Deck 13: Choice of Business Entity, Sole Proprietorships, and Partnerships

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Question
Under the Revised Uniform Partnership Act,the act of leaving a partnership and ceasing to be a principal is called _______.
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Question
General partnerships are not created by filing a form with a government agency.
Question
Even if the parties have no intent to form or operate as a partnership,their conduct may result in the law recognizing them to be partners.
Question
Capitalization refers to how the business will fund its operations.
Question
In all forms of business entities,the entity itself pays taxes on money earned by or through the entity.
Question
Tabletop,LP is registered in Nebraska but operates the business in the state of Iowa.Nebraska will require an in-state address and a ________ be identified to receive mail and accept legal documents.
Question
If two people identify themselves as general partners and create a written partnership agreement,the law is obligated to recognize their business entity as a general partnership.
Question
The duty of a partner to act in the best interests of the partnership is called a ________ duty.
Question
A business existing in or by right of law is considered a ________ entity.
Question
Federal laws regulating the selling of equity in limited partnerships through broker-dealer contracts are known as ________ laws.
Question
A general partner who rightfully dissociates from a partnership remains liable for predissociation debts of the partnership.
Question
The Revised Uniform Partnership Act was enacted by Congress to make partnership law more consistent and standardized throughout the United States.
Question
Under the Revised Uniform Limited Partnership Act,the act of leaving a limited partnership and ceasing to be a principal is called _______.
Question
Business entities are sometimes referred to as business _______.
Question
Business owners are also known as _______.
Question
General partnerships are pass-through entities regarding taxation,however; limited partnerships are not pass-through entities for taxes.
Question
A "Doing Business As" certificate is also known as a ________ certificate.
Question
Limited partnerships are required to file a/an ________ return with the IRS each year.
Question
Wayne Lewis wants to start a sole proprietorship named Lewis Plumbing Services.Because it will be a sole proprietorship,Wayne has no filing requirements other than obtaining the appropriate business license from the local and state government where the business will be located in.
D.B.A. certificate naming himself as principal.
Question
One disadvantage of a sole proprietorship business entity is that it is restricted to the principal and the principal's immediate family in terms of number of employees that may work for the business.
Question
Family limited partnerships are designed solely for estate planning and asset distribution for wealthy families.
Question
Robert and Philip are operating a general partnership.Under the Revised Uniform Partnership Act,if Robert rightfully or wrongfully dissociates from the partnership,the partnership continues to exist.
Question
Joint ventures are governed by the same legal principles as a general partnership.
Question
Sole proprietorships may sell equity in the company in order to raise funds.
Question
With regard to dissociation and dissolution,the Revised Uniform Partnership Act adopted and reserved the same general rules and procedures as its predecessor,the Uniform Partnership Act.
Question
Family limited partnerships are designed for parents and children to operate a business together while protecting family related assets.
Question
In the absence of an agreement to the contrary,the Revised Uniform Partnership Act mandates that general partnership profits be split equally amongst the partners.
Question
Under the Revised Uniform Limited Partnership Act,limited partners may act as consultants and may contribute their expertise to the limited partnership.
Question
A limited partnership is required to have two or more limited partners.
Question
The Revised Uniform Limited Partnership Act requires that there be a written partnership agreement regarding limited partnerships.
Question
A limited partnership is formed by the limited partner filing a certificate of limited partnership with the appropriate state governmental authority.
Question
To date,every state in the union has adopted the Revised Uniform Partnership Act except the state of Louisiana.
Question
An advantage of operating as a sole proprietorship is that personal liability for any business losses is limited to the owner's investment in the business.
Question
Mike is a limited partner in Big Blue,LP.The partnership agreement permits him to have a say in the removal of general partners and the blocking of new partners.This agreement will jeopardize his limited partner status.
Question
If a limited partner actively participates in day to day management of the business they may forfeit their limited partner status and lose their limited liability for debts and liabilities.
Question
In United States v.Morton,Morton was declared a general partner despite all paperwork including tax returns naming her as a limited partner because of her conduct.
Question
A sole proprietorship automatically is dissolved when the owner dies.
Question
If a sole proprietorship loses money,the principal may deduct the losses from her own personal tax liability if any.
Question
If someone successfully sues a sole proprietorship,they must exhaust the businesses assets before they may go after the principal's personal assets.
Question
One disadvantage of a sole proprietorship business entity is that it is restricted to a single location and cannot expand.
Question
A business which exists in fact although not formally recognized is referred to as being:

A) de facto.
B) de jure.
C) de minimus.
D) de legal
Question
A partnership is considered fully terminated:

A) after dissociation.
B) after winding up.
C) after dissolution.
D) after the termination certificate is properly filed
Question
Stan and Frank have started a general partnership.Stan has contributed 95% of the startup capital and has the business experience and contacts while Frank's primary contribution is labor necessary to operate the business.Management decisions are jointly made.At the end of the year,the business has shown a $100,000 profit.They have no formal written partnership agreement.

A) Stan is entitled to $95,000 and Frank gets $5,000
B) RUPA mandates that each get $50,000
C) RUPA mandates that Frank be paid a fair amount for his labor contribution and the remaining profits be split with 95% going to Stan and 5% going to Frank
D) RUPA mandates that Frank be paid a fair amount for his labor contribution and the remaining profits be split equally between Stan and Frank
Question
Jonathan has graduated and wants to start a business.Which business entity gives him the most complete and exclusive control over the business and any business decisions?

A) sole proprietorship
B) limited liability company
C) corporation
D) general partnership
Question
Redrock GP has decided to go out of business.The sale of the partnership assets and the making of payments to creditors will occur during the ________ phase of the closing of a partnership.

A) dissolution
B) dissociation
C) winding up
D) termination
Question
Which of the following requires a formal filing to be recognized as a valid business entity?

A) a sole proprietorship
B) a general partnership
C) a limited partnership
D) all business entities require a formal filing to validly exist
Question
Steve has opened a sole proprietorship bicycle shop.The business shows a net income of $100,000.Steve took a salary of $40,000.The remaining money is left in the bank.

A) at tax time, the business pays taxes on $100,000 and Steve pays taxes on $40,000
B) at tax time the business pays taxes on $140,000
C) at tax time Steve pays taxes on $140,000
D) at tax time the business pays taxes on $70,000 and Steve pays taxes on $70,000
Question
Harry wants to start a personal training business.He should choose a sole proprietorship entity if:

A) he seeks limited liability.
B) he seeks perpetual existence for the new company.
C) he seeks the ability to raise capital by selling equity in the business.
D) he seeks to avoid management conflict
Question
Frank and Jesse are operating as a general partnership.A question has arisen not covered under their partnership agreement and also not addressed by the Revised Uniform Partnership Act.What will the courts do to resolve the situation?

A) dissolve the partnership and allow them to reform
B) look to foreign partnership laws because RUPA encompasses all U.S. partnership law
C) look to the common law
D) look to the UCC for a gap filler
Question
With regard to taxation of partnerships:

A) a partnership files a federal and state partnership tax return and pays taxes on its income.
B) a partnership must file an information return.
C) a partnership files a state partnership tax return and pays taxes on its income but no federal filing is required.
D) partnerships have no tax filing responsibilities
Question
Regarding limited partners:

A) they may withdraw from the partnership at any time but they forfeit their investment if they withdraw early.
B) they may not withdraw before the time that the partners have agreed that the partnership will terminate.
C) if the partnership agreement is silent as to notice require prior to termination, 90 days written notice will be required before the limited partner may withdraw.
D) they must obtain a court order to withdraw because of their limited liability and its effect on the remaining partners and third parties dealing with the business
Question
A disadvantage of the sole proprietorship is:

A) the difficulty of formation.
B) the inflexibility of management and control.
C) the unlimited liability of the principal.
D) the double taxation that occurs
Question
The Revised Uniform Partnership Act mandates that with regard to partnership debts and liabilities,general partners are:

A) not personally liable for non-debt liabilities which may only be charged to the partnership but personally liable for debts.
B) personally jointly liable for unpaid debts and liabilities.
C) personally jointly and severally liable for unpaid debts and liabilities.
D) not personally liable for debts or liabilities which may only be charged to the partnership
Question
In a general partnership:

A) profits and losses must be split equally amongst the partners.
B) an unequal split of profits may be agreed to based on the partnership agreement, but losses must be split equally.
C) profits must be split equally, but losses may be split unequally based on the partnership agreement.
D) profits and losses may be unequally split based on the partnership agreement
Question
Lisa and Tara are operating a business as a general partnership without an express partnership agreement.Should a dispute arise,the courts will look to ________ to resolve the issue regarding operation of the partnership.

A) the common law
B) state contract law
C) the Revised Uniform Partnership Act
D) federal contract law
Question
Bob,Carol and Ted have decided to go into businesses as a limited partnership importing and selling exotic spices.Bob and Carol will manage the business and Ted will have no role in the day to day operations.Bob and Carol contributed have each invested $500,000 and Ted has contributed the building and land that the business will be operated from.Alice,a customer,contracts a rare disease from a contaminated spice sold by the company and sues.Alice is awarded a judgment for $5 million.After she exhausts the assets of the partnership,having the property and building sold and seizing all other property,$3 million remains unpaid.

A) Bob, Carol and Ted each owe $1 million and Alice must sue each for their part
B) Bob, Carol and Ted each owe $3 million jointly and severally so Alice may sue one, two or all three for the $3 million balance
C) Bob and Carol each owe $1.5 million and Alice must sue each for their part; Ted has no additional liability
D) Bob and Carol each owe $3 million jointly and severally so Alice may sue one or both of them; Ted has no additional liability
Question
Mike lends money to Kathy as a business loan to Kathy who is capitalizing her start up sole proprietorship named Kathy's Things.If Mike must sue for repayment,he would sue:

A) Kathy.
B) Kathy's Things.
C) Kathy and Kathy's Things.
D) no one since the loan makes him a partner
Question
Which of the following is not an option available to a general partnership seeking capitalization?

A) borrowing money from one or more of the partners
B) selling the right to a percentage of the profits to an investor
C) selling ownership rights through the public markets
D) borrowing money from a commercial lender
Question
A limited partnership requires:

A) at least two general partners.
B) at least two limited partners.
C) a written limited partnership agreement.
D) at least one general and one limited partner
Question
Dissolving a limited partnership requires:

A) a unanimous vote amongst all partners.
B) a unanimous vote of the general partners and a majority vote of the limited partners.
C) a unanimous vote of the general partners and consent of any limited partner who owns a majority of the rights to receive a distribution as a limited partner.
D) a unanimous vote of the limited partners and consent of any general partner who owns a majority of the rights to receive a distribution as a general partner
Question
How is the Revised Uniform Partnership Act similar to the Uniform Commercial Code in terms of gap filling?
Question
A general partnership may be formed by:

A) oral agreement.
B) written agreement.
C) either oral or written agreement.
D) either oral, written or implied agreement
Question
Principals generally have no personal liability for the business entity's debts regarding:

A) limited partnerships.
B) limited liability partnerships.
C) corporations.
D) limited liability companies
Question
You have been invited to become a member of a partnership.What are some of the considerations you need to assess in making a decision to become a general or limited partner?
Question
Roger is a limited partner in a business.To retain his limited liability protection he must not:

A) participate in the approval of new partners.
B) participate in the removal of existing partners.
C) consult or be paid by the business.
D) assume management responsibilities
Question
Name and discuss the fiduciary duties owed by general partners to the partnership as set out in the Revised Uniform Partnership Act.
Question
Which of the following does not require a duty of care or good faith to other principals?

A) a sole proprietorship
B) a general partnership
C) a limited partnership
D) a family limited partnership
Question
Which of the following does not require the filing of a form with a governmental agency to come into existence?

A) a general partnership
B) a sole proprietorship
C) a corporation
D) a limited partnership
Question
Which of the following does not require two or more principals?

A) limited partnerships
B) limited liability partnerships
C) sole proprietorships
D) limited liability companies
Question
Bud and Lou own and operate a bakery.They each perform all of the functions in the bakery from baking to cleaning up.They make decisions jointly and hold themselves out to the public as business equals.When starting the business,Bud contributed $60,000 and Lou $40,000 to capitalize the business.They have a written agreement stating that they will share profits equally,however; responsibility for losses will be allocated at 60% to Lou and 40% to Bud.If Helen slips and falls in the shop and gets a judgment for $100,000,how may Helen proceed?
Question
Chris and Paul operate a business in which both have contributed $50,000 to the businesses capitalization.Chris makes all business decisions and Paul made Chris sign a partnership agreement saying that Paul is only liable for partnership debts up to $50,000.

A) both are general partners
B) Chris is a general partner and Paul is a limited partner
C) Paul is a general partner and Chris is a limited partner
D) both are limited partners
Question
May a limited partner ever be held liable for partnership liabilities beyond the amount of their partnership contribution? Explain.
Question
Name the three specific events that are deemed events of dissociation by the Revised Uniform Partnership Act considered to be the most common.
Question
What process will the courts use to resolve a dispute between principals of a limited partnership in the absence of a written partnership agreement?
Question
Sam and Dave are going to open a sporting goods store.They sign a written limited partnership agreement naming Dave as a limited partner and Sam the general partner.Sam files a certificate of limited partnership with the state.Sam contributes $100,000 toward the startup while Dave contributes $200,000 and they agree to split profits evenly because Sam will be working in the store and operating the day to day business.About a month after they open,the business is not doing well so Dave starts becoming more involved.Soon he is requiring that Sam approve all purchases with him and Dave is actively directing Jack,the sole other employee.One day,Geoff,a customer,is injured when a bowling ball falls off a shelf and shatters his foot.Geoff sues and is awarded a judgment of $1 million.

A) as this was a limited partnership, Sam is liable for $800,000 and Dave is liable for $200,000
B) Sam and Dave are each liable up to $500,000 each
C) under the circumstances, Sam and Dave are both jointly and severally liable for the full $1 million
D) whoever negligently secured the bowling ball on the shelf is liable for the $1 million liability
Question
You have just graduated and you want to start your own business.You have a degree in horticulture so you have chosen to open a florist shop and plant nursery.What type of business entity will you choose and explain its benefits and detriments in detail.
Question
Charlie and Mia have started selling t-shirts with iron on decals and lettering.They have no formal written agreement and simply decided to split all profits equally.Each has contributed $1,000 to the enterprise and since Mia will be doing all of the work,Charlie agrees that he will be responsible for 75% of any losses.Charlie does call in to make day to day decisions but Mia purchases the shirts,decals and lettering,operates the press and mans the store.Charlie stays home and smokes cigars and drinks scotch.Alan purchases one of their shirts and after wearing it all day discovers that the dye has run and his upper body is now blue.After bathing numerous times he finds that the blue dye will not wash out.Alan sues and is awarded $100,000 in damages.Charlie claims that there was no real business entity formed and that he should not be liable.How should the court decide?
Question
Thelma and Louise are roommates in college.Thelma loves to bake and makes incredibly tasty chocolate chip cookies.Louise suggests that they sell the cookies around campus and split the profits.They orally agree that Louise will advertise the cookies,provide decorative bags to put the cookies in and be responsible for deliveries around campus while Thelma will obtain the ingredients and do all the baking.They intend for the whole endeavor to be low key and informal.Have Thelma and Louise created a business entity and why is it important for them to fully understand their relationship?
Question
Bill is a general partner in a four member limited partnership with two general and two limited partners.The partnership is silent with regard to the duration of the partnership and Bill wishes to retire.

A) Bill may withdraw at any time and the partnership continues.
B) Bill must give six months notice before being permitted to withdraw.
C) The other general partner and the limited partner with the largest liability must agree to his withdrawal.
D) The court must grant permission for him to withdraw since the agreement was silent and the other partners and third party customers of the partnership must be protected
Question
In Clancy v.King,the plaintiff and defendant had operated a general partnership to promote certain literary works.Their partnership agreement contained standard language requiring the duty of diligence and care but specifically permitted the partners to freely compete against the partnership on an individual basis.The partnership entered into a very profitable agreement to have Clancy lend his name to fictional works of other authors taking advantage of Clancy's substantial fame and marketing power.Clancy retained the right to withdraw the use of his name at any time.Subsequent to his divorce from King,Clancy withdrew the use of his name from use in the agreement despite the lucrative nature of the agreement although the Clancy/King partnership continued to operate.Clancy's only participation in the agreement was the use of his name and no labor or other duties were required of him.King sued claiming a lack of good faith and the court decided:

A) the partnership's clause allowing competition by a partner with the partnership violated common law principles and could not be enforced so Clancy could opt out of the illegal contract and King had no case.
B) the partnership's clause allowing competition by a partner with the partnership violated RUPA standards and principles and could not be enforced so Clancy could opt out of the illegal contract and King had no case.
C) the partnership agreement clause allowing individual competition was enforceable and preempted the duty to act in good faith so Clancy could add or withdraw his name pursuant to the contract without liability.
D) the duty to act in good faith was not negated by the clause permitting competition so because Clancy withdrew his name solely to spite and injure his ex-wife he is liable to her and may not withdraw his name from the contract
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Deck 13: Choice of Business Entity, Sole Proprietorships, and Partnerships
1
Under the Revised Uniform Partnership Act,the act of leaving a partnership and ceasing to be a principal is called _______.
Dissociation
2
General partnerships are not created by filing a form with a government agency.
True
Explanation: The partnership is created when the parties agree to act as a partnership or their actions create a partnership by implication.
3
Even if the parties have no intent to form or operate as a partnership,their conduct may result in the law recognizing them to be partners.
True
Explanation: A partnership may be implied from the parties conduct even if no intent exists.
4
Capitalization refers to how the business will fund its operations.
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5
In all forms of business entities,the entity itself pays taxes on money earned by or through the entity.
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6
Tabletop,LP is registered in Nebraska but operates the business in the state of Iowa.Nebraska will require an in-state address and a ________ be identified to receive mail and accept legal documents.
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7
If two people identify themselves as general partners and create a written partnership agreement,the law is obligated to recognize their business entity as a general partnership.
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8
The duty of a partner to act in the best interests of the partnership is called a ________ duty.
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9
A business existing in or by right of law is considered a ________ entity.
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10
Federal laws regulating the selling of equity in limited partnerships through broker-dealer contracts are known as ________ laws.
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11
A general partner who rightfully dissociates from a partnership remains liable for predissociation debts of the partnership.
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12
The Revised Uniform Partnership Act was enacted by Congress to make partnership law more consistent and standardized throughout the United States.
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13
Under the Revised Uniform Limited Partnership Act,the act of leaving a limited partnership and ceasing to be a principal is called _______.
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14
Business entities are sometimes referred to as business _______.
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15
Business owners are also known as _______.
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16
General partnerships are pass-through entities regarding taxation,however; limited partnerships are not pass-through entities for taxes.
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17
A "Doing Business As" certificate is also known as a ________ certificate.
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18
Limited partnerships are required to file a/an ________ return with the IRS each year.
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19
Wayne Lewis wants to start a sole proprietorship named Lewis Plumbing Services.Because it will be a sole proprietorship,Wayne has no filing requirements other than obtaining the appropriate business license from the local and state government where the business will be located in.
D.B.A. certificate naming himself as principal.
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20
One disadvantage of a sole proprietorship business entity is that it is restricted to the principal and the principal's immediate family in terms of number of employees that may work for the business.
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21
Family limited partnerships are designed solely for estate planning and asset distribution for wealthy families.
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22
Robert and Philip are operating a general partnership.Under the Revised Uniform Partnership Act,if Robert rightfully or wrongfully dissociates from the partnership,the partnership continues to exist.
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23
Joint ventures are governed by the same legal principles as a general partnership.
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24
Sole proprietorships may sell equity in the company in order to raise funds.
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25
With regard to dissociation and dissolution,the Revised Uniform Partnership Act adopted and reserved the same general rules and procedures as its predecessor,the Uniform Partnership Act.
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26
Family limited partnerships are designed for parents and children to operate a business together while protecting family related assets.
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27
In the absence of an agreement to the contrary,the Revised Uniform Partnership Act mandates that general partnership profits be split equally amongst the partners.
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28
Under the Revised Uniform Limited Partnership Act,limited partners may act as consultants and may contribute their expertise to the limited partnership.
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29
A limited partnership is required to have two or more limited partners.
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30
The Revised Uniform Limited Partnership Act requires that there be a written partnership agreement regarding limited partnerships.
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31
A limited partnership is formed by the limited partner filing a certificate of limited partnership with the appropriate state governmental authority.
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32
To date,every state in the union has adopted the Revised Uniform Partnership Act except the state of Louisiana.
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33
An advantage of operating as a sole proprietorship is that personal liability for any business losses is limited to the owner's investment in the business.
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34
Mike is a limited partner in Big Blue,LP.The partnership agreement permits him to have a say in the removal of general partners and the blocking of new partners.This agreement will jeopardize his limited partner status.
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35
If a limited partner actively participates in day to day management of the business they may forfeit their limited partner status and lose their limited liability for debts and liabilities.
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36
In United States v.Morton,Morton was declared a general partner despite all paperwork including tax returns naming her as a limited partner because of her conduct.
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37
A sole proprietorship automatically is dissolved when the owner dies.
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38
If a sole proprietorship loses money,the principal may deduct the losses from her own personal tax liability if any.
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39
If someone successfully sues a sole proprietorship,they must exhaust the businesses assets before they may go after the principal's personal assets.
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40
One disadvantage of a sole proprietorship business entity is that it is restricted to a single location and cannot expand.
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41
A business which exists in fact although not formally recognized is referred to as being:

A) de facto.
B) de jure.
C) de minimus.
D) de legal
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42
A partnership is considered fully terminated:

A) after dissociation.
B) after winding up.
C) after dissolution.
D) after the termination certificate is properly filed
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43
Stan and Frank have started a general partnership.Stan has contributed 95% of the startup capital and has the business experience and contacts while Frank's primary contribution is labor necessary to operate the business.Management decisions are jointly made.At the end of the year,the business has shown a $100,000 profit.They have no formal written partnership agreement.

A) Stan is entitled to $95,000 and Frank gets $5,000
B) RUPA mandates that each get $50,000
C) RUPA mandates that Frank be paid a fair amount for his labor contribution and the remaining profits be split with 95% going to Stan and 5% going to Frank
D) RUPA mandates that Frank be paid a fair amount for his labor contribution and the remaining profits be split equally between Stan and Frank
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44
Jonathan has graduated and wants to start a business.Which business entity gives him the most complete and exclusive control over the business and any business decisions?

A) sole proprietorship
B) limited liability company
C) corporation
D) general partnership
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45
Redrock GP has decided to go out of business.The sale of the partnership assets and the making of payments to creditors will occur during the ________ phase of the closing of a partnership.

A) dissolution
B) dissociation
C) winding up
D) termination
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46
Which of the following requires a formal filing to be recognized as a valid business entity?

A) a sole proprietorship
B) a general partnership
C) a limited partnership
D) all business entities require a formal filing to validly exist
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47
Steve has opened a sole proprietorship bicycle shop.The business shows a net income of $100,000.Steve took a salary of $40,000.The remaining money is left in the bank.

A) at tax time, the business pays taxes on $100,000 and Steve pays taxes on $40,000
B) at tax time the business pays taxes on $140,000
C) at tax time Steve pays taxes on $140,000
D) at tax time the business pays taxes on $70,000 and Steve pays taxes on $70,000
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48
Harry wants to start a personal training business.He should choose a sole proprietorship entity if:

A) he seeks limited liability.
B) he seeks perpetual existence for the new company.
C) he seeks the ability to raise capital by selling equity in the business.
D) he seeks to avoid management conflict
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49
Frank and Jesse are operating as a general partnership.A question has arisen not covered under their partnership agreement and also not addressed by the Revised Uniform Partnership Act.What will the courts do to resolve the situation?

A) dissolve the partnership and allow them to reform
B) look to foreign partnership laws because RUPA encompasses all U.S. partnership law
C) look to the common law
D) look to the UCC for a gap filler
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50
With regard to taxation of partnerships:

A) a partnership files a federal and state partnership tax return and pays taxes on its income.
B) a partnership must file an information return.
C) a partnership files a state partnership tax return and pays taxes on its income but no federal filing is required.
D) partnerships have no tax filing responsibilities
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51
Regarding limited partners:

A) they may withdraw from the partnership at any time but they forfeit their investment if they withdraw early.
B) they may not withdraw before the time that the partners have agreed that the partnership will terminate.
C) if the partnership agreement is silent as to notice require prior to termination, 90 days written notice will be required before the limited partner may withdraw.
D) they must obtain a court order to withdraw because of their limited liability and its effect on the remaining partners and third parties dealing with the business
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52
A disadvantage of the sole proprietorship is:

A) the difficulty of formation.
B) the inflexibility of management and control.
C) the unlimited liability of the principal.
D) the double taxation that occurs
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53
The Revised Uniform Partnership Act mandates that with regard to partnership debts and liabilities,general partners are:

A) not personally liable for non-debt liabilities which may only be charged to the partnership but personally liable for debts.
B) personally jointly liable for unpaid debts and liabilities.
C) personally jointly and severally liable for unpaid debts and liabilities.
D) not personally liable for debts or liabilities which may only be charged to the partnership
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54
In a general partnership:

A) profits and losses must be split equally amongst the partners.
B) an unequal split of profits may be agreed to based on the partnership agreement, but losses must be split equally.
C) profits must be split equally, but losses may be split unequally based on the partnership agreement.
D) profits and losses may be unequally split based on the partnership agreement
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55
Lisa and Tara are operating a business as a general partnership without an express partnership agreement.Should a dispute arise,the courts will look to ________ to resolve the issue regarding operation of the partnership.

A) the common law
B) state contract law
C) the Revised Uniform Partnership Act
D) federal contract law
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56
Bob,Carol and Ted have decided to go into businesses as a limited partnership importing and selling exotic spices.Bob and Carol will manage the business and Ted will have no role in the day to day operations.Bob and Carol contributed have each invested $500,000 and Ted has contributed the building and land that the business will be operated from.Alice,a customer,contracts a rare disease from a contaminated spice sold by the company and sues.Alice is awarded a judgment for $5 million.After she exhausts the assets of the partnership,having the property and building sold and seizing all other property,$3 million remains unpaid.

A) Bob, Carol and Ted each owe $1 million and Alice must sue each for their part
B) Bob, Carol and Ted each owe $3 million jointly and severally so Alice may sue one, two or all three for the $3 million balance
C) Bob and Carol each owe $1.5 million and Alice must sue each for their part; Ted has no additional liability
D) Bob and Carol each owe $3 million jointly and severally so Alice may sue one or both of them; Ted has no additional liability
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57
Mike lends money to Kathy as a business loan to Kathy who is capitalizing her start up sole proprietorship named Kathy's Things.If Mike must sue for repayment,he would sue:

A) Kathy.
B) Kathy's Things.
C) Kathy and Kathy's Things.
D) no one since the loan makes him a partner
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58
Which of the following is not an option available to a general partnership seeking capitalization?

A) borrowing money from one or more of the partners
B) selling the right to a percentage of the profits to an investor
C) selling ownership rights through the public markets
D) borrowing money from a commercial lender
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59
A limited partnership requires:

A) at least two general partners.
B) at least two limited partners.
C) a written limited partnership agreement.
D) at least one general and one limited partner
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60
Dissolving a limited partnership requires:

A) a unanimous vote amongst all partners.
B) a unanimous vote of the general partners and a majority vote of the limited partners.
C) a unanimous vote of the general partners and consent of any limited partner who owns a majority of the rights to receive a distribution as a limited partner.
D) a unanimous vote of the limited partners and consent of any general partner who owns a majority of the rights to receive a distribution as a general partner
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61
How is the Revised Uniform Partnership Act similar to the Uniform Commercial Code in terms of gap filling?
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62
A general partnership may be formed by:

A) oral agreement.
B) written agreement.
C) either oral or written agreement.
D) either oral, written or implied agreement
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63
Principals generally have no personal liability for the business entity's debts regarding:

A) limited partnerships.
B) limited liability partnerships.
C) corporations.
D) limited liability companies
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64
You have been invited to become a member of a partnership.What are some of the considerations you need to assess in making a decision to become a general or limited partner?
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65
Roger is a limited partner in a business.To retain his limited liability protection he must not:

A) participate in the approval of new partners.
B) participate in the removal of existing partners.
C) consult or be paid by the business.
D) assume management responsibilities
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66
Name and discuss the fiduciary duties owed by general partners to the partnership as set out in the Revised Uniform Partnership Act.
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67
Which of the following does not require a duty of care or good faith to other principals?

A) a sole proprietorship
B) a general partnership
C) a limited partnership
D) a family limited partnership
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68
Which of the following does not require the filing of a form with a governmental agency to come into existence?

A) a general partnership
B) a sole proprietorship
C) a corporation
D) a limited partnership
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69
Which of the following does not require two or more principals?

A) limited partnerships
B) limited liability partnerships
C) sole proprietorships
D) limited liability companies
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70
Bud and Lou own and operate a bakery.They each perform all of the functions in the bakery from baking to cleaning up.They make decisions jointly and hold themselves out to the public as business equals.When starting the business,Bud contributed $60,000 and Lou $40,000 to capitalize the business.They have a written agreement stating that they will share profits equally,however; responsibility for losses will be allocated at 60% to Lou and 40% to Bud.If Helen slips and falls in the shop and gets a judgment for $100,000,how may Helen proceed?
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71
Chris and Paul operate a business in which both have contributed $50,000 to the businesses capitalization.Chris makes all business decisions and Paul made Chris sign a partnership agreement saying that Paul is only liable for partnership debts up to $50,000.

A) both are general partners
B) Chris is a general partner and Paul is a limited partner
C) Paul is a general partner and Chris is a limited partner
D) both are limited partners
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72
May a limited partner ever be held liable for partnership liabilities beyond the amount of their partnership contribution? Explain.
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73
Name the three specific events that are deemed events of dissociation by the Revised Uniform Partnership Act considered to be the most common.
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74
What process will the courts use to resolve a dispute between principals of a limited partnership in the absence of a written partnership agreement?
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75
Sam and Dave are going to open a sporting goods store.They sign a written limited partnership agreement naming Dave as a limited partner and Sam the general partner.Sam files a certificate of limited partnership with the state.Sam contributes $100,000 toward the startup while Dave contributes $200,000 and they agree to split profits evenly because Sam will be working in the store and operating the day to day business.About a month after they open,the business is not doing well so Dave starts becoming more involved.Soon he is requiring that Sam approve all purchases with him and Dave is actively directing Jack,the sole other employee.One day,Geoff,a customer,is injured when a bowling ball falls off a shelf and shatters his foot.Geoff sues and is awarded a judgment of $1 million.

A) as this was a limited partnership, Sam is liable for $800,000 and Dave is liable for $200,000
B) Sam and Dave are each liable up to $500,000 each
C) under the circumstances, Sam and Dave are both jointly and severally liable for the full $1 million
D) whoever negligently secured the bowling ball on the shelf is liable for the $1 million liability
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76
You have just graduated and you want to start your own business.You have a degree in horticulture so you have chosen to open a florist shop and plant nursery.What type of business entity will you choose and explain its benefits and detriments in detail.
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77
Charlie and Mia have started selling t-shirts with iron on decals and lettering.They have no formal written agreement and simply decided to split all profits equally.Each has contributed $1,000 to the enterprise and since Mia will be doing all of the work,Charlie agrees that he will be responsible for 75% of any losses.Charlie does call in to make day to day decisions but Mia purchases the shirts,decals and lettering,operates the press and mans the store.Charlie stays home and smokes cigars and drinks scotch.Alan purchases one of their shirts and after wearing it all day discovers that the dye has run and his upper body is now blue.After bathing numerous times he finds that the blue dye will not wash out.Alan sues and is awarded $100,000 in damages.Charlie claims that there was no real business entity formed and that he should not be liable.How should the court decide?
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78
Thelma and Louise are roommates in college.Thelma loves to bake and makes incredibly tasty chocolate chip cookies.Louise suggests that they sell the cookies around campus and split the profits.They orally agree that Louise will advertise the cookies,provide decorative bags to put the cookies in and be responsible for deliveries around campus while Thelma will obtain the ingredients and do all the baking.They intend for the whole endeavor to be low key and informal.Have Thelma and Louise created a business entity and why is it important for them to fully understand their relationship?
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79
Bill is a general partner in a four member limited partnership with two general and two limited partners.The partnership is silent with regard to the duration of the partnership and Bill wishes to retire.

A) Bill may withdraw at any time and the partnership continues.
B) Bill must give six months notice before being permitted to withdraw.
C) The other general partner and the limited partner with the largest liability must agree to his withdrawal.
D) The court must grant permission for him to withdraw since the agreement was silent and the other partners and third party customers of the partnership must be protected
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80
In Clancy v.King,the plaintiff and defendant had operated a general partnership to promote certain literary works.Their partnership agreement contained standard language requiring the duty of diligence and care but specifically permitted the partners to freely compete against the partnership on an individual basis.The partnership entered into a very profitable agreement to have Clancy lend his name to fictional works of other authors taking advantage of Clancy's substantial fame and marketing power.Clancy retained the right to withdraw the use of his name at any time.Subsequent to his divorce from King,Clancy withdrew the use of his name from use in the agreement despite the lucrative nature of the agreement although the Clancy/King partnership continued to operate.Clancy's only participation in the agreement was the use of his name and no labor or other duties were required of him.King sued claiming a lack of good faith and the court decided:

A) the partnership's clause allowing competition by a partner with the partnership violated common law principles and could not be enforced so Clancy could opt out of the illegal contract and King had no case.
B) the partnership's clause allowing competition by a partner with the partnership violated RUPA standards and principles and could not be enforced so Clancy could opt out of the illegal contract and King had no case.
C) the partnership agreement clause allowing individual competition was enforceable and preempted the duty to act in good faith so Clancy could add or withdraw his name pursuant to the contract without liability.
D) the duty to act in good faith was not negated by the clause permitting competition so because Clancy withdrew his name solely to spite and injure his ex-wife he is liable to her and may not withdraw his name from the contract
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