Question 1

Jessica had operated a business for several years. Because the number of customers increased significantly, she persuaded Zach to work together with her. Two years after Zach came aboard, Jessica committed a tort, while acting in the course of the business and caused a customer to suffer a substantial loss. A question has arisen as to whether Zach and Jessica were partners. Which of the following statements is TRUE?

Accepted Answer

A partnership may exist based on the conduct and relationship between the parties, regardless of any document stating otherwise.

Question 2

Which of the following statements is TRUE with respect to the risk of liability under a partnership?

Accepted Answer

D

Question 3

Which of the following statements is TRUE?

Accepted Answer

Corporations, sole proprietorships, and partnerships may all be subject to similar licensing requirements depending on the industry and location, even though their legal structures and formation processes differ.

Question 4

Ella is a partner in a law firm operating as a general partnership. One of the firm's clients deposited $1 000 000 in the firm account to be used by Ella to complete a real estate purchase. Ella negligently bungled the transaction with the result that the client lost the $1 000 000. Which of the following is TRUE?

Accepted Answer

In a general partnership, partners are jointly and severally liable for the actions of other partners conducted in the ordinary course of business. Therefore, the partnership is liable for Ella's negligence.

Question 5

The most significant limitation on use of a sole proprietorship is that

Accepted Answer

The most significant limitation of a sole proprietorship is that the sole proprietor has unlimited personal liability, meaning they are personally responsible for all debts and obligations of the business.

Question 6

Which of the following statements are TRUE?

Accepted Answer

Partners often have a high degree of trust and confidence in each other, which is a fundamental aspect of partnership relationships.

Question 7

Norman and Velma are partners carrying on a trucking business. They share a single truck. Which of the following is TRUE?

Accepted Answer

In a partnership, partners are generally liable for the actions of other partners if those actions are conducted in the course of the partnership business.

Question 8

If you were considering selling $1 000 000 worth of computer equipment to a partnership on credit, which of the following factors would influence your assessment of the ability of the partnership to pay you back?

Accepted Answer

The value of the personal assets of the individual partners is relevant because partners may be personally liable for the debts of the partnership.

Question 9

A sole proprietorship comes into existence when a person

Accepted Answer

A sole proprietorship is established when an individual starts conducting business activities, without the need for formal registration or incorporation.

Question 10

Cassandra is the sole shareholder of a corporation incorporated under the Canada Business Corporations Act which carries on a grocery store business. Which of the following statements is TRUE?

Accepted Answer

The answer of Cassandra is the sole shareholder of a...

Question 11

Ten years ago, Tad and Tori created a partnership. At that time, he contributed $400 000 in property and Tori contributed $600 000 in cash. as capital for the partnership. Two years later, Tori provided $300 000 to the partnership as an interest- free loan. That loan has not yet been repaid. During the entire life of the partnership, Tori performed approximately 60 per cent of the partnership's work, while Tad tended to devote much of his time to various charitable causes that were unrelated to the partnership. The partnership has now been dissolved. Sale of the partnership assets produced a fund of $1 200 000. It is necessary to spend $200 000 on debts that the partnership still owes to various creditors. Assuming that the parties have not replaced or modified the default rules applicable to their partnership

Accepted Answer

The answer of Ten years ago, Tad and Tori created...

Question 12

Which of the following are TRUE?

Accepted Answer

The answer of Which of the following are TRUE?
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Question 13

Directors of a corporation should issue shares as soon as possible after incorporation because

Accepted Answer

Until the shares are issued, the only people who can act for the corporation are the directors. If anything happened to them the corporation would be unable to act.

Question 14

The fiduciary duty owed by one partner to another requires which of the following of a partner?

Accepted Answer

A partner must not compete with the partnership, as this would breach the duty of loyalty owed to the partnership.

Question 15

In which of the following situations is a partnership dissolved?

Accepted Answer

A partnership is dissolved when its purpose is fulfilled (A), when a partner decides to terminate it (B), when the agreed duration expires (C), or when a partner dies (D).

Question 16

Which of the following would be a good reason to choose to make an equity investment in a corporation rather than lending money to a corporation?

Accepted Answer

Equity investments can potentially offer higher returns than debt because they are not fixed and depend on the company's performance, although they come with higher risk.

Question 17

Sam and Jemma each owned a 50 percent interest in an office building. Which of the following is a factor which would support a conclusion that their relationship is a partnership?

Accepted Answer

All the factors listed (A, B, C, and D) suggest a partnership because they indicate shared responsibilities, joint management, and financial integration, which are typical characteristics of a partnership.

Question 18

Alice is the sole shareholder of AliCo Inc, a corporation incorporated under the Canada Business Corporations Act. She has elected Samra as the director and Samra has appointed Ezra to be the President of the corporation responsible for its day- to- day business. Which of the following actions by Alice would be inconsistent with the separate legal existence of the corporation?

Accepted Answer

Alice selling real estate belonging to the corporation and keeping the money would be inconsistent with the separate legal existence of the corporation, as it disregards the corporation's ownership of its assets.

Question 19

Rachi is a wealthy businessperson with substantial personal assets. One of the businesses she carries on is a health club. She has carried on this business as a sole proprietorship, but she has decided to incorporate a corporation under the Canada Business Corporations Act to carry it on. She will be the sole shareholder and director. If you were a client of the health club, which of the following would be a legitimate concern based on the change in the legal status of the health club business?

Accepted Answer

Incorporation creates a separate legal entity for the business, which means that the business's debts and liabilities are not the personal debts and liabilities of the owner. This means that if you have a claim against the business, you will only be able to collect from the business's assets, not from Rachi's personal assets.

Question 20

Which of the following statements is TRUE with respect to partnerships?

Accepted Answer

In a general partnership, each partner has unlimited personal liability for the obligations of the partnership.

Quiz 21: Basic Forms of Business Organizations