Question 1

Quint and Reba are partners in Sofas Plus, a furniture store. Quint dissociates from the business. This ends Quint's

Accepted Answer

The answer of Quint and Reba are partners in Sofas...

Question 2

Resort Gift Shop is operated as a partnership, with five partners. Shan has a one-third interest in the firm. Each of the other partners has a one-sixth interest. Thieu is the senior partner. With respect to management decisions

Accepted Answer

In a partnership, decisions are typically made by a majority vote among the partners. Therefore, in this case, a majority of three out of five partners must agree for a management decision to be made. While Thieu may hold more seniority in the firm, this does not necessarily give him greater decision-making power. And although Shan has a larger interest in the firm, this also does not automatically make her the ultimate decision maker. Unanimous consent is not required unless specifically stated in the partnership agreement.

Question 3

Oscar is a partner in Party Caterers. Oscar's death will

Accepted Answer

Oscar's death will dissociate him from the firm, meaning that he will no longer be a part of the partnership. The remaining partners may continue to operate the business without him. If the partnership agreement includes provisions for handling the death of a partner, such as buying out the deceased partner's share, the partnership may continue without being dissolved. However, this depends on the specific terms of the agreement. A breach of the partnership agreement or winding up the business are not automatic consequences of a partner's death.

Question 4

Bhat and Cho do business as Data Security, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as

Accepted Answer

A partnership is treated as an independent entity separate from its partners for accounting and judgment collection purposes in most states.

Question 5

Nina, the owner of Organic Farm, a sole proprietorship, wants to obtain additional capital to operate. This can be accomplished by

Accepted Answer

As a sole proprietor, Nina can obtain additional capital through a variety of means, including a bank loan, a Small Business Administration Loan, or by infusing her own personal funds into the business.

Question 6

The essential elements of a partnership do not include

Accepted Answer

The essential elements of a partnership include a sharing of profits and losses, joint ownership of the business, and an equal right in the management of the business. However, an intent to act in good faith is not an essential element, but rather an expected ethical practice in any business relationship.

Question 7

Raceway LLC licenses the trademarks to its products to Stadium Markets Inc. to reproduce on clothing and other goods for sale. This is

Accepted Answer

This is a franchise arrangement where one company (Raceway LLC) licenses its trademarks to another company (Stadium Markets Inc.) for reproduction on clothing and other goods for sale.

Question 8

Glen is a partner in Home Builders, a construction firm. Glen's assignment of his interest in the partnership to Investment Consultants results in

Accepted Answer

The answer of Glen is a partner in Home Builders,...

Question 9

Sol and Thom agree to form a partnership to sell real property. To be enforceable, their agreement must be

Accepted Answer

A partnership agreement does not need to be filed in a state office or signed by a witness to be enforceable. However, it does need to be in writing in order to be enforceable. Therefore, choice B is the best answer.

Question 10

Nora and Owen do business as Property & Profit, a real estate investment partnership. In acting on the firm's behalf, Nora takes advantage of an opportunity to make a secret profit. To her firm, Nora is liable for a breach of

Accepted Answer

Nora's actions constitute a breach of the duty of loyalty, which requires partners to act in the best interest of the partnership and avoid conflicts of interest. Taking advantage of an opportunity to make a secret profit would be a clear breach of this duty, and Nora would be liable to the firm for any harm caused by her actions.

Question 11

Olin is a partner in Precision Plumbing. When the partners decide to dissolve the firm, Olin collects and distributes the assets. This results in

Accepted Answer

When the partners decide to dissolve the firm, it means they are ending the firm's legal existence. The assets will be collected and distributed, but the firm will no longer exist as a legal entity. So, the correct answer is C - the termination of the firm's legal existence.

Question 12

Obie operates Pizza Palace. Obie hires Qua to take and fill customers' orders at an hourly wage of $15.00, plus tips. Obie and Qua are

Accepted Answer

Qua is considered an employee rather than a partner because he does not have an ownership interest or management rights in Pizza Palace. Being paid an hourly wage and receiving tips are typical characteristics of an employee's compensation, not indicators of a partnership.

Question 13

Sean buys a franchise from Taco Mission Inc. This relationship, like all other franchise relationships, is governed by

Accepted Answer

Franchise relationships are governed by contract law, the federal Franchise Rule, and applicable state law. Therefore, all of the choices are correct.

Question 14

Ling owns and operates Metro Delivery Service as a sole proprietorship. When she dies, the business will automatically

Accepted Answer

When Ling, as the sole proprietor, dies, the business will automatically dissolve because a sole proprietorship is legally inseparable from its owner.

Question 15

Maeve sells New Energy, a sole proprietorship that makes and sells solar panels, to Olaf. This is

Accepted Answer

Maeve selling New Energy to Olaf means that ownership of the business is transferred from Maeve to Olaf. This indicates that it is a transfer of ownership of the business, not a franchise establishment or partnership creation. A sole proprietorship can be sold, making option C incorrect.

Question 16

Beth and Connie do business as Dig Excavators. In acting on the firm's behalf, Beth makes an honest error in underestimating the cost of a certain project. In this situation, to her firm, Beth is liable for a breach of the duty of

Accepted Answer

Beth's honest error in underestimating the cost of a project does not constitute a breach of duty of care, accounting, or loyalty. The duty of care involves acting in a reasonably prudent manner, and honest mistakes do not equate to breaches of this duty.

Question 17

Vera is one of three partners in Waffles Food Truck. Concerning all aspects of the partnership business, Vera is entitled to information

Accepted Answer

As a partner in the business, Vera is entitled to information on all aspects of the partnership business, including financial and operational information. This information must be provided to her on a complete basis, not just as needed or for a specific purpose. This is because all partners have a right to be informed about the business they are a part of and to make informed decisions about its direction and management. Additionally, the information she is entitled to is not limited to her capital contributions, but extends to all aspects of the partnership business.

Question 18

Deb and Eve are partners in Foundations, a construction outfit. Deb manages the business. For this service, unless the partnership agreement states otherwise, she is entitled to pay in proportion to her

Accepted Answer

In a partnership, unless the partnership agreement specifies otherwise, partners are not entitled to pay for managing the business; they share profits and losses. Management duties are part of the roles and responsibilities of being a partner, not typically compensated separately.

Question 19

Van starts Wind Systems to make and sell turbines. Later, Van contracts with Xi to invest additional capital in the firm in exchange for 25 percent of the profits. Vaughn and Xi are not partners in Wind Systems because

Accepted Answer

The fact that Vaughn and Xi do not have joint control over the business means that they do not have the legal relationship of partners. Sharing profits equally, sharing losses, or the timing of their investment are not determinative of whether or not they are partners.

Question 20

Cathy, Don, and Ethel are partners in Fruit Orchard Farms. Cathy gives notice to quit the firm, which otherwise continues to do business. This is

Accepted Answer

Cathy's withdrawal from the partnership is a dissociation, which is a change in the partnership composition but not necessarily a termination of the partnership itself. Dissolution, on the other hand, would be the complete termination of the partnership. Neither dissociation nor dissolution is inherently unethical or illegal.

Quiz 16: Small Businesses and Franchapter Ises