Deck 26: Small Business, Entrepreneurship, and Partnerships

Question 1

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

Answer 1

B

Question 2

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

Answer 2

B

Question 3

Which of the following statements is true about 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.

Answer 3

A

Question 4

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 5

A ________ is a document that is filed with the state that designates a trade name of a business.

A) proprietorship statement
B) partnership agreement
C) fictitious business name statement
D) nomenclature affidavit

Question 6

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

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

Question 7

An ordinary partnership is also known as a ________.

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

Question 8

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

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 9

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 10

Which of the following statements 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 11

The sole proprietor has ________ liability.

A) zero personal
B) limited organizational
C) complete organizational
D) unlimited personal

Question 12

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 13

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 operates a state owned enterprise

Question 14

Which of the following statements 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) Charity organizations and schools are mostly formed from general partnerships.
D) A general partnership can be either oral or implied from the conduct of the parties.

Question 15

Which of the following statements 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 16

The ________ is a model act that codifies general partnership law.

A) Uniform Partnership Act
B) Uniform Limited Partnership Act
C) Revised Uniform Limited Partnership Act
D) Model Partnership Act

Question 17

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 18

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 19

The income or loss from the sole proprietorship is reported on ________ which must be attached to the taxpayer's Form 1040.

A) Schedule B
B) Schedule C
C) Form 14
D) Form 8

Question 20

Which of the following is an advantage to operating a business as a sole proprietorship?

A) right to receive all of the business's profits
B) unlimited access to the capital market
C) limited liability
D) exemption from tax

Question 21

According to the ULPA,which of the following is first in the order of distribution of partnership assets upon the winding up of a general partnership?

A) creditors
B) creditor-partners
C) partner's capital contributions
D) remainder of the proceeds

Question 22

Which of the following is a right to which every general partner is entitled?

A) right to remuneration
B) right to free and open speech
C) right to return of capital
D) right to legal action

Question 23

A(n)________ is a partnership created for a fixed duration.

A) partnership for a term
B) partnership at will
C) ordinary partnership
D) limited partnership

Question 24

Which of the following statements is true about the formation of a general partnership?

A) The most important factor in determining coownership is whether the parties share the business's profits and management responsibility.
B) Nonpartners of a partnership concern are usually given the right to share in a business's profits.
C) The right to participate in the management of a business is conclusive evidence of the existence of a general partnership.
D) An agreement to share losses of a business is not a compelling evidence of the existence of a general partnership.

Question 25

________ refers to the right of a partner to be reimbursed for expenditures incurred on behalf of the partnership.

A) Indemnification
B) Proliferation
C) Lucubration
D) Fenestration

Question 26

Which of the following statements is true concerning the notice that must be given to third parties upon partnership dissolution?

A) All third parties must receive actual notice.
B) All third parties must receive the constructive notice.
C) Third parties who have directly dealt with the partnership must receive constructive notice.
D) Third parties who have not dealt with the partnership, but who know of its existence, must receive constructive notice.

Question 27

________ 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 28

Which of the following statements is true about the ability of a partner to withdraw from a general partnership?

A) Partners have both the power and the right to withdraw from a partnership.
B) Partners have the right, but not necessarily the power, to withdraw from a partnership.
C) Partners have the power, but not necessarily the right, to withdraw from a partnership.
D) Partners have neither the right nor the power to withdraw from a partnership.

Question 29

A(n)________ is a partnership created with no fixed duration.

A) partnership for a term
B) partnership at will
C) ordinary partnership
D) limited partnership

Question 30

Which of the following statements 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 in the same proportion as profits 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 31

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 32

Which of the following is a consequence of failing to give adequate notice of partnership dissolution to third parties?

A) The partnership's attempted dissolution will be ineffective.
B) The partners will be prevented from receiving their share of partnership assets.
C) There will be a court-ordered waiting period before partners can receive their share of partnership assets.
D) Partners might be personally liable for transactions entered into by other partners occurring after the partnership dissolution.

Question 33

A ________ is the obligation partners owe to use the same level of caution and skill that a reasonable person in the same position would use in the same circumstances.

A) call for action
B) duty of care
C) duty to inform
D) duty of obedience

Question 34

Which of the following statements is true about the Uniform Partnership Act?

A) A partnership agreement is generally enforceable, except in situations where its terms differ from the provisions of the act.
B) The act can be thought of as a "gap-filling" statute that applies when a partnership has no partnership agreement provision addressing a particular issue.
C) The act requires that partnership agreements be in writing in order to be enforceable.
D) The act prohibits individuals from varying its terms in partnership agreements.

Question 35

The ________ requires general partners to adhere to the provisions of the partnership agreement and the decisions of the partnership.

A) duty to inform
B) duty of loyalty
C) duty of care
D) duty of obedience

Question 36

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 37

Competing with the partnership without the permission of other partners violates a general partner's ________.

A) duty to inform
B) duty of loyalty
C) duty of care
D) duty of obedience

Question 38

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 39

Which of the following is a criterion for a general partnership?

A) nonprofit motive
B) involuntary association
C) nonparticipatory nature
D) co-ownership

Question 40

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) 10 weeks
D) one year

Question 41

General partners have ________ for the debts and obligations of the partnership.

A) limited exemption
B) conditional exemption
C) limited organizational liability
D) unlimited personal liability

Question 42

Which of the following statements is true about a corporation being a general partner in a limited partnership?

A) A corporation can be a general partner in a limited partnership, but only if it is not the sole general partner.
B) A corporation can be a general partner in a limited partnership, even if it is the only general partner.
C) A corporation can be a general partner in a limited partnership, but only if another corporation is a limited partner.
D) A corporation can be a general partner in a limited partnership, but only if there is at least two or more general partners.

Question 43

When a new partner is admitted to a preexisting partnership,the new partner has ________.

A) unlimited liability for obligations of the partnership, both for those arising before he/she joined the partnership, and those arising after joining
B) liability to the extent of his/her investment for obligations that arose before joining the partnership, and unlimited liability for those arising afterwards
C) no liability for obligations arising from before he/she joined the partnership, and limited liability for those arising afterwards
D) no liability for obligations arising from before he/she joined the partnership, and unlimited liability for those arising afterwards

Question 44

Upon the death of a partner,the deceased partner's right in specific partnership property ________.

A) vests in the remaining partner or partners
B) vests in his or her heirs or next of kin
C) is held in trust for the deceased's heirs or next of kin until the last remaining partner dies
D) is forfeited upon his or her death

Question 45

Which of the following statements is true regarding the liability of the partners in a limited partnership?

A) Both the limited and general partners have unlimited liability for partnership debts.
B) The limited partners have limited liability and the general partners have unlimited liability for partnership debts.
C) The limited partners have unlimited liability, and the general partners have limited liability, for partnership debts.
D) If a corporation is a partner, its shareholders have unlimited liability for partnership debts.

Question 46

________ occurs when a partner contracts personally with the general partnership,such as buying or selling goods or property to the partnership.

A) Undisclosed self-dealing
B) Misuse of partnership property
C) Breach of confidentiality
D) Usurping of a partnership opportunity

Question 47

Which of the following statements is true about the articles of limited partnership?

A) The articles must be filed along with the certificate of limited partnership.
B) The articles of limited partnership apply only to the general partners.
C) Without articles of limited partnership, the partnership will be treated as a general partnership.
D) Without articles of limited partnership, the certificate of limited partnership will serve as the articles.

Question 48

Which of the following statements is true about the liability of partners in a limited partnership?

A) The general partners of a limited partnership have limited personal liability for the debts and obligations of the limited partnership.
B) The liability of general partners extends to debts that cannot be satisfied with the existing capital of the limited partnership.
C) Limited partners are personally liable for the debts and obligations of the limited partnership.
D) A corporation as a general partner has an unlimited liability to the shareholders of the company.

Question 49

A limited liability limited partnership is required to have at least ________.

A) two limited partners
B) one general partner, and two limited partners
C) one general partner, and one limited partner
D) two general partners

Question 50

A limited partner who takes an active part in managing a limited partnership ________.

A) will lose the right to receive profit distributions as a limited partner
B) will be entitled to reasonable compensation for the value of the managerial services provided
C) will be treated as a general partner and is liable only to parties who reasonably believe that he or she is a general partner
D) will be treated as a general partner and liable to all parties with whom he or she transacts business affairs

Question 51

Limited partnerships are also referred to as ________ partnerships.

A) special
B) ordinary
C) qualified
D) equitable

Question 52

Which of the following circumstances result in a defective formation?

A) when a certificate of limited partnership is not properly filed
B) when a certificate of amendment is not executed or signed
C) when the liability of partners extends to debts that cannot be satisfied with the existing capital of the limited partnership
D) when a creditor fails to enforce the personal guarantee and recover payment from the limited partner who personally guaranteed the repayment of the loan

Question 53

Which of the following statements regarding a partnership is true?

A) A partnership is an involuntary association.
B) To be valid, a partnership must have a written partnership agreement.
C) A partnership is a separate tax-paying entity for federal tax purposes.
D) Partners have personal liability for business debts and other legal obligations of the business.

Question 54

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 tort.
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 55

Which of the following is true about contract liability of general partners?

A) General partners have limited liability for contracts of the partnership.
B) A third party who sues to recover on a partnership contract or debt need not name all the general partners.
C) Releasing a general partner from a lawsuit does not necessarily release all the other partners.
D) A general partner can seek indemnification from the partnership and from those partners who have not paid their share of the loss.

Question 56

Symmetry,Inc.is a general partnership with five partners.On July 1,James is admitted as a new general partner by investing a $200,000 capital contribution.As of July 1,Symmetry,Inc.owes $600,000 of preexisting debt.After James becomes a partner,the general partnership borrows $2 million of new debt.If the general partnership goes bankrupt,then James is ________.

A) personally liable for the preexisting debt of $600,000
B) personally liable for the unpaid debt of $2 million
C) not required to pay out his capital contribution toward the preexisting debt
D) not liable for any debt whether preexisting or borrowed after he joins the partnership

Question 57

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

A) The creation of a limited partnership involves an informal procedure.
B) The creation of a limited partnership should be kept confidential and not disclosed to the public.
C) A person cannot be both a general partner and a limited partner in the same limited partnership.
D) A limited partnership agreement cannot waive the right of partners to approve the admission of new general partners.

Question 58

Which of the following statements is true about partners in a limited partnership?

A) Limited partners actively participate in the management of the partnership concern.
B) General partners are personally liable for debts in the partnership concern.
C) General partners cannot assume the role of limited partners in the partnership concern.
D) Limited partners are restricted to not more than thirty in a partnership concern.

Question 59

Which of the following statements 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 60

While claiming under ________,a plaintiff must name the partnership and all of the partners as defendants in a lawsuit.

A) multiple liability
B) joint liability
C) limited liability
D) unlimited personal liability

Question 61

A person cannot be forced to be a partner or to accept another person as a partner.

Question 62

An inference of the existence of a general partnership is drawn if profits are received in payment of a debt owed to a creditor in installments or otherwise.

Question 63

If no other form of business organization is chosen,the business is by default a general partnership.

Question 64

A partner is entitled to repayment of the loan,but this right is subordinated to the claims of creditors who are not partners.

Question 65

If a partnership agreement provides for the sharing of losses but is silent as to how profits are to be shared,profits are shared in the same proportion as losses.

Question 66

The corollary to the rule of right to information is that each partner has a duty to provide such information upon the receipt of a reasonable demand.

Question 67

A sole proprietorship is considered a separate legal entity.

Question 68

An agreement to share losses of a business is strong evidence of a general partnership.

Question 69

A sole proprietorship requires an approval from federal agencies to transfer or sell the business.

Question 70

General partnerships are liable to pay federal income taxes.

Question 71

The agreement to form a general partnership must always be in writing.

Question 72

A partner's vote count is based on the proportional size of his or her capital contribution or share in the partnership's profits.

Question 73

General partnerships that exist for more than one year must be in writing under the Statute of Frauds.

Question 74

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

Question 75

The surviving general partners who have not engaged in any wrongdoing have the right to wind up the partnership.

Question 76

The income and losses of partnership flow onto and have to be reported on the individual partners' personal income tax returns.

Question 77

Under the Uniform Partnership Act,partners are entitled to receive a salary for providing services to the partnership.

Question 78

A general partnership need not file a fictitious business name statement to operate under a trade name.

Question 79

Forming a sole proprietorship is easy and does not cost a lot.

Question 80

The Uniform Partnership Act is a model act that codifies general partnership law.