Question 1

A partnership cannot employ employees but must carry on its business through the partners.

Accepted Answer

A partnership can employ employees and is responsible for paying their salaries and benefits. However, the partners still carry on the day-to-day operations of the business.

Question 2

The relationship between the partners is governed by contract law.

Accepted Answer

Partnership agreements are typically governed by contract law. This includes the formation of the partnership, the rights and responsibilities of each partner, and the terms and conditions of the partnership.

Question 3

Chan sold a business to Scott and in the process they valued the "good will" 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 agreement to pay a portion of profits does not necessarily create a partnership; it is a method of payment for the goodwill, not an indication of shared ownership or partnership in the business.

Question 4

When the partners fail to register their partnership, they can neither sue or be sued.

Accepted Answer

Partners can still sue or be sued even if they fail to register their partnership. However, registering the partnership provides certain legal benefits and protections.

Question 5

The Partnership Act allows the 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 partnership's obligations and debts.

Question 6

Partners can agree among themselves as to what portion of liability they each will bear, and their losses will be limited to that portion when being sued by outsiders.

Accepted Answer

The answer of Partners can agree among themselves as to...

Question 7

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

The statement is true. Even if Ray sold his share to Leonardo, he cannot become a partner until the other partners approve the change.

Question 8

Requirement of unanimous consent protects partners.

Accepted Answer

The requirement of unanimous consent among partners ensures that all partners have an equal say in important decisions and protects their interests. No single partner can make decisions independently without the agreement of all other partners.

Question 9

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 a sole proprietor, the individual is personally liable for any actions taken by their employees while on the job. This means that if an employee engages in wrongful conduct during the course of their employment, the sole proprietor can be held responsible for any damages or losses caused by those actions.

Question 10

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

Accepted Answer

A partnership involves a continuing relationship between two or more parties for the purpose of carrying on a business or other commercial activity. It requires ongoing mutual effort towards a shared goal, rather than a one-time joint activity.

Question 11

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

Accepted Answer

Partnerships are typically less expensive to set up than corporations because they have fewer legal requirements and there is no need to file formal incorporation paperwork.

Question 12

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

Accepted Answer

A partnership agreement can provide for different classes of partners, such as general partners and limited partners, with different rights and obligations.

Question 13

A partner's liability for the torts of their partners extends beyond those committed on company business.

Accepted Answer

The answer of A partner's liability for the torts of...

Question 14

Partners are vicariously liable for the wrongful acts of employees committed on partnership business.

Accepted Answer

Partners are jointly and severally liable for the acts committed by employees in the course of partnership business, which means that each partner can be held responsible for the full amount of damages caused by the employee's wrongful act.

Question 15

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

Accepted Answer

The partnership agreement governs the relationship between partners, while the obligations to third parties are governed by laws and regulations which cannot be changed by the partners.

Question 16

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

Partners in a business have unlimited liability, meaning they are personally responsible for any debts or legal obligations of the company, risking not only their investment but also their personal assets.

Question 17

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

Accepted Answer

The answer of Unlimited liability means that an investor can...

Question 18

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

Accepted Answer

Societies are recognized as legal entities, which means they can own property, enter into contracts, sue and be sued, and have their own finances. This separation between the society and its members allows for the society to conduct business and make decisions independently.

Question 19

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

Accepted Answer

This statement is false. As a sole proprietor, the individual has the option to hire employees to help run the business.

Question 20

A sole proprietor is free from regulatory control.

Accepted Answer

A sole proprietor may still be subject to regulatory control in areas such as licensing, taxes, safety regulations, and environmental regulations.

Quiz 11: Agency and Partnership