Deck 29: Sole Proprietorships,partnerships, Limited

Question 1

A partner is a co-owner of partnership property.

Answer 1

False

Question 2

The Uniform Partnership Act governs the operation of partnerships.

Answer 2

True

Question 3

For most purposes,the law recognizes a partnership as an independent entity.

Answer 3

True

Question 4

On a partner's dissociation,his or her right to participate in the management and conduct of the business terminates.

Question 5

One of the disadvantages of a sole proprietorship is that the owner is liable for all the actions of the business.

Question 6

For federal income tax purposes,a partnership is NOT a tax-paying entity.

Question 7

A sole proprietor must create a separate business organization to create a sole proprietorship.

Question 8

Starting a sole proprietorship is easier and less costly than starting any other form of business.

Question 9

Joint ownership of property in and of itself does NOT create a partnership.

Question 10

A third party cannot sue one of the partners of a partnership without suing all members of the partnership.

Question 11

Each partner in a partnership has the right to full and complete information concerning the conduct of all aspects of partnership business.

Question 12

An oral agreement to form a partnership can never be enforced.

Question 13

A partnership may be sued.

Question 14

On a partner's dissociation,his or her interest in the partnership must be purchased.

Question 15

A partner may dissociate from a partnership by declaring bankruptcy..

Question 16

A partner owes a partnership and its partners a duty of gross negligence and reckless conduct.

Question 17

A sole proprietorship continues in business despite the death of the owner.

Question 18

A partner has a duty to devote time,skill and energy on behalf of the partnership business.

Question 19

A sharing of both profits and losses is the only requirement of a partnership.

Question 20

In a sole proprietorship,the owner receives 90 percent of the profits and the government receives 10 percent.

Question 21

Jim organized,and owns and operates,Jim's Landscaping Service in the simplest form of business organization.This is

A)a limited liability partnership.
B)a limited liability company.
C)a partnership.
D)a sole proprietorship.

Question 22

In a limited liability partnership,a partner can be exempt from personal liability for the malpractice of other partners.

Question 23

In a limited liability limited partnership,the liability of a general part?ner is NOT the same as the liability of a limited partner.

Question 24

The managers of a limited liability company must be members.

Question 25

The members of a limited liability company are fully liable for its obligations.

Question 26

In a limited partnership,a limited partner is liable for all partnership debts.

Question 27

A limited liability company can have only a limited number of shareholder-members.

Question 28

Julia owns and operates Collectable Dolls without creating a separate business organization.She receives all the profits from the doll sales.Collectable Dolls is most likely a

A)general partnership.
B)limited liability partnership.
C)sole proprietorship.
D)limited liability company.

Question 29

A limited liability company is operated in compliance with state law.

Question 30

Fred starts up,and assumes the financial risk of,Graphic Ads,a new marketing enterprise.Fred is

A) a member.
B) a limited partner.
C) an agent.
D) a sole proprietor.

Question 31

The maximum amount of money at risk by a limited partner is the amount of his or her contribution to the limited partnership.

Question 32

A limited liability company shares the tax advantages of a partnership.

Question 33

A corporation cannot be a member of a limited liability company.

Question 34

Leigh wants to go into the business of construction contracting.Among the reasons that would probably convince Leigh to set up his business as a sole proprietorship would be

A)its greater organizational flexibility.
B)its limited liability.
C)its perpetual existence.
D)the ease of transferring the business to other family members.

Question 35

Federal law dictates the requirements for the formation of a limited liability company.

Question 36

A limited liability partnership must be formed in compliance with state law.

Question 37

In a limited liability company,members are allowed to participate in the manage?ment of the company.

Question 38

Kelly,the owner of Llama Farms,a sole proprietorship,wants to obtain additional busi?ness capital but to maintain control.This can best be accomplished by

A)borrowing funds.
B)bringing in partners.
C)issuing stock.
D)selling the business.

Question 39

In winding up a general partnership,creditors are paid before partners receive their capital contributions.

Question 40

Foreign investors cannot be limited liability company members.

Question 41

Noah and Orin do business as Personnel Partners.In most states,for purposes of suing and being sued,Personnel Partners would be treated as

A)an aggregate of the individual partners.
B)a natural person.
C)an independent entity.
D)a non-existent party.

Question 42

Rona and Stiv do business as Treasure Island Traders.In a deal with Unlimited Potential,Inc.,Rona makes a bid in competition with her firm.Rona is

A)liable for breach of the duty of care.
B)liable for breach of the duty of economic sense.
C)liable for breach of the duty of loyalty.
D)not liable.

Question 43

Sara is a partner in the general partnership Big Cookies.Sara does NOT owe Big Cookies a duty to devote

A)time.
B)compassion.
C)skill.
D)energy.

Question 44

Dave and Eiger are partners in First-Place Athletic Supplies,which sells sports equipment.Dave manages the business.Unless the partnership agreement states otherwise,Dave is

A)entitled to compensation in proportion to its effect on the business.
B)entitled to compensation in proportion to the effort expended.
C)entitled to compensation in proportion to the effort required.
D)not entitled to compensation for his effort.

Question 45

Marta is a partner in Kasper's Kleaning.When Marta dies her heirs are

A)not entitled to any interest in Kasper's Kleaning.
B)entitled to half of Marta's interest in Kasper's Kleaning.
C)entitled to the value of Marta's interest in Kasper's Kleaning.
D)entitled to one third of Marta's interest in Kasper's Kleaning.

Question 46

Chet is a partner in Diligent Accounting Service.Chet can inspect

A)all of Diligent's books and records.
B)Diligent's books and records only as the firm's management permits.
C)Diligent's books and records only for a reasonable purpose.
D)Diligent's books and records relating only to Chet's capital contribution.

Question 47

Will and Jay want to form a general partnership.To form a legal partnership,their agreement need NOT include

A)a sharing of profits and losses.
B)a joint ownership of the business.
C)an equal right to management in the business.
D)the initials LLC in the name of the business.

Question 48

Denise and Elke do business as Final Curtain Decorators.In most states,for purposes of holding title to property,this partnership would be treated as

A)an aggregate of the individual partners.
B)a natural person.
C)an independent entity.
D)a non-existent party.

Question 49

Bo and Clancy decide to do business as Marketing & Promotion Services.To be a partnership,this association can result from an agreement that is

A)express,but not from an agreement that is implied.
B)implied,but not from an agreement that is express.
C)oral,written,or implied by conduct.
D)written,but not from an agreement that is oral or implied.

Question 50

Kathy and John decide to form a partnership to sell fish food to local fish farms for the next five years.To be enforceable under the Statute of Frauds,the partnership agreement

A)must be signed by a notary public.
B)must be in writing.
C)must be oral.
D)cannot involve a third party.

Question 51

Sabin and Tyler agree while talking on the phone to form a partner?ship.Their partnership agreement is legally binding

A)only if a third person knows of the agreement.
B)only if the agreement is reduced to writing.
C)only if the parties exchange valid consideration.
D)without more.

Question 52

Robert owns Textbooks Plus,a sole proprietorship that sells textbooks.When Robert dies,Textbooks Plus will

A)be automatically dissolved.
B)pass directly to his oldest child.
C)pass directly to the state.
D)be evenly divided among all Robert's heirs.

Question 53

Grady and Hedley do business as Island Tours.For federal income tax purposes,Island Tours would be treated as

A)an aggregate of the individual partners.
B)a natural person.
C)an independent entity.
D)a non-existent party.

Question 54

Tom and Bill are partners in Tough Trucks Towing.James is not a partner.In dealing with Fred,James holds himself out to be a partner in Tough Trucks Towing and Fred contracts to have Tough Trucks Towing tow some vehicles for him.If Tough Trucks fails to tow the vehicles,a court may conclude that

A)a partnership by estoppel exists and James is liable to Fred.
B)no partnership exists and James is not liable to Fred.
C)a partnership by estoppel exists and Fred has all partnership rights.
D)no partnership exists,but Tom and Bill are liable to Fred.

Question 55

Sweet Selections is a general partnership that sells candy,cards and flowers.Sweet Selections has ten partners.Jill and Amy each have a 25 percent interest in the partnership.All the other members have a 10 percent interest.To pass a management decision

A)a majority of the partners must agree to the decision.
B)both Jill and Amy must agree to the decision.
C)Jill or Amy must agree to the decision.
D)30 percent of the partners must agree to the decision.

Question 56

Edgar,Jon and Phoebe do business as Reliable Movers.Phoebe develops a debilitating illness and can no longer work.Phoebe

A)may dissociate from the partnership.
B)may not dissociate from the partnership without Edgar and Jon's consent.
C)must pay damages to Edgar and Jon for the loss of her work.
D)may terminate the partnership.

Question 57

Phillipa is the sole proprietor of Fun Floral Arrangements.As a sole proprietor,Phillipa

A)does not pay income taxes on Fun Floral Arrangements' profits.
B)pays only personal income taxes on Fun Floral Arrangements' profits.
C)is taxed twice on Fun Floral Arrangements' profits.
D)pays both personal and sole proprietor income taxes on Fun Floral Arrangements' profits.

Question 58

Jody owns KuppaJava Kiosks,a sole proprietorship.Jody's liability is

A)limited by state statute and varies from state to state.
B)limited to the extent of capital expenditures.
C)limited to the extent of his or her original investment.
D)unlimited.

Question 59

Tundi is a partner in YooHoo! Amusement,a new partnership.A YooHoo! debt comes due.Tundi is

A)not liable for the debt.
B)only liable for the debt up to the amount of his capital contribution.
C)personally liable only to the extent the other partners do not pay.
D)personally liable to the full extent of the debt.

Question 60

Clu,Dolf,and Elton do business as Fertile Valley Farm.Clu's relationship to the firm ends,but it continues to do business.This is

A)dissociation.
B)dissolution.
C)winding up.
D)wrongful.

Question 61

Newt is considering forms of business organization for Newton Design,an ar?chitectural firm.An advantage of a limited liability partnership is that partners can avoid personal liability for

A)their own wrongful acts.
B)only other partners' malpractice.
C)only partnership obligations that exceed capital contributions.
D)only partnership obligations that fall within capital contributions.

Question 62

Venture Capital,LP,is a limited partnership.A Venture limited partner loses his or her limited liability if he or she

A)acts as the firm's manager.
B)has full awareness of the firm's business activities.
C)invests in the firm's competitor.
D)votes on the firm's sale or dissolution.

Question 63

Dani is considering forms of business organization for her financial advisory firm.Like most states,Dani's state requires that to form a limited liabil?ity company,she must file with a central state agency

A)articles of certification.
B)articles of formation.
C)articles of organization.
D)no specific documents.

Question 64

Mead,Nero,and Olen do business as Pipe & Plumbing Services.After Mead's relationship to the firm ends,Nero and Olen agree to discontinue the business.This is

A)dissociation.
B)dissolution.
C)gross negligence.
D)simple misconduct.

Question 65

Jim and Kyle are partners in J&K Sales,which exports technical equip?ment under a three-year partnership agreement.The U.S.gov?ernment declares that the equipment can no longer be ex?ported.J&K

A)dissolves as soon as the stated term expires.
B)dissolves as soon as the partners agree to dissolve it.
C)dissolves immediately unless the partners change its business.
D)does not dissolve.

Question 66

Kristal is a member of Laboratory CSI Services,LLC,a limited liability company.Kristal can participate in the firm's management

A)only to the extent that she assumes liability for the firm's debts.
B)only to the extent of her investment in the firm.
C)to any extent.
D)to no extent.

Question 67

Owen plans to open Owen's Pets Store,a pet sales and pet supplies outlet,and to hire Quimby and Ruth.Owen will invest only his own money.He does not ex?pect to make any profit for at least two years and to make almost no profit for the first three years,but he hopes to expand eventually.Which form of business organization would be most appropriate? What are the chief characteristics,advantages,and disadvantages of this form of busi?ness organization? If Owen wants to obtain additional capital to expand the business,but does not want to lose control of the firm,what is his best option?

Question 68

Jay is a member of Klondike Coffee,LLC,a limited liability company.Jay is liable for Klondike's debts

A)in proportion to the total number of members.
B)to the extent of his investment in the firm.
C)to the extent that the other members do not pay the debts.
D)to the full extent.

Question 69

Sally and Tom decide to go into business,selling discounted merchandise through their Web site "e-Buy." They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm.The agreement says nothing about the management of the firm or a division of profits.Without Sally's knowledge,Tom tells United Computer Products,Inc.,that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy.In the first year,e-Buy makes a profit of $50,000.What are the partners' rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year's profits? If so,how much is each entitled to?

Question 70

Bret is a general partner in Capitol Realty,LLLP,a limited liability lim?ited partnership,which cannot pay its debts.Bret is personally li?able for the debts

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution.
D)to the full extent.

Question 71

Rick and Sandy are limited partners in Total Profit Enterprises,a limited part?ner?ship.To avoid personal liability for partnership obligations,they must not

A)acquire an interest in the firm.
B)contribute property to the firm.
C)engage in activities independent of the firm's business.
D)participate in the firm's management.

Question 72

Greta is a member of Hovercraft LLC.As a member,Greta is

A)a manager or officer,but not an owner.
B)an investor,but not a manager,officer,or owner.
C)an owner.
D)a participant,but not an investor,manager,officer,or owner.