Question 1

According to the Spotlight on Small Business box,"The Ties That Bind",it is really not necessary to interview your prospective partner carefully,especially if they are an old friend.

Accepted Answer

The article actually emphasizes the importance of interviewing prospective partners carefully, even if they are old friends, in order to ensure compatibility, shared goals, and effective communication.

Question 2

In a limited partnership,the general partners should encourage the limited partners to take a more active role in the operations of the business.After all,the limited partner has comparable liability in the business,even though he/she may not be a partner for as long a period of time as the general partners.

Accepted Answer

The answer of In a limited partnership,the general partners should...

Question 3

Marco is a limited partner in an e-commerce company.As a limited partner,Marco can be involved with the company for a maximum of five years.

Accepted Answer

There is no set maximum limit for how long a limited partner can be involved with a company. The length of a limited partnership is typically detailed in the partnership agreement, but it can vary depending on the terms negotiated between the partners.

Question 4

Compared to sole proprietorships,an advantage of partnerships is their ability to obtain more financial resources.

Accepted Answer

Partnerships can pool together more resources by bringing in multiple owners who contribute capital and expertise. This can make it easier for the partnership to secure loans or investments.

Question 5

A conventional corporation is a state-chartered legal entity,with authority to act and have liability separate from its owners.

Accepted Answer

A conventional corporation is a legal entity that is chartered by a state and has separate liability from its owners.

Question 6

Setting up a partnership under the terms of a written agreement is a bad idea,because written agreements tend to be too inflexible and impersonal.

Accepted Answer

Setting up a partnership under the terms of a written agreement is a good idea because it provides clarity and structure to the partnership, outlines the roles and responsibilities of each partner, and can help avoid misunderstandings or disputes in the future. While written agreements may seem inflexible, they can also be revised or amended as needed through a mutual decision between the partners. Additionally, having a written agreement can actually help build trust and accountability between partners, as it ensures that everyone is on the same page and committed to the partnership's goals.

Question 7

Connie is a general partner in a retail cookie store.Her personal assets are legally protected from the debts of the business.

Accepted Answer

As a general partner, Connie is personally liable for the debts and obligations of the business. Her personal assets are not legally protected from the business's debts. However, if the business is structured as a limited partnership or limited liability partnership, Connie's personal assets may be protected to some extent.

Question 8

Last night as you scrolled through the TV channels to find an action flick,you came across an old movie with tough guy,James Cagney,called "Yankee Doodle Dandy".Although not particularly your kind of movie,you stayed on that channel for a few minutes because Cagney and another guy were in partnership together.They were arguing over who was the senior partner and who was the junior partner,even though,clearly,they started the business at the same time.If you were brought on board as their present-day business advisor,you would explain to them that all partnerships have at least one general partner known as the senior partner)and one limited partner known as the junior partner).

Accepted Answer

The answer of Last night as you scrolled through the...

Question 9

Ted and Mark are partners in a dry cleaning business.They would like their brother Todd to join them.Unfortunately,partnership law states that only two partners can participate in a partnership.

Accepted Answer

While some states have limitations on the number of partners a business can have, there is no general rule in partnership law stating that only two partners can participate in a partnership. Ted and Mark may need to restructure their partnership agreement to allow for the addition of Todd as a third partner.

Question 10

The fairest way to handle profits in any partnership arrangement is to divide things evenly.If there are two owners in the business,each gets 50%.If there are three owners even if one is a limited partner),each gets 33.333% of any accumulated profits.

Accepted Answer

The answer of The fairest way to handle profits in...

Question 11

One method to avoid conflicts between partners is to solicit the services of a lawyer to create a well-written partnership agreement.

Accepted Answer

A well-written partnership agreement can clearly outline each partner's roles, responsibilities, and expectations, as well as the procedures for resolving conflicts and dissolving the partnership. This can help prevent misunderstandings and disputes between partners in the future.

Question 12

Emma Pebble and Chase Stone formed a partnership in a landscape business.Under their arrangement,Emma actively manages the company and assumes unlimited liability for the firm's debts.Chase has invested several thousand dollars of his money with plans to share in the profits,but does not actively make management decisions,nor will he assume liability beyond his initial investment.Emma and Chase participate in a limited partnership.

Accepted Answer

The answer of Emma Pebble and Chase Stone formed a...

Question 13

Sergio has agreed to become a partner in his brother's horse breeding business.Since he provided 30 percent of the money to start the firm and build an air-conditioned barn,he is entitled to 30 percent of any profits the firm earns during its first year of operation.

Accepted Answer

The answer of Sergio has agreed to become a partner...

Question 14

A limited partnership refers to a partnership set up for a temporary purpose,such as a real estate development project.

Accepted Answer

The answer of A limited partnership refers to a partnership...

Question 15

In the Spotlight on Small Business box,titled,"The Ties That Bind",the writer suggests that potential partners discuss the types of skills that each brings to the business.Partners with complimentary skills may enhance the business.

Accepted Answer

The writer suggests that partners with complimentary skills may enhance the business.

Question 16

If a partner in a limited partnership dies,the partnership ceases to exist.

Accepted Answer

The answer of If a partner in a limited partnership...

Question 17

According to the Spotlight on Small Business box,titled,"The Ties That Bind",attributes such as trust and integrity are not something you should get overly concerned about when selecting partners,due to the fact that this is a business decision,not a friendly game of golf.

Accepted Answer

The statement is incorrect. Trust and integrity are important factors to consider when selecting partners, even in a business decision context.

Question 18

Compared to sole proprietorships,partnerships offer the advantage of shared management and pooled knowledge.

Accepted Answer

Partnerships involve two or more individuals sharing the responsibility of managing and making decisions for the business. This allows for a wider pool of knowledge and expertise to be utilized, which can be beneficial for the success of the business. In contrast, sole proprietorships are managed solely by one individual.

Question 19

In today's economy,only large business enterprises should operate as corporations.

Accepted Answer

Small and medium-sized businesses can also operate as corporations and benefit from the legal and financial protections provided by that business structure. The decision to operate as a corporation should be based on individual business circumstances and goals, not just their size.

Question 20

After spending a summer down-under,two Oregon friends,Rick and Mick created a general partnership to import emu from Australia to the U.S.After a year,Rick found himself at the mercy of Mick who seemed to keep the books and seldom share the financial results,even though Rick was out selling the emu idea to farmers and ecologically conscious consumers;and,shipments were increasing.As their consultant,one of the first things that you inquire about is whether they are familiar with the UPA Uniform Partnership Act),specifically the right to participate in managing the operations of the business.

Accepted Answer

The question suggests that Rick and Mick have formed a general partnership, which is subject to the provisions of the Uniform Partnership Act. Under the UPA, partners have the right to participate in managing the operations of the business, unless the partnership agreement provides otherwise. Therefore, it is important to inquire whether Rick is aware of his right to participate in the management of the business and to review the partnership agreement to determine whether it restricts his rights.

Quiz 5: How to Form a Business