Question 1

What is the legal outcome when one partner exceeds his or her authority and borrows money on behalf of a partnership without the consent of the fellow partners?

Accepted Answer

A)  The other partners will be liable to the third party because partners are mutual agents. 
B)  Non-consenting partners can avoid liability by proving the partner breached the partnership agreement. 
C)  The third party can collect the debt,but only from the partner who authorized the debt. 
D)  The third party can take collection assets against the partnership assets but not the personal assets of the non-consenting partners.

Question 2

Which of the following may result in a loss of limited liability in a corporation?

Accepted Answer

A)  employee misrepresentation of a product 
B)  fraud on customers 
C)  employee negligence 
D)  fraud on creditors

Question 3

Which form of business organization provides the most control but also the greatest liability risk for the owner?

Accepted Answer

A)  partnership 
B)  sole proprietorship 
C)  joint venture 
D)  corporation

Question 4

Which of the following is an example of the implied rules contained in the Partnership Act ?

Accepted Answer

A)  Each partner may sue the other for breach of fiduciary duty. 
B)  Each partner is a fiduciary to the other partners. 
C)  Each partner is entitled to have their name in the partnership business. 
D)  Each partner may take part in the management of the business.

Question 5

The Partnership Act provides for the following rule: "all partners are to share equally in the capital and profits of the business and must contribute equally to the losses." Which statement best exemplifies this rule?

Accepted Answer

A)  The losses are restricted to the capital investments made by each partner. 
B)  This rule is optional and may be varied by written agreement. 
C)  This rule is mandatory and cannot be modified by agreement. 
D)  The rule applies only to limited liability partnerships.

Question 6

The duration of existence of a proprietorship is limited by the life of the owner,whereas a partnership is terminated by agreement and a corporation is perpetual unless dissolved.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is most likely to be indicated by a description that includes,among other things,the option to purchase a partner's interest and the valuation of interests?

Accepted Answer

A)  a partnership agreement clause pertaining to dissolution of partnership 
B)  a partnership agreement clause pertaining to changes in partnership 
C)  a clause in a partnership agreement that addresses profit distribution 
D)  a clause in a partnership agreement that avoids litigation and animosity

Question 8

A partnership is much like a sole proprietorship in that neither has a legal personality-or legal existence-separate from the people who comprise them.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a characteristic of a franchisor-franchisee relationship?

Accepted Answer

A)  fiduciary obligations 
B)  duty of good faith 
C)  a limited partnership 
D)  a limited liability partnership

Question 10

A court has been asked to resolve a matter involving the disputed interests of partners regarding partnership property and their respective rights and duties in relation to the partnership.Which of the following would immediately provide the court with a basis for a decision?

Accepted Answer

A)  the proportional distribution of the losses 
B)  the proportional distribution of capital 
C)  any terms expressed or implied in the partners' agreement 
D)  any expressed terms set out in the partnership agreement

Question 11

What type of liability would flow to the other partners in circumstances involving a wrongful act or omission by one partner acting within the course of employment?

Accepted Answer

A)  joint liability 
B)  unlimited liability 
C)  joint and several liability 
D)  several liability

Question 12

Which of the following is a provision of the Partnership Act in matters relating to Sheps & Shaps Law Offices?

Accepted Answer

A)  The managing partner is the authorized agent of the firm. 
B)  Each partner is an agent of the firm. 
C)  Each partnership must designate a managing partner. 
D)  The partners are the firm's fiduciary agents.

Question 13

Which statement best describes how a partnership comes into existence?

Accepted Answer

A)  The partners must sign a written partnership agreement. 
B)  The partners must register the partnership. 
C)  Two or more people carry on business together with a view to profit. 
D)  Two or more people purchase property together.

Question 14

It is almost always more expensive to organize a corporation than a sole proprietorship or partnership.

Accepted Answer

A) True 
 B)False

Question 15

What are the most likely sources of regulation a partnership must be aware of as it conducts its business each day?

Accepted Answer

A)  contract,agency,and corporate law 
B)  partnership,employment,and application law 
C)  agency,contract,and partnership law 
D)  contract,employment,and application law

Question 16

Identify the basic issues that should be expressly addressed in a partnership agreement,including the description of each respective clause.Lastly,indicate when a partnership agreement would have to be revisited.

Accepted Answer

The answer of Identify the basic issues that should be...

Question 17

The form of business that provides the most limited sources of capital is a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 18

The potential for a board management base that exists in the corporation creates many levels of authority that can be an impediment to decision making.

Accepted Answer

A) True 
 B)False

Question 19

What is a joint venture and what distinguishes it from the forms of business?

Accepted Answer

The answer of What is a joint venture and what...

Question 20

Len,Jill,and Mark own a partnership called Splats.Len's capital contribution to the partnership was $25 000,Jill's was $12 500,and Mark's was $20 000.Jill is duly registered as a limited partner and has acted solely as a financier.There is no agreement on sharing profits or losses among the partners,and none of them has drawn any income from Splats.The partnership borrowed $40 000 from the bank,but Splats eventually became insolvent and was unable to repay the loan.The bank sued Len and recovered the full $30 000 from him.When Len's lawyer gave him advice,what amount would he likely indicate Len is entitled to legally recover from Jill?

Accepted Answer

A)  $0 
B)  $10 000 
C)  $12 500 
D)  $20 000

Exam 14: Business Forms and Arrangements

What is the legal outcome when one partner exceeds his or her authority and borrows money on behalf of a partnership without the consent of the fellow partners?

Which of the following may result in a loss of limited liability in a corporation?

Which form of business organization provides the most control but also the greatest liability risk for the owner?

Which of the following is an example of the implied rules contained in the Partnership Act ?

The Partnership Act provides for the following rule: "all partners are to share equally in the capital and profits of the business and must contribute equally to the losses." Which statement best exemplifies this rule?

The duration of existence of a proprietorship is limited by the life of the owner,whereas a partnership is terminated by agreement and a corporation is perpetual unless dissolved.

Which of the following is most likely to be indicated by a description that includes,among other things,the option to purchase a partner's interest and the valuation of interests?

A partnership is much like a sole proprietorship in that neither has a legal personality-or legal existence-separate from the people who comprise them.

Which of the following is a characteristic of a franchisor-franchisee relationship?

A court has been asked to resolve a matter involving the disputed interests of partners regarding partnership property and their respective rights and duties in relation to the partnership.Which of the following would immediately provide the court with a basis for a decision?

What type of liability would flow to the other partners in circumstances involving a wrongful act or omission by one partner acting within the course of employment?

Which of the following is a provision of the Partnership Act in matters relating to Sheps & Shaps Law Offices?

Which statement best describes how a partnership comes into existence?

It is almost always more expensive to organize a corporation than a sole proprietorship or partnership.

What are the most likely sources of regulation a partnership must be aware of as it conducts its business each day?

Identify the basic issues that should be expressly addressed in a partnership agreement,including the description of each respective clause.Lastly,indicate when a partnership agreement would have to be revisited.

The form of business that provides the most limited sources of capital is a sole proprietorship.

The potential for a board management base that exists in the corporation creates many levels of authority that can be an impediment to decision making.

What is a joint venture and what distinguishes it from the forms of business?