Question 1

Which of the following is an example of the implied rules contained in the Partnership Act ?
A) Each partner may sue the other for breach of fiduciary duty.
B) Each partner is a fiduciary to the other partners.
C) Each partner is entitled to have their name in the partnership business.
D) Each partner may take part in the management of the business.

Accepted Answer

The answer of Which of the following is an example...

Question 2

Which term is "partners" synonymous with regarding the agency relationship and the Partnership Act?
A) profits
B) principals
C) limits on authority
D) capital contributions

Accepted Answer

Partners in the context of an agency relationship and the Partnership Act are synonymous with principals. This is because in a partnership, each partner acts as an agent for the other partners within the scope of the business activities, making decisions and entering into agreements on behalf of the partnership.

Question 3

What is the most likely reason,from a financial liability perspective,for a corporation to be viewed as the most risk-aversive form of business entity?
A) It forms a distinct legal entity,liable for its own obligations.
B) Any entity that deals with a corporation may demand personal guarantees.
C) It shields directors from negligent acts of management.
D) It provides limited liability to the corporation's directors.

Accepted Answer

Corporations are distinct legal entities, meaning they are liable for their own obligations, which limits the financial liability of shareholders and makes them risk-averse.

Question 4

Which of the following is a common characteristic of provincial Partnership Acts?
A) each provides that every partner is liable jointly with co-partners
B) there are subtle differences between joint and several liability
C) each provides that every partner is liable severally from co-partners
D) there are pronounced differences between joint and joint and several liability

Accepted Answer

Partnership Acts typically stipulate that each partner is jointly liable with their co-partners for the debts and obligations of the partnership. This means that creditors can pursue any one of the partners for the full amount of the debt owed by the partnership.

Question 5

What is the legal outcome when one partner exceeds his or her authority and borrows money on behalf of a partnership without the consent of the fellow partners?
A) The other partners will be liable to the third party because partners are mutual agents.
B) Non-consenting partners can avoid liability by proving the partner breached the partnership agreement.
C) The third party can collect the debt,but only from the partner who authorized the debt.
D) The third party can take collection assets against the partnership assets but not the personal assets of the non-consenting partners.

Accepted Answer

Partners in a partnership act as mutual agents, meaning each partner has the authority to bind the partnership in contracts with third parties. Therefore, if one partner borrows money on behalf of the partnership, even without the consent of the other partners, the partnership as a whole is liable for the debt.

Question 6

What is a positive feature of carrying on business as a limited partnership?
A) All partners are completely shielded from negligent or wrongful acts of partners.
B) They can be used as an investment device.
C) They can be created informally.
D) All partners have the same rights.

Accepted Answer

Limited partnerships can be used as investment devices, allowing investors to contribute capital while limiting their liability to the amount of their investment. This structure is attractive for raising capital without requiring investors to take on management responsibilities or additional liability.

Question 7

Which of the following would most likely be a requirement of provincial legislation with respect to a limited liability partnership?
A) liability insurance to compensate victims for loss
B) the use of "limited partnership" or "LP" in the firm name
C) a business licence in the partnership name
D) access to partners' personal assets to satisfy claims

Accepted Answer

Liability insurance is commonly required by provincial legislation for limited liability partnerships to ensure that there are funds available to compensate victims for any loss, providing a layer of protection that aligns with the limited liability aspect of such partnerships.

Question 8

Which statement best describes the profit-sharing feature of corporations?
A) Shareholders are paid a pre-determined rate of return.
B) Shareholders are automatically entitled to a dividend if the business is profitable.
C) The decision of whether to declare dividends is controlled by the shareholders.
D) Shareholders are only entitled to dividends if they are declared by the directors.

Accepted Answer

Shareholders in a corporation are entitled to receive dividends only if the board of directors declares them. The decision to distribute profits as dividends rests with the directors, not automatically with the shareholders or based on a pre-determined rate.

Question 9

Nancie is a shareholder in BlueSky Investments Inc.With respect to BlueSky's obligations,which of the following most likely reflects Nancie's liability?
A) Nancie's liability is dependent on how the obligations were incurred.
B) Nancie is liable for these obligations unless she has given her personal guarantee.
C) Nancie's limited liability shield may be negated by her giving a personal guarantee.
D) As a shareholder,all of Nancie's personal assets will be at risk.

Accepted Answer

Shareholders in a corporation like BlueSky Investments Inc. typically enjoy limited liability, meaning they are not personally liable for the company's debts or obligations. However, if a shareholder, like Nancie, provides a personal guarantee for the company's obligations, this limited liability protection can be negated, making her personally liable.

Question 10

Which of the following may result in a loss of limited liability in a corporation?
A) employee misrepresentation of a product
B) fraud on customers
C) employee negligence
D) fraud on creditors

Accepted Answer

Fraud on creditors can result in a loss of limited liability in a corporation because it is a breach of the duty of loyalty that directors and officers owe to the corporation and its creditors.

Question 11

What type of liability would flow to the other partners in circumstances involving a wrongful act or omission by one partner acting within the course of employment?
A) joint liability
B) unlimited liability
C) joint and several liability
D) several liability

Accepted Answer

The answer of What type of liability would flow to...

Question 12

Rozzi,Shawn,and Rafael have entered into a written limited partnership agreement.Which of the following would be the most likely action needed to ensure the legal recognition of the limited partnerships' status?
A) registration of the partnership with federal authorities
B) registration of the partnership with provincial authorities
C) public notification of capital contributions of the entity's general partners
D) public notification of the registration of the limited partnership entity

Accepted Answer

In most jurisdictions, a limited partnership must be registered with provincial or state authorities to ensure its legal recognition. This typically involves filing a certificate of limited partnership with the appropriate government office.

Question 13

A court is deliberating whether WestWood Dental Offices should be bound by obligations that allegedly arose by virtue of apparent authority.The claim relates to a purchase agreement for dental imaging equipment.What will the court most likely strongly rely on when arriving at a decision?
A) what a third party knows or ought to know of a partner's limited authority
B) whether the partner understands that the law protects business customers
C) what a partner knows or ought to know of an outsider's limited authority
D) whether a third party understood the risks of agents going astray

Accepted Answer

The court will most likely rely on what a third party knows or ought to know of a partner's limited authority when determining if WestWood Dental Offices should be bound by obligations arising from apparent authority. This is because apparent authority is based on the representations made by the agent (in this case, a partner of WestWood Dental Offices) to the third party, and whether the third party reasonably believed the agent had the authority to act on behalf of the principal (WestWood Dental Offices).

Question 14

Len,Jill,and Mark own a partnership called Splats.Len's capital contribution to the partnership was $25 000,Jill's was $12 500,and Mark's was $20 000.Jill is duly registered as a limited partner and has acted solely as a financier.There is no agreement on sharing profits or losses among the partners,and none of them has drawn any income from Splats.The partnership borrowed $40 000 from the bank,but Splats eventually became insolvent and was unable to repay the loan.The bank sued Len and recovered the full $30 000 from him.When Len's lawyer gave him advice,what amount would he likely indicate Len is entitled to legally recover from Jill?
A) $0
B) $10 000
C) $12 500
D) $20 000

Accepted Answer

The answer of Len,Jill,and Mark own a partnership called Splats.Len's...

Question 15

The Partnership Act provides for the following rule: "all partners are to share equally in the capital and profits of the business and must contribute equally to the losses." Which statement best exemplifies this rule?
A) The losses are restricted to the capital investments made by each partner.
B) This rule is optional and may be varied by written agreement.
C) This rule is mandatory and cannot be modified by agreement.
D) The rule applies only to limited liability partnerships.

Accepted Answer

This rule, as stated in the Partnership Act, serves as a default provision. Partners can agree to a different arrangement regarding the sharing of profits, losses, and capital contributions, which must be documented in a written agreement. This flexibility allows partners to tailor the partnership agreement to their specific situation.

Question 16

Which of the following is a distinguishing feature of a limited partnership?
A) The liability of each partner is limited to their capital contributions.
B) The liability of some partners is limited to their capital contributions.
C) Limited partners may participate in the day-to-day management of the firm.
D) Limited partnerships are only available to professionals.

Accepted Answer

In a limited partnership, there are two types of partners: general partners, who manage the business and have unlimited liability, and limited partners, whose liability is limited to the amount of their investment in the partnership. This structure allows for investment by partners who prefer not to be involved in the day-to-day management of the business and wish to limit their liability.

Question 17

Rose,Lily,and Fawn were shareholders in Style Co.,an incorporated company with limited liability.Each bought one-third of the shares in Style Co.for an aggregate payment of $15 000 each.The corporation borrowed $60 000 from the bank to finance its operations.The bank required personal guarantees from all shareholders for the full amount of the loan.Style Co.became insolvent,and the bank ultimately sued each of the shareholders to recover the $60 000.In receiving advice from their lawyer,what amount would he most likely indicate to be the maximum amount that could be recovered from any one of them?
A) $0
B) $15 000
C) $20 000
D) $60 000

Accepted Answer

Given that the bank required personal guarantees from all shareholders for the full amount of the loan, each shareholder could be held personally liable for the entire amount of the debt ($60,000) if Style Co. defaults. This is because personal guarantees allow the lender to pursue the guarantors (in this case, the shareholders) for the full amount owed if the borrower cannot pay.

Question 18

Which of the following would pertain to provincial partnership legislation relating to the relationship between business partners and outsiders?
A) regulatory provisions
B) ostensible provisions
C) mandatory provisions
D) optional provisions

Accepted Answer

The answer of Which of the following would pertain to...

Question 19

Which of the following will be most influenced by restrictions contained in the incorporating documents or by a shareholders' agreement?
A) transfer of ownership of shares
B) voluntary surrender of legal status
C) general application laws
D) perpetual existence of the entity

Accepted Answer

The transfer of ownership of shares is most likely to be influenced by restrictions contained in the incorporating documents or by a shareholders' agreement, as these documents often include clauses that control how and to whom shares can be transferred, ensuring that the company's ownership remains within a desired group or meets certain criteria.

Question 20

Glen,Dale,and Al are partners who own Fizz.Glen made a capital contribution of $5000,Dale's was $15 000,and Al's was $10 000.Glen is a general partner and he oversees the management of the Fizz business.The partnership borrowed $30 000 from the bank.The partners have no agreement relating to the sharing of profits and losses.Fizz became insolvent and unable to repay the loan.The bank sued Dale personally and recovered the full $30 000 from him.Dale then sued Glen.When Dale's lawyer provided him with advice,what amount did she likely indicate he would be able to legally recover from Glen?
A) $5000
B) $10 000
C) $15 000
D) $20 000

Accepted Answer

Dale is entitled to recover half of the amount he paid to the bank, which is $15,000. This is because Glen and Dale are general partners, and as such, they are jointly and severally liable for the debts of the partnership.

Quiz 14: Business Forms and Arrangements

Which of the following is an example of the implied rules contained in the Partnership Act ?

Which term is "partners" synonymous with regarding the agency relationship and the Partnership Act?

What is the most likely reason,from a financial liability perspective,for a corporation to be viewed as the most risk-aversive form of business entity?

Which of the following is a common characteristic of provincial Partnership Acts?

What is the legal outcome when one partner exceeds his or her authority and borrows money on behalf of a partnership without the consent of the fellow partners?

What is a positive feature of carrying on business as a limited partnership?

Which of the following would most likely be a requirement of provincial legislation with respect to a limited liability partnership?

Which statement best describes the profit-sharing feature of corporations?

Nancie is a shareholder in BlueSky Investments Inc.With respect to BlueSky's obligations,which of the following most likely reflects Nancie's liability?

Which of the following may result in a loss of limited liability in a corporation?

What type of liability would flow to the other partners in circumstances involving a wrongful act or omission by one partner acting within the course of employment?

Rozzi,Shawn,and Rafael have entered into a written limited partnership agreement.Which of the following would be the most likely action needed to ensure the legal recognition of the limited partnerships' status?

A court is deliberating whether WestWood Dental Offices should be bound by obligations that allegedly arose by virtue of apparent authority.The claim relates to a purchase agreement for dental imaging equipment.What will the court most likely strongly rely on when arriving at a decision?

The Partnership Act provides for the following rule: "all partners are to share equally in the capital and profits of the business and must contribute equally to the losses." Which statement best exemplifies this rule?

Which of the following is a distinguishing feature of a limited partnership?

Which of the following would pertain to provincial partnership legislation relating to the relationship between business partners and outsiders?

Which of the following will be most influenced by restrictions contained in the incorporating documents or by a shareholders' agreement?