Question 1

Which of the following is true of the relationship between partners?

Accepted Answer

Partners in a partnership have a fiduciary relationship, meaning they must act in the best interest of the partnership.

Question 2

Which of the following holds true for a general partnership if the partners have not entered into a written agreement?

Accepted Answer

If partners have not entered into a written agreement, they are still required to file a partnership return with the Internal Revenue Service that shows the partnership's profit or loss. The other choices are not necessarily true for a general partnership without a written agreement.

Question 3

Which of the following is an advantage of sole proprietorship?

Accepted Answer

Sole proprietorship is subject to less government regulation at all levels compared to other forms of business entities such as corporations or partnerships. This is because the business and the owner are considered one entity, and the owner has complete control over the management decisions. However, it should be noted that this also means the owner is personally liable for any legal or financial liabilities of the business.

Question 4

On its "deathbed," a partnership goes through a process called _.

Accepted Answer

When a partnership is coming to an end, it goes through a process called dissolution and winding-up. This involves settling any outstanding obligations, selling assets, and distributing profits or losses among partners before officially terminating the partnership. Bankruptcy, realignment and merger, and foreclosure are not necessarily exclusive to the end of a partnership and may occur at other points in a business's lifecycle.

Question 5

A partnership in which management responsibilities and profits are divided usually equally among the partners, and all partners have unlimited personal liability for the partnership's debts is called a(n) partnership.

Accepted Answer

The characteristics described in the question are those of a general partnership. In a general partnership, all partners are equally responsible for management decisions and the partnership's profits and losses are divided equally among the partners. Additionally, all partners have unlimited personal liability for the partnership's debts.

Question 6

Which of the following is prevented by dissolution after partners have initiated termination proceedings?

Accepted Answer

Dissolution after partners have initiated termination proceedings prevents any new business transactions from taking place. Finalizing accounting records, paying outstanding debts, and dividing profits between partners can still occur during the dissolution process.

Question 7

A voluntary association of two or more persons formed to carry on a business as co-owners for profit is known as a _ .

Accepted Answer

A partnership is a voluntary association of two or more individuals who carry on a business as co-owners for profit. A Subchapter S corporation is a type of corporation that is taxed similarly to a partnership, but it is still a separate legal entity from its owners. A public corporation is a company that has issued shares that can be traded on a public stock exchange. A limited liability company is a type of business structure that combines the limited liability benefits of a corporation with the tax benefits of a partnership.

Question 8

Which section of the general partnership agreement form contains miscellaneous information, such as arbitration and accounting year?

Accepted Answer

Miscellaneous information such as arbitration and accounting year is typically included in Article IV of a general partnership agreement.

Question 9

Which of the following is a disadvantage of a general partnership?

Accepted Answer

Partnerships do not have perpetual existence, meaning that the partnership will dissolve if one partner decides to leave the business or dies. This can be a disadvantage if the remaining partners wish to continue with the business but are unable to do so without the departing partner.

Question 10

Adrianna and Trevor have formed a partnership without a partnership agreement. Trevor contributes twenty percent of the partnership capital and does sixty percent of the work. If the partnership earns a profit of $10,000 after its first year, how much of the profit can Adrianna legally claim?

Accepted Answer

Without a partnership agreement, the default rule is that profits are shared equally among the partners unless there has been an unequal agreement. In this scenario, Trevor contributes 20% of capital and does 60% of the work, so it is likely that they made an unequal agreement. However, the question does not provide any information about their agreement. Therefore, we have to assume that they did not make an agreement and profits would be split equally.

Therefore, both partners would be entitled to $5,000 in profits.

Question 11

Which section of the general partnership agreement form contains information about a partner's right to demand property?

Accepted Answer

Article III typically contains information about the rights and obligations of partners, including the right to demand property.

Question 12

Which of the following is a reason for a partnership to "die"?

Accepted Answer

A partnership can "die" or dissolve when it is merged with another business, as it ceases to exist as a separate entity.

Question 13

Which of the following holds true for a general partnership where there is no partnership agreement varying the usual provisions of partnership law?

Accepted Answer

In the absence of a partnership agreement, the default rule under partnership law is that partners share profits equally, regardless of their capital contributions or the amount of work they do.

Question 14

Which of the following items is included in the partnership agreement?

Accepted Answer

The partnership agreement typically outlines the duties and responsibilities of each partner in the business. This helps to ensure that each partner knows their role and can work together effectively. The other options, such as age, citizenship, and net worth, are not typically included in the partnership agreement.

Question 15

refers to the process of completing all unfinished transactions, paying off outstanding debts, distributing assets, and dividing remaining profits when a partnership is on its "deathbed."

Accepted Answer

Winding-up is the correct choice as it refers to the process of completing all unfinished transactions, paying off outstanding debts, distributing assets, and dividing remaining profits when a partnership is on its "deathbed." Liquidation refers to the process of selling off assets to pay off debts, which may or may not be a part of the winding-up process. Litigation refers to the process of resolving legal disputes through the court system. Rolling-over does not relate to the process of ending a partnership.

Question 16

Which of the following is a disadvantage of the sole proprietorship form of business organization?

Accepted Answer

In a sole proprietorship, the owner has unlimited personal liability for the debts and lawsuits of the business. This means that if the business runs into financial trouble or is sued, the owner's personal assets may be at risk.

Question 17

Which of the following is true of the Revised Uniform Partnership Act?

Accepted Answer

The Revised Uniform Partnership Act states that a partnership need not dissolve just because a partner leaves. Option A is incorrect as it provides protection to the limited liability partner. Option B is incorrect as not all states have adopted the Revised Uniform Partnership Act. Option C is incorrect as it does not stipulate that no two partners can have equal share of the profits.

Question 18

Which of the following is a duty among partners?

Accepted Answer

The duty of obedience is a crucial duty among partners where each partner is expected to follow the decisions and agreements made by the partnership. This ensures that the partnership operates smoothly and efficiently. Judiciary duty is not a duty among partners, but a role played by the judicial system in resolving disputes. Duty of devotion and auxiliary duty are not standard duties among partners.

Question 19

Which of the following factors is the basis on which the Revised Uniform Partnership Act (RUPA) determines that a partnership exists?

Accepted Answer

According to the Revised Uniform Partnership Act (RUPA), a partnership exists when there is a joint ownership of a business, which means that the partners share in the profits and losses of the business. The nationality, age, and number of partners are not determining factors in the existence of a partnership.

Question 20

Which of the following is an advantage of a general partnership?

Accepted Answer

General partnerships have low expenses required for creating the partnership as they do not require formal registration or legal documentation.

Quiz 16: Law and Business Associations I