Question 1

Societies are separate legal entities,separate and apart from the members who make them up.

Accepted Answer

Societies are legally recognized as separate entities from their members, which means they can enter into contracts, sue or be sued, and own assets in their own name.

Question 2

A partnership is less expensive to set up than a corporation.

Accepted Answer

Unlike corporations, partnerships do not require formal filing with the state, or the payment of fees associated with incorporation, making them less expensive to set up.

Question 3

For a partnership to exist,something more than a single joint activity is required.

Accepted Answer

A partnership implies an ongoing relationship between two or more parties, with shared responsibilities and benefits. A single joint activity does not necessarily qualify as a partnership.

Question 4

Limited liability can be the most significant disadvantage of the sole proprietorship.

Accepted Answer

Limited liability is not a feature of sole proprietorships; instead, the owner has unlimited liability, meaning they are personally responsible for all the business's debts and obligations. This is considered a major disadvantage of the sole proprietorship structure.

Question 5

The relationship between the partners is governed by contract law.

Accepted Answer

Partnerships are typically governed by a partnership agreement or contract, which outlines the rights, responsibilities, and obligations of each partner. This agreement is a legally binding document that is enforceable under contract law.

Question 6

Dennis,Sam,George,and Ray were partners in an accounting business,and Ray decided he wanted to retire.He sold his share of the partnership to Leonardo,but Leonardo is not a partner unless the other partners approve the change.

Accepted Answer

Typically, in a partnership, any change in ownership requires the approval of the current partners. This is usually outlined in the partnership agreement. Therefore, Leonardo would only become a partner if Dennis, Sam, and George approve the change.

Question 7

It is possible through a partnership agreement to create different classes of partners.

Accepted Answer

A partnership agreement can specify different types or classes of partners, such as general partners and limited partners. Each class may have different rights, responsibilities, and levels of liability.

Question 8

The sole proprietor carries on business alone and cannot employ others in the process.

Accepted Answer

A sole proprietor can employ others in the process of carrying on business. However, they are solely responsible for the management and decision-making of the business.

Question 9

Usually,the name of the business must be registered for a sole proprietorship,and a licence to operate must be obtained from the appropriate level of government.

Accepted Answer

This is true. In most cases, a sole proprietorship must register its business name and obtain a license to operate from the applicable government agency.

Question 10

A partnership is primarily a contractual relationship and can be created verbally or implied from conduct.

Accepted Answer

A partnership is a legal relationship that can be formed through a written agreement or implied through the actions of the partners. It is primarily a contractual relationship where each partner has certain rights and obligations. However, it is generally recommended to have a written partnership agreement to avoid any confusion or disputes in the future.

Question 11

A sole proprietor is free from regulatory control.

Accepted Answer

A sole proprietor is subject to regulatory control just like any other business entity. They have to comply with laws and regulations related to taxes, licensing, zoning, health and safety, labor, and more.

Question 12

The partners can change the terms of their responsibilities to each other in the partnership agreement,but cannot change their obligations to third parties.

Accepted Answer

Partners can modify their internal agreements through the partnership agreement, but they cannot change their legal obligations to third parties.

Question 13

Chan sold a business to Scott and in the process they valued the good will of the business at $50,000.In the sale contract,it was agreed that this amount would be paid by Scott giving Chan 15% of the business profits until it was paid.This creates a partnership between them.

Accepted Answer

The arrangement to pay for goodwill with a percentage of profits does not necessarily create a partnership between Chan and Scott. It could simply be a payment term for the purchase of the business. A partnership typically involves a mutual agreement to share in profits and losses and to jointly manage the business, which is not clearly indicated by this arrangement alone.

Question 14

Unlimited liability means that an investor can only lose everything he has invested in a corporation.

Accepted Answer

Unlimited liability means that an investor can be held responsible for a corporation's debts beyond the amount of their investment, potentially losing personal assets as well. This risk is not limited to only losing what they have invested.

Question 15

The unlimited liability of partners means that not only can they lose their entire investment in the business,but their personal assets are also at risk,such as their home and car.

Accepted Answer

Unlimited liability means that the partners are personally responsible for all the debts and obligations of the business, and their personal assets can be used to settle those debts. Therefore, they can lose their entire investment in the business as well as their personal assets such as their home and car.

Question 16

Although the sole proprietor's entire personal fortune is at risk,insurance may offset that risk.

Accepted Answer

Insurance can provide protection for a sole proprietor's business and personal assets, reducing the risk of losing their entire personal fortune.

Question 17

The requirement of unanimous consent protects partners.

Accepted Answer

Unanimous consent ensures that every partner has a say in important business decisions, preventing any one partner from making unilateral decisions that could harm the partnership or the other partners. This helps to protect the interests and rights of all partners involved.

Question 18

The Partnership Act allows partners to change their liabilities and obligations to third parties.

Accepted Answer

The Partnership Act does not allow partners to change their liabilities and obligations to third parties. Partners are jointly and severally liable for the debts and obligations of the partnership.

Question 19

A sole proprietor is not only responsible for his own conduct but also for the wrongful conduct of any employee done in the course of employment.

Accepted Answer

As the sole proprietor is the only owner of the business, he or she bears full responsibility for any misconduct of employees working in the course of employment.

Question 20

A partner's liability for the torts of her partners extends beyond those committed in the course of the business.

Accepted Answer

A partner's liability for the torts of their partners is generally limited to those committed in the course of the partnership's business.

Quiz 10: Agency and Partnership