Chapter 29

When known to the public as a partner, a silent partner is called a:

limited partner.

When Sylvia and Cheryl agreed to start their furniture business, their lawyer recommended they set up an LLC instead of a partnership. They each contributed $100,000 to the business and set up an LLC with each as a member. After ten years Sylvia wanted to move out of the state, so they decided to dissolve their LLC. What is the most likely a consequence of their decision to dissolve?

If both Sylvia and Cheryl agree in writing the LLC may be dissolved.

Joe, who owned a gym in Washington, had made an initial investment of $150,000. He employed a number of people and made money for the first two years. However, the business started declining after he relocated to a different neighborhood. Joe ran up a debt of $500,000. What might happen if his creditors seek to foreclose on the debt?

Joe's personal assets can be taken by the creditors to repay the debt.

Which of the following is an example of a trading partnership?

Mike and Rose's supermarket in Kentucky

Patrick and Philip graduated from one of the most prestigious law schools in the country. They worked for two years in a small law firm before deciding to establish their own firm. They rented an office in the city and began practicing together. They shared expenses and profits equally. Patrick's father, John, acted as their agent in renting the office and hiring clerical staff. Which of the following is most likely?

Patrick and Philip's firm is an example of a nontrading partnership

_____ liability means that business debts are payable by the owner from personal, as well as business, assets.

Unlimited

One of the important benefits of the limited liability company form of business organization is:

avoidance of double taxation.

Michelle and Katie had enjoyed helping a lot of their friends decorate their homes and were considered very talented at it. They decided to make some money doing what they enjoyed, so they set up a home decorating business together that allowed them the limited liability afforded shareholders of a corporation. They both owned the business and shared the management of it calling themselves "members." The business they set up is called a(n):

b. limited liability company.

A partner who is unknown to the public as a partner and takes no part in the management of the business is referred to as a _____ partner.

dormant

_____ partnership forms when two or more people voluntarily contract to pool their capital and skill to conduct some business undertaking for profit.

general

A business relationship in which the parties exercise mutual control for a single transaction and are jointly and severally liable is a:

joint venture.

Thinking they can make a substantial profit, Miles and Marshall decided to engage in a business making baseball bats. They each put $20,000 into the business and decided to operate the business together with each getting an equal share of the profits. However, Miles was much wealthier than Marshall and he did not want to risk all his assets in the operation of the business. Their agreement followed state law and set a cap on the amount of money Miles risked in the business. This is an example of a(n):

limited partnership

Peter started a restaurant by himself called Tasty Bites in Tennessee. He made a profit of $50,000 in the first year of its operation and $80,000 in the second year. He has been successfully running the company for the past five years. Peter is called the _____ of Tasty Bites in the given scenario.

proprietor

Adam, Andre, and Alexandra start a software company called Opulence Systems Inc., in Pennsylvania. Alexandra administers the online promotional campaigns for the company's products and also handles the accounting for the firm. However, she hides the fact that she is one of the partners from the public. Alexandra is called the _____ partner of Opulence Systems Inc.

secret

A _____ is a business owned and carried on by one person.

sole proprietorship

Walter rented a commercial space in Vermont for $20,000 a month. He started his own fashion boutique in the rented space. Walter initially hired two assistants to help him run the business. He made a huge profit within three years and purchased the rented commercial space. The kind of business started by Walter is called a:

sole proprietorship.

A _____ partnership is one engaged in buying and selling merchandise.

trading

Jacob and Melissa together started a construction business in Michigan by each investing $300,000. As co-owners, they hired engineers, carpenters, and office personnel to assist them in their business. The profit from the business is to be shared equally between Jacob and Melissa. The type of business organization started by them is called a(n):

partnership.