Deck 26: Sole Proprietorships, Partnerships, and Limited Liability Organizations

Question 1

Of the following, the only one that is a trading partnership is a(n)

A) law firm.
B) medical office.
C) accounting firm.
D) auto repair shop.

Answer 1

D

Question 2

The personal assets of a partner may be seized to satisfy partnership debts.

Answer 2

True

Question 3

The type of business organization formed most easily is the

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

Answer 3

B

Question 4

Co-owners of a business are known as partners.

Question 5

To avoid problems, the partnership agreement should contain provisions for settling disputes among the partners.

Question 6

One who is known to the public as a partner and who is active in the partnership is a

A) general partner.
B) limited partner.
C) silent partner.
D) dormant partner.

Question 7

A sole proprietorship usually must

A) register to collect sales taxes.
B) comply with all applicable government rules and regulations.
C) obtain a license for certain types of businesses.
D) all of these.

Question 8

A limited partner does not have the right to inspect the books of the partnership.

Question 9

The easiest form of business to establish is the partnership.

Question 10

Both sole proprietorships and partnerships must pay income taxes.

Question 11

Most businesses in the United States are organized as sole proprietorships.

Question 12

If a person wishes to join an existing partnership, all existing partners must agree to admit that person.

Question 13

A sole proprietor receives all the income from a business but also bears all losses.

Question 14

Certain decisions in a partnership are so important that they must be unanimous.

Question 15

All states permit the formation of limited partnerships.

Question 16

A partner has the right to inspect the books and records of the partnership.

Question 17

A partnership can be formed only by the express agreement of the parties.

Question 18

Under certain circumstances, a joint venture may be treated as a corporation.

Question 19

If a sole proprietorship or partnership operates under a name that is different from its owner's, the name of the business must be registered and the owner identified.

Question 20

The disadvantage of the sole proprietorship is

A) lack of flexibility in managing the business.
B) unlimited liability for debts of the business.
C) ease of formation.
D) none of these.

Question 21

A business owned and operated by one person is a(n) ____________________.

Question 22

If a partner decides to start a new business, this must be approved by

A) a two-thirds vote of the partners.
B) a unanimous vote of the partners.
C) the county in which the partnership is located.
D) the stockholders.

Question 23

For federal income tax purposes, partnerships

A) file an informational return only.
B) file and pay income taxes.
C) pay one third of the income taxes if there are two partners.
D) pay one fourth of the income taxes if there are four partners.

Question 24

The written agreement that creates a partnership and outlines the partners' rights, duties, and powers is the ____________________.

Question 25

One of the advantages of the partnership form of organization is

A) ease of transferring a partnership interest.
B) limited liability for partnership debts.
C) ease of organization.
D) ease of settling disputes among the partners.

Question 26

A partnership agreement must be in writing if

A) one of the partners is a minor.
B) there are more than two partners.
C) the partnership is to last three years.
D) the partnership is for professional purposes.

Question 27

All of the following are requirements of a partnership except

A) formation by two or more persons.
B) express agreement.
C) formation to carry on a business.
D) operation for profit.

Question 28

A partner who has an equal voice in management decisions but whose existence as a partner is not to be revealed to anyone is a

A) limited partner.
B) secret partner.
C) dormant partner.
D) silent partner.

Question 29

A limited partnership is dissolved

A) when its term ends.
B) by agreement among all partners.
C) by the bankruptcy of a general partner.
D) by any of these.

Question 30

Two or more companies joining together to work on a project constitute a

A) limited partnership.
B) joint venture.
C) nontrading partnership.
D) general partnership.

Question 31

A limited partnership requires

A) statutory permission.
B) at least one general and one limited partner.
C) a proper certificate to be filed.
D) all of these.

Question 32

A limited partnership is similar to a corporation in that both

A) can be dissolved by agreement among the owners.
B) partners and stockholders can participate in management.
C) provide protection from personal liability for business debts.
D) were permitted at common law.

Question 33

A partnership may be terminated by

A) the death of a partner.
B) agreement among the partners.
C) bankruptcy of the partnership.
D) all of these.

Question 34

When a new partner is admitted into an existing partnership, the new partner is

A) liable for all prior debts of the partnership.
B) liable for prior debts up to the amount invested.
C) not liable for any prior debts.
D) none of these.

Question 35

Partners in a general partnership have a right to

A) share in partnership profits.
B) participate in management.
C) share in the ownership of partnership property.
D) all of these.

Question 36

A partnership is considered to be a legal entity for the purpose of

A) ownership of property.
B) federal taxes.
C) liability to others.
D) none of these.

Question 37

The termination of a partnership is known as ____________________.

Question 38

In a partnership, most decisions are made by a(n) ____________________ vote of the partners.

Question 39

A limited partner has no right to

A) receive an accounting.
B) inspect the partnership books.
C) give advice to the partnership.
D) participate in management.

Question 40

The ____________________ contains the laws relating to the formation, operation, and dissolution of partnerships.

Question 41

Parker was the sole proprietor of a toy store. The business had assets of $20,000 and debts of $40,000. What rights do the creditors of the store have?

Question 42

The law that governs limited partnerships is the ____________________.

Question 43

Mack, Newsome, and Parks were partners in a bookstore. Newsome suffered a severe heart attack. Is the partnership terminated?

Question 44

A cooperative may be treated as either a(n) ____________________ or a corporation.

Question 45

Archer, Lewis, and Kaplan were partners in a clothing store. Archer and Lewis did not like the present location of the store and wanted to move it to another street. Kaplan objected. While Kaplan was out of town, Archer and Lewis signed a lease for a store at another location. Is the lease binding on the partnership?

Question 46

Marino and Cousins were partners in an auto rental agency. They leased from Shear a vacant lot on which to store their automobiles. As rent, they gave Shear 15 percent of their monthly profits. Is Shear a partner?

Question 47

Bard and Small started a nonprofit medical clinic to provide health care for the elderly. Is this a partnership?

Question 48

A limited partnership is a hybrid between a(n) ____________________ and a partnership.

Question 49

In a limited liability company, the liability of the partners is ____________________.

Question 50

If a partner commits a tort, the other partners have ____________________ for the acts of that partner.