Deck 34: Small Business, Entrepreneurship, and General Partnerships

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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 3

B

Question 4

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

Question 5

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

Question 6

The designation of d.b.a. (doing business as) refers to the description for a business that is operating under a trade name.

Question 7

The sole proprietor has ________ liability.

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

Question 8

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 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 9

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 10

A trade name statement refers to a document that is filed with the state that designates a trade name of a business, the name and address of the applicant, and the address of the business.

Question 11

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

A) It is not a separate legal entity from the owner.
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 12

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 13

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

A) No 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.

Question 14

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 bank accounts
C) Orlando's family
D) Bob, Orlando's prospective business partner

Question 15

The designation of ________ is used for businesses that are operating under a trade name.

A) w.e.f.
B) p.f.a.
C) d.b.a.
D) l.o.p.

Question 16

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

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

Question 17

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

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

Question 18

________ 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 19

Which of the following is true of a business operating as a sole proprietorship?

A) It is not considered a separate legal entity from the owner.
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 20

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 21

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

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

Question 22

Inference of the existence of a general partnership can be drawn if profits are received and ________.

A) shared among the involved parties
B) payment of wages is distributed
C) held by only one party
D) debts are incurred

Question 23

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

Question 24

If no other form of business organization is chosen in a business operated by only one person, the business is by default a sole proprietorship.

Question 25

Which of the following 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 business name selected by the partnership cannot indicate that it is a corporation.
D) The business cannot operate under a trade name.

Question 26

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

Question 27

An ordinary partnership is also known as a ________.

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

Question 28

A sole proprietor has limited personal liability.

Question 29

The Uniform Partnership Act's definition of a general partner includes other limited partnerships.

Question 30

Which of the following serves as a motive for an organization or venture to qualify as a partnership?

A) The organization seeks to increase its stake in the percentage of profits made by the business.
B) The organization seeks to avoid personal liability.
C) The organization wants to make a profit.
D) The organization wants to reduce the number of approvals it seeks before taking decisions.

Question 31

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

A) Uniform Partnership Act (UPA)
B) Fair Employment Partnership Act (FEPA)
C) Americans with Disabilities Act (ADA)
D) Age Discrimination in Employment Act (AEDA)

Question 32

Explain how a sole proprietorship is taxed.

Question 33

A general partnership is valid only if it is carried out for profit.

Question 34

List and briefly explain the advantages and disadvantages of a sole proprietorship.

Question 35

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

Question 36

General partnerships that exist for more than ________ must have their general partnership agreement in writing under the Statute of Frauds in order to deal in real estate.

A) six months
B) 180 days
C) five years
D) one year

Question 37

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

Question 38

The General Partnership Act (GPA) is a model act that codifies sole proprietorship law.

Question 39

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

Question 40

A general partnership is an association of two or more persons to carry on as co-owners of a business for profit.

Question 41

The Uniform Partnership Act (UPA) provides that all general partners are entitled to remuneration for their performance in the partnership's business.

Question 42

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 43

Briefly explain the formation of a general partnership.

Question 44

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 45

Which of the following is a right to which every general partner is entitled under the Uniform Partnership Act?

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

Question 46

All general partners have an equal right to participate in the management of the general partnership business unless otherwise specified in the general partnership agreement.

Question 47

Which of the following 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 equally 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 48

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

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

Question 49

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

Question 50

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 51

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

Question 52

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

Question 53

A general partnership cannot operate under the name of any one of the partners; the name has to represent all the partners if a fictitious name is not being adopted.

Question 54

________ 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 55

An inference of the existence of a general partnership is drawn in cases where profits are received in payment of wages owed to an employee.

Question 56

Flow-through taxation is the federal income tax imposed on general partnerships.

Question 57

General partnerships do not pay federal income taxes.

Question 58

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

Question 59

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

Question 60

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 61

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 62

A plaintiff must name the partnership and all of the partners as defendants in a lawsuit in order to pursue a claim for ________.

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

Question 63

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

Question 64

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 65

Explain, with an example, the duty of care owed by a general partner.

Question 66

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

Question 67

A breach of the duty of care by a partner does not constitute negligence.

Question 68

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 69

No monetary damages can be claimed between partners for breach of duty of obedience in a general partnership.

Question 70

General partners are permitted to sue other partners for an accounting of the partnership.

Question 71

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 72

Which of the following 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 73

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

Question 74

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

Question 75

General partners owe a duty to inform their partners of all information they possess that is relevant to the affairs of the partnership.

Question 76

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

Question 77

________ 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 78

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 79

Self-dealing-although fully disclosed-is not permitted in a general partnership.