?

Accepted Answer

A) Mr.Ace could sue the corporation for breach of its fiduciary duty. 
B) Mr.Ace could have avoided such a dilemma through the provisions of a shareholders' agreement. 
C) The court would "lift the corporate veil" because Mr.Bane and Mr.Curr were hiding behind the corporation to commit a fraud. 
D) Mr.Ace could sell his shares to whomever he chose and the remaining shareholders must register the new owner. 
E) Because of statutory pre-emptive right provisions,if Ace wants out,the other shareholders must buy him out. 
A) Mr.Ace could sue the corporation for breach of its fiduciary duty. 
B) Mr.Ace could have avoided such a dilemma through the provisions of a shareholders' agreement. 
C) The court would "lift the corporate veil" because Mr.Bane and Mr.Curr were hiding behind the corporation to commit a fraud. 
D) Mr.Ace could sell his shares to whomever he chose and the remaining shareholders must register the new owner. 
E) Because of statutory pre-emptive right provisions,if Ace wants out,the other shareholders must buy him out.

Question 4

Which of the following is true with regard to the characteristics of corporations?

Accepted Answer

A) The shareholders would be vicariously liable for any damage caused by a employee of the corporation carrying out his or her duties. 
B) The corporation is a separate legal person,but neither can sue nor be sued. 
C) Directors are responsible for the shareholders of the corporation. 
D) Shareholders are liable for the debts and other obligations of the corporation. 
E) A shareholder's liability is limited to the amount he or she paid for the shares. 
A) The shareholders would be vicariously liable for any damage caused by a employee of the corporation carrying out his or her duties. 
B) The corporation is a separate legal person,but neither can sue nor be sued. 
C) Directors are responsible for the shareholders of the corporation. 
D) Shareholders are liable for the debts and other obligations of the corporation. 
E) A shareholder's liability is limited to the amount he or she paid for the shares.

Question 5

A partnership is primarily a contractual relationship and can be created verbally or implied by conduct.

Accepted Answer

A) True 
 B)False

Question 6

Jones is a partner in a law firm in a small town,and he is also doing legal work out of his home in the evenings for himself.Which of the following statements is correct with respect to his responsibility for the money he earns?

Accepted Answer

A) Jones has a duty to tell the other partners,but the money is his and he can continue the extra work regardless of the other partners' consent. 
B) Jones has no responsibility; the money he makes through this extra work is his. 
C) Such conduct will automatically dissolve the partnership,but Jones can keep what he has made. 
D) If Jones did not have the consent of his partners,he must pay over all money he makes through his business at home to the partnership. 
E) If Jones is a one-third partner in the law firm,he need only pay over a third of what he makes on the side. 
A) Jones has a duty to tell the other partners,but the money is his and he can continue the extra work regardless of the other partners' consent. 
B) Jones has no responsibility; the money he makes through this extra work is his. 
C) Such conduct will automatically dissolve the partnership,but Jones can keep what he has made. 
D) If Jones did not have the consent of his partners,he must pay over all money he makes through his business at home to the partnership. 
E) If Jones is a one-third partner in the law firm,he need only pay over a third of what he makes on the side.

Question 7

What are the advantages and disadvantages of being a sole proprietor?

Accepted Answer

Disadvantages: unlimited liability,only

Question 8

Which one of the following statements is correct with respect to the creation of a partnership agreement?

Accepted Answer

A) A partnership can be created by an intention to share the revenues between the partners. 
B) For a partnership to exist,the relationship giving rise to it must be of an ongoing business nature,not a one-time promotion. 
C) For a person to be a limited partner,there must be at least two general partners. 
D) A partnership can be created only by contract. 
E) Where two people agree to enter into a partnership,there is no partnership created unless all elements of a contract are present. 
A) A partnership can be created by an intention to share the revenues between the partners. 
B) For a partnership to exist,the relationship giving rise to it must be of an ongoing business nature,not a one-time promotion. 
C) For a person to be a limited partner,there must be at least two general partners. 
D) A partnership can be created only by contract. 
E) Where two people agree to enter into a partnership,there is no partnership created unless all elements of a contract are present.

Question 9

Kent incorporated Dynamite Data Ltd.,which worked with small businesses in developing graphs and charts from their data for presentations to bankers,shareholders,etc.Kent loaned the company $25 000 by way of a shareholder's loan and took as security computers,plotters,and printers under a chattel mortgage document.An employee of the corporation,Jack,while delivering some graphs to a customer,Roth,got into an argument with Roth,who complained that the graph was in red and not in pink as requested.It ended with Jack punching Roth,who fell onto a microscopic camera.The damage to Roth's nose and the camera totalled $35 000.Which of the following is true?

Accepted Answer

A) The corporation is not liable for the damage caused by the action of its employee,Jack. 
B) If the corporation went bankrupt but owed creditors (other than Roth),Kent would be in a worse position than unsecured creditors to collect proceeds realized from the sale of the corporation's assets. 
C) Kent is liable for the damage to Roth and the camera if neither Jack nor the employer/corporation has sufficient funds. 
D) Roth's action against Jack is for the tort of assault. 
E) Even if Kent,the only shareholder,died,the corporation would not die and would still owe its outstanding debts. 
A) The corporation is not liable for the damage caused by the action of its employee,Jack. 
B) If the corporation went bankrupt but owed creditors (other than Roth),Kent would be in a worse position than unsecured creditors to collect proceeds realized from the sale of the corporation's assets. 
C) Kent is liable for the damage to Roth and the camera if neither Jack nor the employer/corporation has sufficient funds. 
D) Roth's action against Jack is for the tort of assault. 
E) Even if Kent,the only shareholder,died,the corporation would not die and would still owe its outstanding debts.

Question 10

A sole proprietor is free from regulatory control.

Accepted Answer

A) True 
 B)False

Question 11

A real estate agent,by virtue of his fiduciary duty to his principal,is not allowed to buy the property being sold by his principal without full disclosure to and consent from his principal.The real estate agent does not want to disclose that he is the buyer of the property,so he forms a corporation and takes an offer to his principal from the corporation.Based on these facts,which of the following is true if the principal finds out that the corporation/buyer is owned by the real estate agent and objects to the contract?

Accepted Answer

A) The court would enforce the contract because the corporation is a separate legal entity in the eyes of the law. 
B) The court would not enforce the contract and would "lift the corporate veil." 
C) The court would enforce the contract because this is not a direct breach of the agent's fiduciary duty. 
D) The court would dissolve the corporation. 
E) The court would enforce the contract,but the principal would be able to claim any profits from the agent when he took them out of the corporation. 
A) The court would enforce the contract because the corporation is a separate legal entity in the eyes of the law. 
B) The court would not enforce the contract and would "lift the corporate veil." 
C) The court would enforce the contract because this is not a direct breach of the agent's fiduciary duty. 
D) The court would dissolve the corporation. 
E) The court would enforce the contract,but the principal would be able to claim any profits from the agent when he took them out of the corporation.

Question 12

Four years ago,Ben Ratzi incorporated a corporation and became the sole shareholder,director,and officer.He loaned the corporation $10 000 and took a debenture from the corporation as security for repayment of the loan.The corporation prospered.Last year,your brother began supplying the corporation with office supplies.He was paid at the end of each month for supplies delivered during that month.For the last six months,however,he has not been paid.He learned that other suppliers had not been paid either because sales dropped drastically,apparently due to Ratzi's harsh management style,which has upset the entire staff.Which of the following is true?

Accepted Answer

A) If Ratzi dies,his corporation would automatically die too,and there wouldn't be any person to sue. 
B) Your brother has no claim against the corporation because it has limited liability. 
C) If this corporation were placed into bankruptcy,Ratzi would be in a better position than your brother for receiving proceeds realized from the sale of the assets of the corporation. 
D) Your brother could take an action under statutory "relief-from-oppression" provisions. 
E) If your brother decided to sue for the debt,he could sue Ratzi because he was the sole shareholder and his management style caused all of the trouble. 
A) If Ratzi dies,his corporation would automatically die too,and there wouldn't be any person to sue. 
B) Your brother has no claim against the corporation because it has limited liability. 
C) If this corporation were placed into bankruptcy,Ratzi would be in a better position than your brother for receiving proceeds realized from the sale of the assets of the corporation. 
D) Your brother could take an action under statutory "relief-from-oppression" provisions. 
E) If your brother decided to sue for the debt,he could sue Ratzi because he was the sole shareholder and his management style caused all of the trouble.

Question 13

Which of the following statements is correct with respect to unlimited liability?

Accepted Answer

A) Only the partner's share of the partnership assets can be used to satisfy the debt incurred by another partner. 
B) Each partner can be held responsible for the debts of the partnership no matter how great they are. 
C) Unlimited liability means the partner can lose what he has invested but no more. 
D) The partner cannot only lose what she has invested but can also be required to pay an additional amount equal to what she has invested. 
E) If there are two partners,each partner can be held responsible for an amount equal to but no more than one half of the debts of the partnership. 
A) Only the partner's share of the partnership assets can be used to satisfy the debt incurred by another partner. 
B) Each partner can be held responsible for the debts of the partnership no matter how great they are. 
C) Unlimited liability means the partner can lose what he has invested but no more. 
D) The partner cannot only lose what she has invested but can also be required to pay an additional amount equal to what she has invested. 
E) If there are two partners,each partner can be held responsible for an amount equal to but no more than one half of the debts of the partnership.

Question 14

Which of the following is correct with respect to limited partnerships?

Accepted Answer

A) Limited partnership refers to the fact that no more than five people are allowed to be partners in such partnerships. 
B) Limited partnership refers to the fact that the partnership can only issue common shares. 
C) Limited partnership refers to the fact that some partnerships are only created for a limited period of time. 
D) Limited partnership refers to the fact that limited partnerships can only carry on certain kinds of businesses. 
E) Limited partnership refers to the fact that some partners have limited liability. 
A) Limited partnership refers to the fact that no more than five people are allowed to be partners in such partnerships. 
B) Limited partnership refers to the fact that the partnership can only issue common shares. 
C) Limited partnership refers to the fact that some partnerships are only created for a limited period of time. 
D) Limited partnership refers to the fact that limited partnerships can only carry on certain kinds of businesses. 
E) Limited partnership refers to the fact that some partners have limited liability.

Which of the following statements best describes a partnership?

If dividends are not paid,preferred shares usually convert to voting shares.

Which of the following is true with regard to the characteristics of corporations?

A partnership is primarily a contractual relationship and can be created verbally or implied by conduct.

Jones is a partner in a law firm in a small town,and he is also doing legal work out of his home in the evenings for himself.Which of the following statements is correct with respect to his responsibility for the money he earns?

What are the advantages and disadvantages of being a sole proprietor?

Which one of the following statements is correct with respect to the creation of a partnership agreement?

A sole proprietor is free from regulatory control.

Which of the following statements is correct with respect to unlimited liability?

Which of the following is correct with respect to limited partnerships?

The Canadian Legal System

Torts and Professional Liability

Formation of Contracts

Enforcing Contractual Obligations

Legislation in the Marketplace

Agency and Employment

Property

Ideas and Information

Electronic Commerce and International Trade

Filters

Exam 7: Methods of Carrying on Business

Which of the following statements best describes a partnership?

If dividends are not paid,preferred shares usually convert to voting shares.

Which of the following is true with regard to the characteristics of corporations?

A partnership is primarily a contractual relationship and can be created verbally or implied by conduct.

Jones is a partner in a law firm in a small town,and he is also doing legal work out of his home in the evenings for himself.Which of the following statements is correct with respect to his responsibility for the money he earns?

What are the advantages and disadvantages of being a sole proprietor?

Which one of the following statements is correct with respect to the creation of a partnership agreement?

A sole proprietor is free from regulatory control.

Which of the following statements is correct with respect to unlimited liability?

Which of the following is correct with respect to limited partnerships?

The Canadian Legal System

Torts and Professional Liability

Formation of Contracts

Enforcing Contractual Obligations

Legislation in the Marketplace

Agency and Employment

Property

Ideas and Information

Electronic Commerce and International Trade

Filters