Chapter 12 Choice of Business Entity, Sole Proprietorships, and Partnerships

A limited partner will lose his or her limited liability protection for engaging in a negligent or ___ act while acting within the scope of partnership duties.

unlawful

Which of the following is a correct statement regarding general partner liability under general partnership law?

A partner's personal assets are subject to partnership debt.

Which of the following is typically filed with the secretary of state's office when forming a limited partnership?

Certificate of limited partnership

Which of the following is not a way in which a limited partnership can be funded?

Selling ownership rights through the public markets

A(n) ___ venture is a limited-in-time business relationship typically governed by the same legal principles as a general partnership.

joint

A(n) ___ partnership has at least one general partner and at least one limited partner.

limited

In a limited partnership, the ___ partner's liability is limited to what he or she contributed to the business.

limited

In a limited partnership, the limited partner's liability is

limited to the extent of the limited partner's contribution in the business

In a limited partnership, what type of partner is typically responsible for filing the information return with taxing authorities?

General

Which of the following are typically used to denote a limited partnership?

LP

Which of the following may a limited partner perform for a limited partnership?

Contribute expertise

True or false: A written partnership agreement is required for an entity to be able to exist as a partnership.

False

Which of the following typically follows the business name to signify that it operates as a general partnership?

GP

Which of the following is a limited partner entitled to perform?

Inspect financial records of the business

The extent to which principals are personally responsible for the debts of the business is which of the following factors?

Liability

Approximately forty states have adopted all or substantial portions of the Revised Uniform ___ Act.

Partnership

Which of the following is the simplest multiple-person business entity?

Partnership

Limited and general are the two traditional subcategories of which of the following business entities?

Partnerships

In the absence of an agreement, which of the following are used as default provisions for a limited partnership?

Revised Uniform Limited Partnership Act

Which of the following have most states adopted to provide default provisions for partnerships where the principals have not expressly agreed otherwise?

Revised Uniform Partnership Act

Which choice of business entity is the top choice for a start-up business with low annual revenues and expenses?

Sole Proprietorship

Which of the following is true of sole proprietorships?

Sole proprietorships do not file an entity tax return.

Which of the following is true of limited partners in a partnership?

They remain primarily investors.

___ ___ is triggered when the principals wish to dissolve the partnership after dissociation.

Winding up

A limited partnership ___ may expand the role of the limited partner, but not to the point of constituting day-to-day involvement of the business

agreement

Under the RULPA, a general partner may withdraw from a limited partnership so long as all partners agree in writing to continue the partnership and

at least one general partner remains.

When forming a limited partnership, name, address, and partner capital contribution are typically items found in the

certificate of limited partnership.

When a principal wishes to leave a partnership, the RUPA defines this act of separation as which of the following:

dissociation

If a wrongful dissociation occurs, the wrongfully dissociated partner is liable for ___ caused by the dissociation.

damages

Generally speaking, a general partner may withdraw from a limited partnership at any time without causing ___ of the partnership.

dissolution

Under RUPA, unless the parties otherwise agree, all partners receive how much of a share of the profits and losses?

equal

Which of the following is a partnership where the principals agree to an ongoing business relationship.

express

The good ___ standard requires partners to exercise appropriate care when conducting partnership business.

faith

True or false: To form a general partnership, a formal document must be filed with the government.

false

Duties requiring partners to act in the best interest of the partnership are known as ___ duties.

fiduciary

The franchisor and the franchisee are typically governed by the ___ agreement.

franchise

The ______ is given the right to operate the business and use the business's trade secrets and products.

franchisee

A business entity with a proven track record of success is known as the

franchisor

A joint venture is typically governed by the same legal principles as a

general partnership

Two or more people operating as co-owners of a business for profit is called a:

general partnership

Which of the following does not require any formal documents to be filed with the government in order to legally exist?

general partnership

In a limited partnership, tax is paid based on the

individual partner's tax rate

For tax purposes, a partnership will file a(n)

information return

If a limited partner commits an illegal or negligent act on behalf of the limited partnership, the limited partner

is personally liable to pay damages to the injured party

If a limited partner engages in activities reserved for general partners, the limited partner may

jeopardize the limited partnership status.

Unless the parties otherwise agree, the RUPA states that partners providing labor to the partnership are:

not entitled to any compensation other than a share of profits

In the context of business organizations, the principals of the business are the

owners

A general ___ is where two or more principals have demonstrated an intent to carry on as co-owners of a business for profit.

partnership

Principal funding and commercial lenders are viable funding options for a general ___

partnership

Limited partnerships are ___ - ___ entities for tax purposes, meaning the entity itself does not pay taxes.

pass through

Which of the following is the term used to describe an entity that, for tax purposes, means that the partnership entity pays no level of corporate tax.

pass through

In a limited partnership, the general partner is

personally liable for the debts of the partnership

A partner withdrawing that violates the partnership agreement or if a partner withdraws before the agreed-upon expiration are examples of

wrongful dissociation

When a limited partnership interest is sold to the public, the transaction is subject to federal and state ___ laws.

security

Voluntary ___ occurs when a partner gives notice of intent to withdraw from the partnership.

separation

A(n) ___ proprietorship accounts for income taxes through the individual owner's personal return.

sole

When it comes to liability, general partners are personally exposed to liability similar to

sole proprietors

A(n) ___ ___ is the easiest single-person ownership entity to form and maintain.

sole proprietorship

True or false: A partnership may not sell ownership rights through the public markets.

true

The RUPA provides for expulsion of a partner from a partnership by the what kind of vote of the other partners.

unanimous

Discharging partnership liabilities and settling a partnership's business are examples of activities that occur during

windup

When a principal desires to leave a limited partnership, the RULPA defines this act of separation as which of the following:

withdrawal