Examples from ch. 16 in the book

Partners have which of the following duties? a. Fiduciary duties b. Capital contribution c. Litigating on behalf of the partnership d. Record keeping

a. Fiduciary duties b. Capital contribution d. Record keeping

In a distributorship: a. a manufacturer licenses a dealer to sell its product. b. a franchisor transmits to the franchisee the essential ingredients to make a particular product. c. management rights belong to the FTC. d. a franchisee operates under a franchisor's trade name.

a. a manufacturer licenses a dealer to sell its product.

What are the three ways in which a partnership can be dissolved? (Choose 3 answers.) a. by a fixed term in the partnership agreement. b. by failing to make a profit c. by operation of law d. by an act of the partners

a. by a fixed term in the partnership agreement. c. by operation of law d. by an act of the partners

The simplest form of business to establish is a: a. sole proprietorship. b. corporation. c. partnership. d. limited liability company.

a. sole proprietorship.

The formation of a partnership without a partnership agreement requires which of the following (choose 2 answers)? a. Five or more partners b. Sharing of profits and losses c. The intent to form a partnership d. Sharing of management duties

b. Sharing of profits and losses and d. Sharing of management duties

A partnership in which the liability is shared between all of the partners together or one or more individually is called: a. dissociation. b. joint and several liability. c. indemnification. d. joint liability.

b. joint and several liability.

Which of the following are TWO disadvantages of a sole proprietorship? a. ease of formation b. limited capital c. ease of tax filing d. personal liability for debts

b. limited capital and d. personal liability for debts

A sole proprietorship differs from a partnership in: a. documentation required for formation. b. the number of owners. c. how stock is sold. d. liability for debt.

b. the number of owners.

Which statement is true about creating a sole proprietorship? a. The members of a sole proprietorship must write and sign an operating agreement. b. The owner of a sole proprietorship must file an official record of the business name with the secretary of state's office. c. No documentation is required to create a sole proprietorship. d. There is a waiting period of 30 days between opening the business and the time a sole proprietorship becomes official.

c. No documentation is required to create a sole proprietorship.

A written agreement outlining the roles of partners, their rights, and their duties are called: a. Operating agreements. b. Articles of Organization. c. a partnership agreement. d. Articles of Incorporation.

c. a partnership agreement.

When a new partner joins a previously existing partnership, the new partner is personally liable for: a. all the debts of the partnership, whenever incurred. b. any of the debts of the partnership up to $10,000. c. only obligations after becoming partner. d. only the debts she agrees to take on upon joining the partnership.

c. only obligations after becoming partner.

Which of the following is a disadvantage of operating as a partnership? a. A partnership may not own real or personal property. b. Partnerships are taxed at the same rate as corporations. c. A partnership may be formed for only one year at a time and the registration must be renewed annually. d. Partners may suffer financial loss if the partnership is not profitable.

d. Partners may suffer financial loss if the partnership is not profitable.

Tala operates Sunshine Event Planning as a sole proprietorship. Lately, Tala has become dissatisfied with her employee, Leon. Leon continually refuses to follow directions, calls in late to work, and generally is not performing up to Tala's standards. Before Tala can fire Leon, she must obtain approval from: a. the shareholders of Sunshine Event Planning. b. the Board of Directors of Sunshine Event Planning. c. the partners of Sunshine Event Planning. d. no one.

d. no one.

A sole proprietorship differs from a limited liability company (LLC) in: a. the minimum number of owners. b. ability to earn a profit. c. how stock is sold. d. the documentation required for formation.

d. the documentation required for formation.

Any partner: a. may act as an agent who binds the partnership. b. may create a business in direct competition with the partnership. c. is entitled to compensation for their time, skill, and effort. d. may encumber the property of the partnership to satisfy personal debt.

a. may act as an agent who binds the partnership.

Which of the following are advantages of operating as a partnership? Choose 2 answers. a. Any partner may add a new partner at any time to help decrease the workload and liability and to bring in more capital. b. The partners are not personally liable for business debts if the partnership is registered with the state. c. Forming a partnership is simple and relatively inexpensive. d. Partnerships are not taxed.

c. Forming a partnership is simple and relatively inexpensive. and d. Partnerships are not taxed.

Ben and Jerry are partners in an ice cream shop. They both work in the ice cream shop and share profits and expenses equally. Jerry thinks that expanding their ice cream shop to include a soda fountain would attract more customers. Without getting Ben's approval on the deal, Jerry signs a contract with the construction company to begin building the soda fountain. When Ben finds out, he is furious and says that he will not be responsible for payment under the contract. The construction company can enforce the contract against: a. Jerry only. b. Ben only. c. both Ben and Jerry. d. neither Ben nor Jerry.

c. both Ben and Jerry.

In order to capitalize a sole proprietorship, an owner is likely to: a. take out a bank loan without a personal guarantee. b. sell membership shares. c. sell stock. d. pay out of their own pocket or undertake personal debt.

d. pay out of their own pocket or undertake personal debt.

Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park, to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a: a. limited liability company. b. sole proprietorship. c. corporation. d. franchise.

b. sole proprietorship.

Jerry Hall and Lawrence Vaught practice law in the same building. They share equally in the overhead expenses, such as rent and utilities, required to keep the business running. Both Jerry and Lawrence handle their own cases, consult and accept their own clients, and purchase their own advertising. Jerry and Lawrence do occasionally handle a case together, and they have stationery that says "Hall and Vaught" on the letterhead. They each have their own stationery as well. Jerry and Lawrence keep their finances separate, except when they handle a case together; then, they split the proceeds equally. When a client of Jerry's becomes dissatisfied and sues Jerry for malpractice, she sues Lawrence as well. In deciding whether or not a partnership exists here, the court will look at: a. whether Jerry and Lawrence list themselves as partners on their letterhead. b. whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business. c. whether Jerry and Lawrence have signed a partnership agreement. d. whether Jerry and Lawrence share profits and losses in the business.

b. whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business.

Ellie, Josie, and Dylan are partners in a car dealership. Ellie gives notice to Josie and Dylan that she wants to withdraw from the partnership, and Josie and Dylan decide to continue the partnership without her. Shortly after Ellie leaves the partnership, she has lunch with an old friend, Justin. Justin has been looking for a new car and asks about the price of a particular car he saw on the website of the dealership, because he does not know that Ellie has left the partnership. Instead of telling Justin that she has left the partnership, Ellie quotes Dylan a price for the car, and Dylan accepts. When Dylan goes to the car dealership to complete the deal: a. the dealership is not required to honor the deal whether or not it has provided Dylan notice of Ellie's dissociation. b. the dealership must honor the deal and reinstate Ellie as a partner. c. the dealership is not required to honor the deal because Ellie is no longer a partner. d. the dealership must honor the deal unless it has provided Dylan notice of Ellie's dissociation.

d. the dealership must honor the deal unless it has provided Dylan notice of Ellie's dissociation.