BLaw 2 - Ch. 34 Quiz

Aisha and Chantel form a general partnership. On March 1st​, Carlo is admitted as a new partner and makes a capital contribution of​ $100,000. As of March 1st the partnership had​ $100,000 in debt. On May 1st​, the partnership takes out a loan for​ $500,000. Which of the following statements is​ true?

Carlo's capital contribution will go to paying the​ $100,000 debt and Carlo will become personally liable for the​ $500,000 loan.

Which of the following is NOT a duty of general​ partners?

Duty of divergent purpose - duties: ---> duty to inform ---> duty of loyalty ---> duty of care ---> duty of obedience

According to the​ UPA, a general partner is entitled to​ _____ for expenses reasonably incurred in the ordinary and proper conduct of the business.

Indemnification

Which of the following is NOT an advantage of a sole​ proprietorship?

The sole proprietorship "veil" shields the sole proprietor from personal liability for business debts. - advantages: ---> A sole proprietorship can be easily transferred or sold if and when the owner desires to do​ so; no other approval is necessary. ---> The owner has the right to make all management decisions concerning the​ business, including those involving hiring and firing employees. ---> Forming a sole proprietorship is easy and does not cost a lot. ---> The sole proprietor owns all of the business and has the right to receive all of the​ business's profits.

​Aisha, Carlo, and Chantel form a general partnership. While on partnership​ business, Carlo causes an automobile accident that injures​ Catherine, a pedestrian. Catherine suffers​ $100,000 in injuries.​ Catherine, at her​ option, can sue​ _______.

Aisha, Carlo, or Chantel separately, or any two of them, or all of them.

The income or loss from the sole proprietorship is reported on​ _____, which must be attached to the​ taxpayer's Form 1040 U.S. Individual Income Tax Return.

Schedule C

Which of the following is an INCORRECT statement regarding formation of a general​ partnership?

Stock of the partnership, representing ownership, must be publicly traded on a well-known stock exchange (for example, NASDAQ). - correct statements: ---> A person cannot be forced to be a partner. ---> A general partnership may be formed with little or no formality. ---> All partners must agree to the participation of each​ co-partner. ---> A person cannot be forced to accept another person as a partner.

​Teena, Isaiah, and Bart form a general partnership to sell automobiles.​ Teena, who is responsible for ordering​ inventory, orders large​ sport-utility vehicles​ (SUVs) that use great quantities of gasoline. A war breaks out unexpectedly in the Middle East that interrupts the supply of oil to the United States. The demand for large SUVs drops​ substantially, and the partnership cannot sell its inventory. Which of the following statements is​ true?

Teena is not liable because the duty of care was not breached.

Which of the following is an INCORRECT statement regarding the Uniform Partnership Act​ (UPA)?

The UPA has been adopted in whole or in part by a minority of states. - correct statements: ---> The UPA is a model act that codifies general partnership law. ---> A Revised Uniform Partnership Act​ (RUPA) has been issued by the National Conference of Commissioners on Uniform State Laws. ---> The goal of the UPA was to establish consistent partnership law that was uniform throughout the United States. ---> The UPA covers most problems that arise in the​ formation, operation, and dissolution of general partnerships.

Which of the following is an INCORRECT statement regarding the name of a general​ partnership?

The name selected by the partnership can indicate that it is a corporation. - Correct statements: ---> A general partnership must file a fictitious business name statement—d.b.a. ​(doing business ​as)—with the appropriate government agency to operate under a trade name. ---> A general partnership can operate under a fictitious business name. ---> The name selected for the partnership cannot be similar to the name used by any existing business entity. ---> A general partnership can operate under the names of any one or more of the partners.

Which of the following is an INCORRECT statement regarding formation of a general​ partnership?

The organization or venture must actually make a profit in order to qualify as a partnership. - correct statements: ---> Co-ownership of a business is essential to create a partnership. ---> According to the​ UPA, a corporation can be a person who may be a general partner. ---> According to the​ UPA, a limited partnership can be a person who may be a general partner. ---> The organization or venture must have a profit motive in order to qualify as a partnership.

Which of the following is NOT a major legal form in which to conduct a​ business?

limited sole proprietorship. - major legal forms: ---> limited partnership ---> general partnership ---> limited liability partnership ---> sole proprietorship

Which of the following is NOT a major form for conducting businesses and​ professions?

sole partnership - main forms: ---> limited liability partnership ---> corporation ---> sole proprietorship ---> limited liability company

Which of the following is NOT a criterion to qualify as a general partnership under the​ UPA?

the issuance of​ publicly-traded stock - criteria: ---> as​ co-owners ---> an association of two or more persons ---> for profit ---> carrying on a business

A sole proprietor has​ _____ personal liability.

unlimited

The process of​ _____ consists of the liquidation​ (sale) of partnership assets and the distribution of the proceeds to satisfy claims against the partnership.

winding up

​Heidi, Sergei,​ Shou-Ju, and Jesus form a general partnership to operate a sporting equipment store. After their first store is​ successful, they expand until the partnership owns 100 stores. At that​ time, Heidi dies. Which of the following is​ true?

​Heidi's heirs now have the right to receive​ Heidi's one-quarter of the​ partnership's profits and other partnership distributions.

Under the Uniform Partnership​ Act, general partners have​ _____ liability for torts and breaches of trust committed by a partner or an employee of the general partnership while acting on partnership business.

joint and several

Which of the following is NOT a basic form of breach of a general​ partner's duty of loyalty to other partners and the​ partnership?

keeping partnership information confidential - Basic Forms: ​---> self-dealing ---> competing with the partnership ---> making secret profits ---> usurping a partnership opportunity

Nathan opens a clothing store called​ "The Clothing​ Store" and operates it as a sole proprietorship. Nathan files the proper statement and publishes the necessary notice of the use of the trade name. Nathan contributes​ $25,000 of his personal funds to the business and borrows​ $100,000 from a bank in the name of the business. After several​ months, Nathan closes the business because it is unsuccessful. At the time it is​ closed, the business has no​ assets, owes the bank​ $100,000, and owes other debts of​ $25,000. Which of the following is a correct statement regarding​ Nathan's personal risk exposure for his unsuccessful​ business?

Nathan loses his​ $25,000 capital​ contribution, and he is responsible for the​ $100,000 debt owed to the bank and the​ $25,000 debt owed to others.

Which of the following is NOT a basic form of breach of a general​ partner's duty of loyalty to other partners and the​ partnership?

keeping partnership information confidential - basic forms of breach: ---> making secret profits ---> competing with the partnership ---> ​self-dealing ---> usurping a partnership opportunity

Which of the following is an INCORRECT statement regarding the creation of a sole​ proprietorship?

creation of a sole proprietorship utilizes the same procedure for the creation of a corporation. - correct statements: ---> If no other form of business organization is​ chosen, the business is by default a sole proprietorship. ---> There are no formalities required for the creation of a sole proprietorship. ---> Creating a sole proprietorship is easy. ---> No federal or state government approval is required for the creation of a sole proprietorship.

According to the​ UPA, the​ _____ of a partnership is​ "the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the​ business."

dissolution

​Maude, Diego,​ Tisa, and Shen form a general partnership. Capital is contributed to the partnership in the following​ amounts: Maude, 30​ percent; Diego, 5​ percent; Tisa, 50​ percent; and​ Shen, 15 percent. The partnership makes​ $100,000 profit for the year. Absent an agreement to the​ contrary, _______.

each partner receives $25,000

General partners do not pay federal income taxes.​ Instead, the income and losses of partnership have to be reported on the individual​ partners' personal income tax returns. This is called​ _____.

flow-through taxation

​_____ are personally liable for the debts and obligations of the partnership.

general partners