Deck 14: Small Business, General Partnerships, and Limited Partnerships

Question 1

An entrepreneur is a person who forms and operates a business.

Answer 1

True

Question 2

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

Answer 2

B

Question 3

A sole proprietorship cannot be easily transferred when the owner desires to do so.

Answer 3

False

Question 4

Which of the following is true of creating a sole proprietorship?

A)No state government approval is required.
B)A sole proprietorship is subject to double-taxation.
C)No licenses are required to do business within a city or state.
D)Special permission must be obtained to receive sole proprietorship status.

Question 5

Which of the following 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 must 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 6

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

Question 7

________ are the most common form of business organization in the United States.

A)General partnerships
B)Sole proprietorships
C)Limited liability companies
D)Limited partnerships

Question 8

A sole proprietor has limited personal liability.

Question 9

A sole proprietorship can operate under the name of the sole proprietor or a trade name.

Question 10

Why does a sole proprietorship not pay taxes at the business level?

A)It does not have a separate legal existence.
B)It is a small business that is exempted from taxation.
C)It is a non-profit organization.
D)It is generally an institution with no business dealings.

Question 11

A sole proprietor is legally responsible for the business's contracts.

Question 12

The designation for a business that is operating under a trade name is ________.

Question 13

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 14

No federal or state government approval is required for creating a sole proprietorship.

Question 15

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 derives a profit from a new or an existing business

Question 16

The earnings and losses from a sole proprietorship are reported on ________.

A)the federal income tax filing document for sole proprietorships
B)the sole proprietorship business license that is renewed each year
C)the sole proprietor's personal income tax filing
D)the state income tax filing document for sole proprietorships

Question 17

If no other form of business organization is chosen while obtaining a license,the business is by default a sole proprietorship.

Question 18

Which of the following is a major form of conducting business?

A)an institution
B)a charity
C)a corporation
D)a trust

Question 19

In a sole proprietorship,the business is considered a separate legal entity.

Question 20

Orlando opened a hot dog stand in Brooklyn,doing business as Orlando's Red Hots.Unfortunately,the venture has not generated a profit.Orlando borrowed $5,000 from the bank to open his business,and the short-term loan is now due.Orlando's friend Bob has suggested partnering with him at the beginning of next year.From which of the following sources can the bank currently recover its $5,000?

A)Orlando's secondary lender
B)Orlando's savings account
C)Orlando's family
D)Bob,Orlando's prospective business partner

Question 21

List the advantages and disadvantages of a sole proprietorship.

Question 22

Which of the following is true in the creation of a general partnership?

A)The business name must include the names of all 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 23

According to the Statute of Frauds,a general partnership that exists for more than ________ must have a written partnership agreement.

A)three months
B)six months
C)nine months
D)one year

Question 24

Which of the following is true of the liability of an incoming partner?

A)An incoming partner is liable for the antecedent debts of the partnership.
B)An incoming partner has joint and several liability with existing partners for the antecedent debts of the partnership.
C)An incoming partner is liable for the existing 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 25

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 a general partner who is also a member of the partnership's board of directors has the authority to participate in the management of the partnership.
D)If the vote is tied,the action being voted on is considered to be defeated.

Question 26

Where a partnership agreement provides for the sharing of profits but is silent as to how losses are to be shared,________.

A)losses are shared in the same proportion as profits
B)losses are shared in greater proportion than profits
C)profits are shared in greater proportion than losses
D)losses are absorbed by the partnership entity rather than borne by the individual partners

Question 27

The Revised Uniform Partnership Act is a federal statute that is recognized in all states.

Question 28

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

Question 29

Which of the following is true of a general partnership?

A)A business must generate a profit in order to qualify as a general partnership.
B)The general partners need not be the co-owners of the business.
C)A general partnership may be formed with little or no formality.
D)Charity organizations and schools are usually formed as general partnerships.

Question 30

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 31

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)an action for an accounting
B)indemnification
C)winding up
D)dissolution

Question 32

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 33

According to priority,which of the following claims is satisfied first after dissolution?

A)creditors
B)creditor-partners
C)capital contributions
D)profits

Question 34

Which of the following is true of tort liability of a general partnership?

A)Only the partner who committed the tort is liable.
B)Under the UPA,general partners have joint,but not several,liability for torts committed in the course and scope of the partnership.
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 35

The Uniform Partnership Act (UPA)is a model act that codifies sole proprietorship law.

Question 36

Which of the following is true of profits and losses in a general partnership?

A)By law,it is presumed that the proportion of profits shared is equal to the general partner's initial investment.
B)Unless otherwise agreed,losses are shared equally by all general partners.
C)The general partner who proposed the idea of the business receives the greatest share of profits.
D)The proportion of investment governs only the proportion of losses shared and not profits obtained.

Question 37

________ 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 38

An organization or venture must have a ________ motive in order to qualify as a partnership.

A)large-scale expansion
B)noncommercial
C)profit
D)target market

Question 39

The sole proprietor has ________ liability.

Question 40

Which of the following must be in writing under the Statute of Frauds?

A)a business that has more than one commercial venture
B)a partnership that is authorized to deal in real estate
C)a business that is authorized to lend money
D)an enterprise that deals in health and medicine

Question 41

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

Question 42

Explain the formation of a general partnership.

Question 43

A general partnership agreement must always be in writing to be considered legal.

Question 44

Since the income of a partnership must be reported on the individual partners' personal income tax returns,this results in double-taxation of partnership profits.

Question 45

The ________ is a rule which provides that upon the death of a general partner,the deceased partner's right in specific partnership property vests in the remaining partner or partners;it does not pass to his or her heirs or next of kin.

Question 46

An ordinary partnership is also known as a(n)________.

Question 47

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

Question 48

General partners have unlimited personal liability for the debts and obligations of the partnership.

Question 49

How are assets distributed after the dissolution of a general partnership?

Question 50

A third party who sues to recover on a partnership contract need not name all the general partners in the lawsuit.

Question 51

General partners are not permitted to sue the partnership or other partners at law.

Question 52

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

Question 53

The process of liquidating a partnership's assets and distributing the proceeds to satisfy claims against the partnership is known as winding up.

Question 54

The name selected by a general partnership cannot indicate that it is a corporation.

Question 55

General partnerships do not pay federal income taxes.

Question 56

Receipt of a share of business profits is prima facie evidence of a general partnership.

Question 57

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

Question 58

The dissolution of a general partnership discharges the liability of an outgoing partner for existing partnership debts and obligations.

Question 59

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

Question 60

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

Question 61

Partners who erroneously but in good faith believe they have become limited partners can escape liability as general partners by ________.

A)adding their surname to the name of the business establishment
B)filing for a refund of his or her initial investment with interest
C)bringing a lawsuit against all general and limited partners in the state court with appropriate jurisdiction over the limited partnership
D)withdrawing from any future equity participation in the enterprise and causing a certificate showing this withdrawal to be filed

Question 62

The creation of a limited partnership is formal and requires public disclosure.

Question 63

A limited partnership cannot have general partners.

Question 64

It is not necessary for a limited partnership to have general partners if the limited partners share management responsibility among themselves.

Question 65

Which of the following is true of general and limited partners in a limited partnership?

A)Limited partners are exempt from annual capital investment and need only participate in management functions.
B)General partners are not personally liable for partnership debts.
C)General partners are required to invest capital and refrain from managerial activities.
D)Limited partners are not personally liable for partnership debts beyond their capital contributions.

Question 66

Which of the following partners of a limited partnership invests capital but does not participate in management?

A)specific partners
B)limited partners
C)general partners
D)sole proprietors

Question 67

General partners are not personally liable for partnership debts beyond their capital contributions.

Question 68

Which of the following governs a limited partnership,its internal affairs,and the liability of its limited partners?

A)the federal government
B)all states in which the business operates
C)the articles of limited partnership
D)the law of the state in which it is organized

Question 69

Which of the following partners in a limited partnership invests capital,manages the business,and is personally liable for partnership debts?

A)specific partners
B)limited partners
C)general partners
D)sole proprietors

Question 70

If a limited partner personally guarantees a loan made to the limited partnership by a creditor,he or she is not personally responsible for the loan if the partnership defaults,since limited partners are liable for the debts of the limited partnership only up to their capital contributions.

Question 71

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

A)It must provide that all partnership transactions be approved by all partners.
B)It does not contain information about dissolution of the partnership,since it is an agreement of formation.
C)It must provide that general and limited partners have equal voting rights.
D)It sets forth the terms and conditions regarding the termination of the partnership.

Question 72

Which of the following information should a certificate of limited partnership contain?

A)the latest date of dissolution of the partnership
B)a clause to not accept new general partners
C)the name of the party who becomes a general partner in the event of transfer
D)the scope of potential business opportunities and related investment

Question 73

Limited partners have unlimited personal liability for the debts and obligations of the limited partnership.

Question 74

________ is said to have occurred if a certificate of limited partnership was not properly filed.

A)Defective formation
B)Illegitimate partnership
C)Void partnership
D)Voidable association

Question 75

Which of the following is true of a limited partnership?

A)Other limited partnerships cannot become limited partners in an existing limited partnership.
B)A limited partner is personally liable for the debts of the partnership.
C)Corporations are allowed to become partners in a limited partnership.
D)A limited partnership can have only one general partner but multiple limited partners.

Question 76

Who among the following gets first priority in the distribution of assets upon the dissolution of a partnership?

A)investors
B)limited partners
C)general partners
D)creditors

Question 77

Justin and Michael form a limited partnership and start a car dealership.Justin is the general partner and Michael is the limited partner.Seven months after the commencement of the business,Pedro makes an investment and wishes to become a general partner.A week later,Michael's mother wishes to join the partnership as a limited partner.Which of the following is true in this scenario?

A)Pedro cannot be admitted as a general partner to the partnership after the business has commenced.
B)Pedro cannot be admitted as a general partner to the partnership as a limited partnership can only have one general partner.
C)Michael's mother cannot be admitted as a limited partner to the partnership as a limited partnership can only have one limited partner.
D)Both Pedro and Michael's mother can choose to be admitted as either general or limited partners to the partnership.

Question 78

A limited partner may engage in voting on the dissolution of the limited partnership without losing his or her limited liability.

Question 79

A limited partnership has two types of partners,________.

A)general partners and sole proprietors
B)general partners and limited partners
C)ordinary partners and liable partners
D)special partners and sole proprietors

Question 80

Defective formation of a limited partnership occurs when a certificate of limited partnership is not properly filed.