Question 1

Aaron owns a food truck that he takes to various festivals each summer.He has not filed any documents at the registry and is the only owner of the business.In law,how is Aaron's business characterized?
A) limited partnership
B) sole proprietorship
C) general partnership
D) joint venture

Accepted Answer

Aaron's business is characterized as a sole proprietorship because he is the only owner and operates the business without forming any specific legal entity or filing documents at a registry.

Question 2

Which form of a business can issues shares to raise capital for operations?
A) an unlimited proprietorship
B) a sole proprietorship
C) a limited liability partnership
D) a corporation

Accepted Answer

Corporations are the type of business structure that can issue shares to raise capital. This is a key feature that distinguishes them from other forms of business such as sole proprietorships, unlimited proprietorships, and partnerships, which do not have the ability to issue shares.

Question 3

Triston and Quinn jointly own property under a documented agreement.If a dispute arises between the parties,which of the following would immediately alert a lawyer to the possibility of a court concluding a partnership exists?
A) the restriction on ability to share joint liability
B) a concurrent incidental relationship
C) a restriction on unilateral ability to sell
D) the co-ownership of other property

Accepted Answer

A restriction on unilateral ability to sell indicates a level of shared control and mutual agreement typical of partnerships, suggesting a joint business venture rather than mere co-ownership.

Question 4

Ellayne manages a busy law practice as a sole practitioner.What is a major risk of Ellayne's choice of business form?
A) complications arising from the inability to contract for employees
B) adverse affects of illness or incapacity
C) complications arising from the hiring and firing of employees
D) adverse affects of taxation of profits

Accepted Answer

As a sole practitioner, Ellayne's business operations heavily depend on her ability to work. Illness or incapacity could significantly disrupt the business, posing a major risk. Other options like contracting for employees, managing them, or taxation issues are manageable aspects and not unique risks to a sole practitioner.

Question 5

In what manner are a sole proprietorship and a partnership similar?
A) There is no legislated regulation affecting either.
B) Both require special steps to create.
C) Neither is a legal entity with capacity to contract.
D) Both require regulation of their profit motives.

Accepted Answer

Sole proprietorships and partnerships are similar in that neither is considered a separate legal entity from their owners. This means they cannot enter into contracts or own property in the name of the business itself; instead, these actions are done in the names of the individual owners or partners.

Question 6

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?
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

Accepted Answer

The court would look at any terms expressed or implied in the partners' agreement to determine the rights and duties of the partners regarding partnership property.

Question 7

Lita and Linda are partners in a general partnership and have borrowed $10,000 from the bank to finance their start-up.How is their liability for the bank loan best characterized?
A) limited liability
B) joint liability
C) proportional limited liability
D) full and complete impunity

Accepted Answer

In a general partnership, partners have joint liability, meaning they are collectively responsible for the debts and obligations of the partnership, including loans taken out for the business.

Question 8

Which statement best describes how a partnership comes into existence?
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.

Accepted Answer

A partnership is generally formed when two or more individuals or entities conduct a business together with the intention of sharing profits. There is no absolute requirement for a written agreement or registration for a partnership to exist, although these steps might be taken for clarity and legal reasons. Purchasing property together does not necessarily constitute a partnership unless it is done with the intent of carrying on a business.

Question 9

Why are limited liability partnerships advantageous to professional partnerships?
A) Partners are immune from liability arising from the professional negligence of their partners.
B) A partner's liability is limited to his or her capital contribution.
C) They are easier to form than general partnerships.
D) They ensure equal sharing of profits among the partners.

Accepted Answer

Limited liability partnerships (LLPs) protect partners from being personally liable for the professional negligence or misconduct of other partners, which is a significant advantage for professional partnerships.

Question 10

Ray and Mohammed are forming a general partnership but have not yet discussed how profits will be shared between them.Which statement best describes their legal situation?
A) General partners are always required to share profits equally.
B) They are automatically entitled to a share proportional their relative contributions to the capital of the partnership.
C) They cannot have a partnership until they determined how profits will be shared.
D) If they fail to agree,partnership legislation requires them to share profits equally.

Accepted Answer

In the absence of a specific agreement on profit sharing, general partnership law typically defaults to an equal distribution of profits among partners, regardless of their individual contributions to the partnership.

Question 11

Which statement best describes the legal requirements for conducting a sole proprietorship?
A) They are subject to the same general legislation as any other business form.
B) Unlike other business forms,they are unregulated.
C) They are governed by sole proprietorship legislation existing in each province.
D) They must be licensed under provincial legislation as sole proprietorships.

Accepted Answer

Sole proprietorships are subject to the same general business laws as other forms of businesses, but they do not have specific legislation like corporations do. They must adhere to general business, tax, and industry-specific regulations.

Question 12

Which of the following would most strongly support Martina's agreement to an allotment of a 25 percent interest in her partnership with Lorenzo and Marcella?
A) It accurately reflects the partners' proportionment of her contributions.
B) It accurately reflects the value of their varied contributions.
C) It doesn't affect their ability to distribute shared profits equally.
D) It doesn't affect their ability to freely define their proportionate profit share.

Accepted Answer

The choice that most strongly supports Martina's agreement to a 25 percent interest in the partnership is the one that acknowledges the value of the varied contributions made by each partner. If the 25 percent interest accurately reflects the value of their varied contributions, it suggests a fair assessment of each partner's input, thereby justifying Martina's agreement to that specific interest allocation.

Question 13

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) 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

Accepted Answer

This description is most likely related to a clause in a partnership agreement that deals with changes in partnership, such as buy-sell agreements, which often include options to purchase a partner's interest and methods for valuing those interests.

Question 14

Which form of business organization provides the most control but also the greatest liability risk for the owner?
A) partnership
B) sole proprietorship
C) joint venture
D) corporation

Accepted Answer

A sole proprietorship offers the owner complete control over the business operations but also exposes them to unlimited personal liability for the business's debts and obligations.

Question 15

What are the most likely sources of regulation a partnership must be aware of as it conducts its business each day?
A) contract,agency,and corporate law
B) partnership,employment,and application law
C) agency,contract,and partnership law
D) contract,employment,and application law

Accepted Answer

Partnerships must be aware of agency law because partners can act as agents for the partnership, contract law due to the agreements they enter into, and partnership law which governs the operation of partnerships.

Question 16

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

Accepted Answer

Under the Partnership Act, each partner is considered an agent of the firm, meaning they can act on behalf of the partnership in business dealings.

Question 17

A business with no partners and no board of directors to report to is typically considered to be independent and positioned to act quickly when required.Which of the following is also typical of this form of business?
A) its limited failure expectancy
B) its limited life expectancy
C) the diversity of profit-sharing plans
D) the complexity involved in its formation

Accepted Answer

Sole proprietorships, which are businesses owned and operated by a single individual with no partners or board of directors, typically have a limited life expectancy. This is because the business is closely tied to the life of the owner, and it may cease to exist or undergo significant changes if the owner retires, passes away, or decides to sell the business.

Question 18

Why is an owner's choice of the form of business organization a critical decision?
A) It determines financial liability for the business.
B) It determines whether the business may have employees.
C) It determines where the organization may conduct its operations.
D) It determines whether funds can be borrowed to finance operations.

Accepted Answer

The form of business organization (such as sole proprietorship, partnership, corporation) significantly impacts the owner's financial liability. For example, sole proprietors and general partners have unlimited personal liability for business debts, while shareholders of a corporation typically have limited liability. This choice does not directly determine the ability to have employees, where the business can operate, or the ability to borrow funds, as those aspects can be influenced by other factors regardless of the business structure.

Question 19

Which of the following will result in the termination of a partnership?
A) a change of partnership clause in a partnership agreement
B) the death of a partner
C) a capital contribution clause in a partnership agreement
D) a declaration

Accepted Answer

The death of a partner will result in the termination of a partnership unless the partnership agreement specifies otherwise. This is because a partnership is essentially an agreement between individuals, and the death of a partner disrupts this agreement.

Question 20

Ivan is the sole proprietor of Voyageur Transport.He operates Voyageur with three small ships that transport supplies by the riverways to northern settlements after spring breakup.Which of the following most likely applies with respect to Ivan's use of the name "Voyageur Transport"?
A) Business name use is subject to more specialized rules for this form of business.
B) To avoid fines and penalties,the business name must be registered.
C) A business name is irrelevant to an owner's ability to sue for business obligations.
D) There are no legal requirements for this form of business organization.

Accepted Answer

Sole proprietors, like Ivan, must register their business name if it differs from their own name to legally operate under that name, avoid fines, and ensure the business is recognized as a separate entity for various purposes, including legal actions and banking.

Quiz 14: Business Forms and Arrangements

Aaron owns a food truck that he takes to various festivals each summer.He has not filed any documents at the registry and is the only owner of the business.In law,how is Aaron's business characterized?

Which form of a business can issues shares to raise capital for operations?

Triston and Quinn jointly own property under a documented agreement.If a dispute arises between the parties,which of the following would immediately alert a lawyer to the possibility of a court concluding a partnership exists?

Ellayne manages a busy law practice as a sole practitioner.What is a major risk of Ellayne's choice of business form?

In what manner are a sole proprietorship and a partnership similar?

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?

Lita and Linda are partners in a general partnership and have borrowed $10,000 from the bank to finance their start-up.How is their liability for the bank loan best characterized?

Which statement best describes how a partnership comes into existence?

Why are limited liability partnerships advantageous to professional partnerships?

Ray and Mohammed are forming a general partnership but have not yet discussed how profits will be shared between them.Which statement best describes their legal situation?

Which statement best describes the legal requirements for conducting a sole proprietorship?

Which of the following would most strongly support Martina's agreement to an allotment of a 25 percent interest in her partnership with Lorenzo and Marcella?

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?

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

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

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

A business with no partners and no board of directors to report to is typically considered to be independent and positioned to act quickly when required.Which of the following is also typical of this form of business?

Why is an owner's choice of the form of business organization a critical decision?

Which of the following will result in the termination of a partnership?

Ivan is the sole proprietor of Voyageur Transport.He operates Voyageur with three small ships that transport supplies by the riverways to northern settlements after spring breakup.Which of the following most likely applies with respect to Ivan's use of the name "Voyageur Transport"?