Unit 13 quizes

Which of the following statements is true about a partnership name?

- The name is an asset of the partnership that may be sold or assigned - The partnership must comply with the state's assume name provisions.

Which of the following would bring about the dissolution of the partnership?

-The time the partnership is to last, as stated in the partnership agreement, has expired -All of the partners agree to end the partnership -One of the partners dies.

AMJ Partnership has 3 partners: Amy made a 60,000 capital contribution; May, made a 20,000 capital contribution; and June made a 10,000 capital contribution. The partnership agreement is silent about how profits will be divided. If the partnership makes 90,000 in profits, how will it be distributed?

30,000 each to Amy, May and June

What is the limit of shareholders in subchapter S corporations?

35

Which of the following is NOT one of the recognized disadvantages of doing business as a corporation?

A corporation can be in existence for a maximum of ninety-nine years. -unlimited life

Phil has a partnership interest in Best Bike. He has been denied access to the books and records and he suspects that one of the partners is engaging in secret business transactions using partnership funds. Phil wants to know the status of the business. Phil should request an______:

Accounting

Which of the following decisions would require a unanimous vote of the partners?

Admitting a new partner into the partnership

Subchapter S corporation will avoid double taxation if which of the following applies?

All the shareholders agree to be taxed as in a partnership

Sharing in net profits is not prima facie evidence that a partnership exists if the profits were paid by the partnership

As rent For wages As an annuity to the spouse of a deceased partner

The capital contribution of a partner may consist in all of the following except

Business experience

The court order directing that the share of profits due a partner be given to his or her creditor to satisfy a judgment is a ____ order.

Charging

What kind of business organization is subject to the most regulation at the state and federal level?

Corporation

Which of the following best describes the "double taxation" on corporate profits?

Corporations pay taxes on the profits they distribute to the shareholders as dividends, and shareholders pay taxes on the same dividends

Frank is a seller of imported pottery. To induce a new wholesaler to sell him goods on credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the business. In fact, Ed had no partnership interest and Frank was a sole proprietor. Ed now has liability to the wholesaler based on

Estoppel

Frank is in the business of selling imported pottery. To induce a new wholesaler to sell him goods on credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the business. In fact, Ed had no partnership interest and Frank was a sole proprietor. Ed now has liability to the wholesaler based on

Estoppel

A business organized as a proprietorship may have up to, but not more than, thirty-five owners

False

A partner's capital contribution may consist in business experience or service to the firm.

False

A partnerhsip cannot have a provision for the continuation of a the partnership upon the death of one of the partners.

False

Absent an agreement otherwise, each partner is entitled to compensation for his or her services in managing the business.

False

In a partnership for a term of years, each partner has both the power and the right to withdraw from the partnership at any time.

False

The owner of a limited liability company (LLC) has unlimited personal liability for the debts of the LLC.

False

Subchapter S corporations may have a maximum of 100 shareholders.

False, 35

In a limited partnership LP, what are the partners who have unlimited personal liability for the debts of the LP?

General partners

If a partnership agreement does not say how losses will be shared, they will be shared

In whatever way the profits are shared.

Jim and Fred had been equal partners in J amp; F Industries for 20 years. Jim has died and Fred is now in the process of winding up the partnership. Which of the following statements about the winding up process is false?

Jim's estate is entitled to participate in the winding up process.

Nelson and Jack are both avid sailors. When a sailing acquaintance put his older, but still highly desirable, boat up for sale, Nelson and Jack agreed to pool their resources to buy and fix up the boat, then sell it and split the profits. This is an example of a ____ .

Joint venture

Which business entity has the following characteristics: an informal association of two or more persons that is formed to accomplish a single business transaction?

Joint venture

Which of the following is an informal association of two or more persons who agree to engage as co-owners in a single business transaction?

Joint venture

If a business has the power to own property, enter into contracts, and sue others in court, it is said to have

Legal capacity

States give corporations many rights, among them is the right to sue and the right to own property in the corporation's name. What do such legal rights collectively constitute for a corporation?

Legal capacity

An important factor to consider in the creation of a business organization is:

Liability Control Taxation

Which of the following statements about the limited partner in a limited partnership is false?

Limited partners may participate fully in the management of the partnership.

What is the equitable rule that 1 distributes assets of an insolvent partnership first to creditors of the partnership and 2 does not let partnership creditors reach the assets of individual partners until the partners' personal creditors are satisfied?

Marshaling of assets

Allfam is a closely held family corporation, many of whose shareholders are employees of the corporation. In an attempt to reduce its taxes, Allfam paid its shareholder-employees enormous salaries and deducted the salaries as a corporate expense. Is Allfam permitted to do this?

No, the IRS will disallow the deductions for unreasonably high salaries and tax them as dividends.

Jim and Sid are partners in Widget Manufacturing. Jim read a letter from one of Widget's buyers asking for adequate assurances that Widget would be able to meet an upcoming contractual obligation. The demand was proper and, under Article 2, the buyer could treat the contract as breached if Widget did not respond to the demand within 3 months. Jim forgot to tell Sid about the demand and did not respond to it himself. Widget is now being sued by Buyer for 4,000 in damages for breach of contract. Sid contends that the partnership is not liable because only one partner was aware of the demand. Is Sid correct?

No, the partnership is liable because notice to one partner is legally notice to all the partners and the partnership.

When partners enter into a partnership without stating how long the partnership will last, they have formed an ____________________.

Partnership at will

Why are corporations said to have a burden of "double tax"?

Profits are taxed at the corporate level as income and again at the shareholder level as dividends

A partner who participates in the management of the partnership, but whose existence is not known to the public is a _____________ partner.

Secret

A partner who does not participate in the management of the business is a ____ partner; a partner who participates in decisions and advises management, but whose partnership interest is not known to third parties is a ____ partner.

Silent-------------------Secret

Which of the following is not normally included in the Partnership Agreement?

The daily work schedule for each partner.

Which of the following statements about proprietorships is true?

The owner of a proprietorship is personally liable for all the debts of the proprietorship.

Which of the following is not a right of a partner?

The right to draw yearly interest on his or her capital contribution

Which of the following statements about LLC's is false?

There is an extensive body of law based on court decisions governing LLC's.

Which of the following statements about the rights and duties of doctors who practice medicine in a professional corporation is true?

They are eligible to participate in tax advantaged pension plans.

Bob, Sue and Jim were classmates in medical school who formed a professional corporation to practice medicine. Which of the following statements about their professional corporation is false?

They will be protected from suits for medical malpractice.

A partnership that buys and sells commodities is a _______________partnership; a partnership that produces goods or sells services is a _____________partnership.

Trading---------non-trading

A buy and sell agreement normally specifies the terms under which a withdrawing or deceased partner's interest will be bought out.

True

A limited partnership must have at least one general partner and one limited partner.

True

A new partner is liable only to the extent of his or her capital contribution for the already existing debts of the partnership.

True

A partner in a trading partnership has the implied power to make warranties on goods sold by the partnership.

True

A partnership maybe created by an express agreement between the parties or it may be implied from their conduct.

True

An advantage to doing business as a corporation is that ownership interests can be transferred without impact on day-to-day business operations.

True

If net profits are retained in a Subchapter S corporation, income tax must be paid by shareholders on these earnings even though the earnings have not yet been received.

True

Investors favor using Limited Partnerships to invest in commercial real estate because they can use the depreciation of the property as a tax loss.

True

Partner A defrauded a client of the partnership. Partners B and C are jointly and severally liable with A to the client, even though they were unaware of the fraud.

True

Partners are agents of the partnership and of the other partners individually.

True

Partners have unlimited personal liability for the debts incurred by the partnership.

True

Partnerships typically buy life insurance policies on each partner in order to fund the required purchase of the partner's interest in the partnership when the partner dies.

True

Premiums paid by corporations for the health insurance it provides employees are tax-deductible expenses.

True

Premiums paid by corporations for the health insurance it provides to employees are tax-deductible expenses.

True

The admission of a new partner automatically dissolves the partnership.

True

The bankruptcy of a partner will cause the dissolution of the partnership by operation of law.

True

The capital contribution of each partner is a liability to the partnership and must be returned to the partner when the partnership ends.

True

The provisions of the law AND the partnership agreement govern the operations of the partnership.

True

The surviving partner is entitled to compensation for winding up the affairs of the partnership.

True

Under RUPA, a partnership may take title to real property as a tenancy in partnership.

True

A partnership that fails to comply with a state's assumed name statute

Will not be able to use the courts of the state to sue its debtors May exposed the partners to criminal liability

When a partnership ceases to exist, the process of reducing the firm's assets to cash, paying off the creditors, returning the capital contributions of the partners, and distributing profits is called ____ .

Winding up

By statute, a limited partnership must have a minimum of ____________limited partners.

one