Deck 14: Small Business and General and Limited Partnerships

Question 1

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

Answer 1

True

Question 2

A sole proprietor is legally responsible for the business's contracts.

Answer 2

True

Question 3

A third party who sues to recover on a partnership contract need not name all the general partners in the lawsuit.

Answer 3

False

Question 4

Flow-through taxation is the federal income tax imposed on general partnerships.

Question 5

General partnerships do not pay federal income taxes.

Question 6

The designation of d.b.a. refers to the description for a business that is operating under a trade name.

Question 7

A sole proprietor has limited personal liability.

Question 8

A general partnership agreement must always be in writing to be considered legal.

Question 9

An entrepreneur is a person who forms and operates a business.

Question 10

Receipt of a share of business profits is prima facie evidence of a general partnership.

Question 11

A sole proprietorship does not does not pay taxes at the business level.

Question 12

General partners have unlimited personal liability for the debts and obligations of the partnership.

Question 13

The UPA is a model act that codifies sole proprietorship law.

Question 14

General partners are not permitted to sue other partners at law.

Question 15

The Revised Uniform Partnership Act is a federal statute that holds in all states.

Question 16

No federal or state government approval is required for creating a sole proprietorship.

Question 17

A sole proprietorship cannot be easily transferred when the owner desires to do so.

Question 18

The name selected by a general partnership cannot indicate that it is a corporation.

Question 19

In a sole proprietorship, the business is considered a separate legal entity.

Question 20

If no other form of business organization is chosen while obtaining a license, the business is by default a sole proprietorship.

Question 21

Defective formation of a limited partnership occurs when a certificate of limited partnership is not properly filed.

Question 22

Which of the following is true of creating a sole proprietorship?

A) No state government approval is required.
B) Federal taxation is levied upon sole proprietorship.
C) No licenses are required to do business within a city or state.
D) Special permission must be obtained to receive a sole proprietorship status.

Question 23

The process of liquidating a partnership's assets and distributing the proceeds to satisfy claims against the partnership is known as winding up.

Question 24

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?

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

Question 25

The creation of a limited partnership is formal and requires public disclosure.

Question 26

The earnings and losses from a sole proprietorship are reported on ________.

A) the federal income tax filing document
B) the business license that is renewed each year
C) the proprietor's personal income tax filing
D) the state income tax filing document

Question 27

________ are the most common form of business organization in the United States.

A) General partnerships
B) Sole proprietorships
C) Limited liability companies
D) Limited partnerships

Question 28

Limited partners have unlimited personal liability for the debts and obligations of the limited partnership.

Question 29

A limited partnership cannot have general partners.

Question 30

Which of the following is true of a business operating under sole proprietorship?

A) It is not considered a separate legal entity.
B) It cannot be sold when the owner decides to do so.
C) It requires governmental approval when being transferred.
D) It has access to unrestricted capital by means of investments.

Question 31

It is not necessary for a limited partnership to have general partners if the limited partners share management responsibility among themselves.

Question 32

General partners are not personally liable for partnership debts beyond their capital contributions.

Question 33

The dissolution of a general partnership discharges the liability of an outgoing partner for existing partnership debts and obligations.

Question 34

Orlando opened a hot dog stand in Brooklyn which unfortunately did not earn him a profit. He had borrowed $5,000 from the bank to set it up, which had to be repaid to the bank in two days. However, Orlando's friend Bob agreed to partner with him starting the subsequent month. From which of the following sources can the bank recover its $5,000 with interest?

A) Orlando's secondary financer
B) Orlando's savings account
C) Orlando's family
D) Bob, Orlando's prospective business partner

Question 35

Which of the following best describes an entrepreneur?

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 derives a profit from a new or an existing business

Question 36

Why does a sole proprietorship not pay taxes at the business level?

A) It does not have a separate legal personality.
B) It is a small business that is exempted from taxation.
C) It is a not-for-profit organization.
D) It is generally an institution with no business dealings.

Question 37

Which of the following is true of a sole proprietorship?

A) A business operated under sole proprietorship cannot be transferred.
B) Large businesses cannot be operated under sole proprietorship.
C) A business operated under sole proprietorship should be owned by one or more people of the same family.
D) Creditors can recover claims against the business from the sole proprietor's personal assets.

Question 38

Acting as a surety for the limited partnership makes a limited partner lose his or her limited liability.

Question 39

A limited partner may engage in voting on the dissolution of the limited partnership without losing his or her limited liability.

Question 40

Which of the following is a major form of conducting a business?

A) institution
B) charity
C) corporation
D) trust

Question 41

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

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 torn.
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 42

Which of the following is true of general partnership?

A) A business should make a profit in order to qualify as a general partnership.
B) The general partners need not be the co-owners of the business.
C) General partnerships can be either oral or implied from the conduct of the parties.
D) Charity organizations and schools are mostly formed from general partnerships.

Question 43

Which of the following is true of profits and losses in a general partnership?

A) The proportion of profit shared is equal to the general partner's initial investment.
B) Losses are shared equally by all general partners.
C) The general partner who proposed the idea of the business gets most profit.
D) The proportion of investment governs only the proportion of loss shared and not profit obtained.

Question 44

An organization or venture must have a ________ motive in order to qualify as a partnership

A) large-scale expansion
B) non-commercial
C) profit
D) target market

Question 45

The change in the relationship of partners in a partnership caused by any partner ceasing to be associated in the carrying on of the business is known as ________.

A) action for an accounting
B) indemnification
C) winding up
D) dissolution

Question 46

Which of the following is true in the creation of a general partnership?

A) The business name has to have the names of all the partners.
B) The business name cannot be a fictitious name.
C) The name selected by the partnership cannot indicate that it is a corporation.
D) The business cannot operate under a trade name.

Question 47

A limited partnership has two types of partners, ________.

A) general partners and sole proprietors
B) general partners and limited partners
C) ordinary partners and liable partners
D) special partners and sole proprietors

Question 48

________ is a situation in which a partner withdraws from a partnership without having the right to do so at that time.

A) Winding up
B) Indemnification
C) Wrongful dissolution
D) Proliferation

Question 49

Which of the following partners of a limited partnership invest capital but do not participate in management?

A) specific partners
B) limited partners
C) general partners
D) sole proprietors

Question 50

Which of the following must be in writing even if it is below the time stipulation of the Statute of Frauds?

A) businesses that have more than one commercial venture
B) partnerships authorized to deal real estate
C) businesses that are authorized to lend money
D) enterprises which deal with health and medicine

Question 51

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

A) six months
B) 180 days
C) five years
D) one year

Question 52

Which of the following is true of the liability of an incoming partner?

A) An incoming partner is liable for the previous debts of the partnership.
B) An incoming partner is equally liable for all existing debts of the partnership.
C) An incoming partner is liable for the debts of the partnership only to the extent of his or her capital contribution.
D) An incoming partner is not liable for the future debts of the partnership.

Question 53

Which of the following is true of general and limited partners in a limited partnership?

A) Limited partners are exempt from annual capital investment and need only participate in management functions.
B) General partners are not personally liable for partnership debts.
C) General partners are required to invest capital and refrain from managerial activities.
D) Limited partners are not personally liable for partnership debts beyond their capital contributions.

Question 54

According to priority, which of the following claims are satisfied first after dissolution?

A) creditors
B) creditor-partners
C) capital contributions
D) profits

Question 55

Justin and Michael form a limited partnership and start a car dealership. Justin is the general partner and Michael is the limited partner. Seven months after the commencement of the business, Pedro makes an investment and wishes to become a general partner. A week later, Michael's mother wishes to join the partnership as a limited partner. Which of the following is true in this scenario?

A) Pedro cannot become a general partner to the partnership after the business has commenced.
B) Pedro cannot become a general partner to the partnership as a limited partnership can only have one general partner.
C) Michael's mother cannot become a limited partner to the partnership as a limited partnership can only have one limited partner.
D) Both Pedro and Michael's mother can choose to become either general or limited partners to the partnership.

Question 56

Which of the following is true of the management of a general partnership?

A) The number of votes a general partner has depends on the proportion of his or her capital investment.
B) Partnership matters are decided by unanimous agreement only.
C) Only general partners in the board of directors have the authority to participate in the management.
D) If the vote is tied, the action being voted on is considered to be defeated.

Question 57

Inference of the existence of a general partnership is drawn only if profits are received as ________.

A) share in partnership
B) payment of wages
C) interest owed on a loan
D) a debt owed to a creditor

Question 58

Instead of suing the partnerships or other partners at law, general partners are given the right to bring a(n)________ against other partners.

A) claim for damages
B) tort action
C) call for action
D) action for an accounting

Question 59

Which of the following partners in a limited partnership invest capital, manage the business, and are personally liable for partnership debts?

A) specific partners
B) limited partners
C) general partners
D) sole proprietors

Question 60

An association of two or more persons to carry on as co-owners of a business for profit is known as a(n)________.

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

Question 61

According to the RULPA, what liability does a corporation have if it is a general partner to a limited partnership?

A) unlimited personal liability
B) liability restricted to debts up to its capital contributions
C) liability of termination as partner
D) unlimited organizational capital liability

Question 62

Who among the following get first priority in the distribution of assets upon the dissolution of a partnership?

A) investors
B) limited partners
C) general partners
D) creditors

Question 63

Which of the following is a cause for the dissolution of a partnership?

A) written consent of the general partners
B) withdrawal of a general partner
C) withdrawal of all limited partners
D) acquisition of business by another partnership

Question 64

How are assets distributed after the dissolution of a general partnership?

Question 65

Which of the following types of liability do limited partners of a limited partnership have for the debts and obligations of the limited partnerships?

A) unlimited personal liability
B) liability restricted to debts up to their capital contributions
C) liability of termination as partner
D) unlimited organizational capital liability

Question 66

Explain in brief the liabilities of general and limited partners in a limited partnership.

Question 67

Under partnership law, ________ have the right to manage the affairs of the limited partnership.

A) investors
B) sole proprietors
C) limited partners
D) general partners

Question 68

Which of the following governs a limited partnership, its internal affairs, and the liability of its limited partners?

A) the federal government
B) all states in which the business operates
C) the articles of limited partnership
D) the law of the state in which it is organized

Question 69

Partners who erroneously but in good faith believe they have become limited partners can escape liability as general partners by ________.

A) adding their surname to the name of the business establishment
B) filing for a refund of his or her initial investment with interest
C) bringing a lawsuit against all general and limited partners
D) withdrawing from any future equity participation in the enterprise

Question 70

________ is said to have occurred if a certificate of limited partnership was not properly filed.

A) Defective formation
B) Illegitimate partnership
C) Void partnership
D) Voidable association

Question 71

Explain in brief the formation of a general partnership.

Question 72

Which of the following information should a certificate of limited partnership contain?

A) the latest date of dissolution of the partnership
B) a clause to not accept new general partners
C) the name of the party who becomes a general partner in the event of transfer
D) the scope of potential business opportunities and related investment

Question 73

Laura is an investor limited partner in a limited partnership. Two years after she becomes a limited partner, Laura thinks that the general partners are not doing a very good job managing the affairs of the limited partnership and participates in the management of the limited partnership. While she is doing so, a bank loans $1 million to the limited partnership, believing that Laura is a general partner. If the limited partnership defaults on the $1 million loan, which of the following holds well?

A) Laura is not personally liable as she is a limited partner on paper.
B) Laura is personally liable as the bank, in good faith, thought she is a general partner.
C) Laura has unlimited personal liability as a limited partner.
D) Laura's liability is restricted to the value of her capital investment in the partnership.

Question 74

Which of the following is true of a limited partnership?

A) Other limited partnerships cannot become limited partners in an existing limited partnership.
B) A limited partner is personally liable for the debts of the partnership.
C) Corporations are allowed to become partners in a limited partnership.
D) A limited partnership can have only one general partner but multiple limited partners.

Question 75

List the advantages and disadvantages of a sole proprietorship.

Question 76

Which of the following types of liability do general partners of a limited partnership have for the debts and obligations of the limited partnership?

A) unlimited personal liability
B) limited capital liability
C) liability of termination as partner
D) limited personal liability

Question 77

Which of the following is true of a limited partnership agreement?

A) It provides that all transactions must be approved by all partners.
B) It does not contain information about dissolution of the partnership as it an agreement of formation.
C) It provides that general and limited partners have equal voting rights.
D) It sets forth the terms and conditions regarding the termination of the partnership.

Question 78

Which of the following happens when a general partner withdraws from a limited partnership?

A) The partnership must be sold.
B) The partnership is transferred.
C) The partnership is dissolved.
D) The partnership operates normally.

Question 79

If Gerard Koontz retires from being a general partner in a limited partnership, which of the following is true?

A) A member from Mr. Koontz's immediate family is allowed to take his partnership interest.
B) Only the person Mr. Koontz nominates can take his partnership interest.
C) The partnership is dissolved, according to RULPA norms.
D) The partnership operates normally, without a general partner.

Question 80

If a corporation is a general partner to a limited partnership, which of the following would result from the dissolution of the corporation?

A) dissolution of the limited partnership
B) creation of a general partnership
C) reformation of the limited partnership
D) transfer of the partnership to other parties