Business Law II Chapter 31 Practice Questions
A legal entity separate and distinct from its owners referred to as shareholders, and formed by filing articles of incorporation is a: a. corporation. b. limited liability company. c. limited partnership. d. general partnership.
A
A partner who has no right to participate in control of the business and who has limited liability is called a: a. limited partner. b. nominal partner. c. secret partner. d. general partner.
A
A partner who has no right to participate in control of the business and who has limited liability is called a: a. limited partner. b. nominal partner. c. secret partner. d. general partner.
A
Arthur, Betty, and Clara each inherit an undivided one-third interest in an apartment complex. Instead of selling it, they decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can earn some extra money. What are they? a. A partnership. b. Co-owners only. c. A corporation. d. Creditors of the apartment complex.
A
In which way is a partnership recognized as a legal entity by the Uniform Partnership Act? a. The assets of the firm are treated as those of the business. b. Title to real estate may not be acquired by the partnership. c. Partners are not fiduciaries to the partnership. d. Partnership creditors have no prior right to partnership assets.
A
Marilyn, George, and Christine pool their money to buy land to operate a vegetable farm from which they plan to sell the produce and share the profits or losses. Are they partners? a. Yes, since they are associating to carry on a for-profit business which they co-own. b. No, because they each control the use of the land. c. Yes, because if there is a loss in the land's value, they will all share that loss. d. No, they are merely joint venturers.
A
The law establishes a test for determining whether a partnership has been formed. The test includes which of the following? a. An association of two or more persons. b. Conducting a business not necessarily for profit. c. That the partnership agreement is filed with the Secretary of State. d. The sharing of gross returns.
A
Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a: a. partnership. b. joint venture. c. corporation. d. R & D partnership.
B
The RUPA treats a partnership as a legal entity in which one of the following respects? a. Liability of partners for partnership obligations. b. For the purpose of suing or being sued. c. For all purposes. d. Assignment of a partner's interest.
B
Unless otherwise agreed, all of the following are true regarding partnerships except that: a. all of the duties of partnership correspond precisely with those duties owed by an agent to his principal. b. a managing partner is entitled to a salary. c. partners share profits equally regardless of the ratio of their financial contributions. d. a partner may sell or assign his interest in the partnership, but the new owner is not a partner.
B
Which of the following is NOT an advantage of a partnership? a. Partners' income taxes may be less than the income taxes would be on a corporation. b. Each partner has limited liability. c. It is possible to bring together more managerial skills than in a sole proprietorship. d. It is possible to bring together more capital than in a sole proprietorship.
B
Which of the following is correct with regard to partnership property? a. Like partnership capital, it is a fixed amount set forth in the articles of partnership. b. Unless contrary intention appears, property acquired with partnership funds is partnership property. c. Under the UPA, title to real estate purchased with partnership funds cannot be taken in the partnership name. d. If there is no express agreement whether property owned by a partner before formation of the partnership and used in the partnership business is an asset of the partnership, the fact that taxes, liens, and expenses have been paid by the partnership is irrelevant.
B
Which of the following would lack the capacity to become a partner? a. A trust. b. An adjudicated incompetent. c. A corporation. d. All of these are correct.
B
Which of the following would lack the capacity to become a partner? a. A trust. b. An adjudicated incompetent. c. A corporation. d. All of the above.
B
A judicial lien against a partner's transferable interest in a partnership is known as: a. a legal aggregate. b. a delegation of assets. c. a charging order. d. an assignment.
C
A partner's interest is subject to the claims of that partner's creditors who may obtain a judicial lien known as a(n) __________ against the partner's transferable interest. a. assignability b. distribution c. changing order. d. indemnification
C
A partner's interest is subject to the claims of that partner's creditors who may obtain a judicial lien known as a(n) __________ against the partner's transferable interest. a. assignability b. creditors' rights c. charging order d. None of the above.
C
A partnership agreement should include all but which one of the following? a. The duties of the partners. b. The capital contribution of the partners. c. The agreement for dividing tax liability of the partnership. d. The division of profits and losses.
C
A partnership agreement should include all but which one of the following? a. The duties of the partners. b. The capital contribution of the partners. c. The agreement for dividing tax liability of the partnership. d. The division of profits and losses.
C
Andre invested $100,000 in a partnership with Erik and Louis. Andre's contract with the partnership states he will receive a portion of partnership profits, but he will be liable for partnership's debts only to the extent of the $100,000 he invested. Andre is: a. a subpartner. b. a dormant partner. c. a limited partner. d. an aggregate partner.
C
Luke typically spends 50-55 hours per week working in the real estate partnership he co-owns with Spencer. Spencer only spends about 30 hours a week on partnership business. Under the RUPA: a. Luke would be entitled to payment from the partnership for the extra 20-25 hours per week he spends on partnership business unless a partnership agreement denies this right. b. the partners cannot agree to deny extra payment for extra work by a partner. c. unless the partners have otherwise agreed, Luke is not entitled to payment for his work for the partnership, even if it is disproportionate to his partner's work. d. Luke would be entitled to payment from the partnership only if the amount of time and effort he expends on partnership business is grossly disproportionate to that spent by his partner.
C
To be partnership property, title to real estate bought with partnership assets and used by the partnership may be put in the name of: a. any partner in that individual's name. b. the partnership only. c. the partnership in its name, or one or more partners in their capacity as partners in the partnership if the name of the partnership is indicated in the instrument transferring title. d. None of the above.
C
Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a: a. joint tenant. b. tenant in common. c. tenant in partnership. d. tenant by the entireties.
C
Which of the following is the most convincing evidence of a partnership arrangement? a. Two or more persons are co-owners of property used in a business. b. Two or more persons have a written agreement regarding a fundraiser for charity. c. Two or more persons carry on a business for profit, but they have no formal agreement. d. Two persons share a joint savings account in which they deposit money and share the interest.
C
Which of the following is the most convincing evidence of a partnership arrangement? a. Two or more persons are co-owners of property used in a business. b. Two or more persons have a written agreement regarding a fundraiser for charity. c. Two or more persons carry on a business for profit, but they have no formal agreement. d. Two person share a joint savings account in which they deposit money and share the interest.
C
Which of the following would be the most convincing evidence of a partnership? a. An agreement to share in the management of a business. b. Agreements to share gross returns. c. An agreement to share profits and losses. d. An agreement to pay a firm manager a percentage of the profits for his salary.
C
A __________ is an unincorporated business association consisting of at least one general partner and at least one limited partner. a. joint venture b. limited liability company c. limited liability partnership d. limited partnership
D
A __________ is an unincorporated business association consisting of at least one general partner and at least one limited partner. a. joint venture b. limited liability company c. limited liability partnership d. limited partnership
D
A business form devised to avoid the burdens of corporate regulation, particularly the prohibition denying corporations the power to own and deal in real estate, and used primarily for asset securitization ventures is the: a. limited liability limited partnership. b. limited partnership. c. limited liability company. d. business trust.
D
A general partnership: a. is an unincorporated business. b. must consist of two or more persons. c. may be formed without legal formality. d. is characterized by all of these.
D
A joint venture: a. is incorporated. b. is of perpetual duration. c. is generally governed by the law of corporations. d. is none of these.
D
A partner owes all of the following duties to the partnership except: a. duty of loyalty. b. duty of obedience. c. duty of care. d. duty of control.
D
Business trusts: a. are sometimes called Massachusetts trusts. b. were devised to avoid the burdens of corporate regulations. c. do not need authorization by the state. d. are characterized by all of these.
D
In choosing the form in which to conduct business, if ease of formation is the primary concern, the owners would choose a: a. corporation. b. limited liability partnership. c. limited partnership. d. general partnership.
D
In choosing the form in which to conduct business, if ease of formation is the primary concern, the owners would choose a: a. corporation. b. limited liability partnership. c. limited partnership. d. general partnership.
D
Sue, Barb, and Carlotta agree to put in $1,000 each to set up a shelter for lost animals. They each work two days a week. Donations fund the day-to-day operations. Do they have a partnership? a. Yes, since each has control of the operation. b. Yes, because they are all co-equals in ownership of the shelter. c. No, because they have made no formal agreement. d. No, because there is no business for profit.
D
Which of the following forms of business association may elect that only the partners/members are taxed? a. General partnerships. b. Limited partnership. c. Limited liability company. d. All of these are correct.
D
Which of the following is the correct definition for a partnership? a. An association of two or more persons with one or more general partners and one or more limited partners. b. A legal entity ordinarily consisting of an association of numerous individuals. c. An association of two or more persons to carry on as co-tenants in business. d. An association of two or more persons to carry on as co-owners a business for profit.
D
Mount Pleasant Tires does not have sufficient funds to pay damages for a tort that arose out of the operation of the business. Jess, a business owner, is personally liable if: a. he is a sole proprietor of the business. b. the business is a corporation and he is a shareholder. c. he committed the tort. d. he is a general partner of the business. e. All of the above except (b).
E
A corporation may not be a partner in a partnership.
F
A partner can withdraw his partnership capital at any time.
F
A partner cannot assign his interest in the partnership without dissolving the partnership.
F
All businesses are considered to be separate taxable entities.
F
Assignment of a partner's interest will cause dissolution.
F
Corporations today outnumber unincorporated business associations plus sole proprietorships.
F
General partners differ from limited partners only in the amount of input they have in partnership decisions.
F
Miller and Baker formed a partnership and purchased a cycle shop. The name of the new business cannot be "Miller Cycle Shop" because the name of the partnership must include the names of both partners if it includes the name of one partner.
F
Sole proprietors have limited liability for the sole proprietorship's debts.
F
Sole proprietors must file documents with the secretary of state in their state of residence to operate as a business.
F
The RUPA cannot be modified by agreement of the partners to a partnership. Its provisions must be strictly followed in any partnership agreement.
F
The UPA does not allow a partnership to own property.
F
The UPA treats a partnership as a legal entity for all purposes
F
The statute of frauds expressly applies to a contract for the formation of a partnership.
F
Under the RUPA, a partner is a co-owner of partnership property.
F
Under the RUPA, a partner violates the duty of loyalty if the conduct furthers the partner's own interest.
F
Under the UPA, one of the advantages of the partnership form of doing business is continuity of existence.
F
Under the common law, a partnership was generally considered to be a legal entity rather than an aggregate of individuals.
F
"Partnership property" is the sum of the partnership's assets, including all property acquired by a partnership.
T
A charitable organization cannot be formed as a partnership.
T
A general partnership is formed without any formality and no documents need be filed with the state.
T
A sole proprietorship dissolves upon the death of the owner.
T
Alice and Brad enter into a partnership, which becomes insolvent, as does Brad. Alice is fully liable for the debts of the partnership.
T
Anita, in violation of a specific agreement not to extend credit over $1,000 without the other partners' approval, extends credit of $2,000 to a friend. Anita will be held personally liable to the partners for any unpaid debt since she violated the duty of obedience.
T
Any natural person having full capacity may enter a partnership.
T
Because the statute of frauds does not apply expressly to a contract for the formation of a partnership, usually no writing is required to create the relationship.
T
Corporate income is taxed twice by the federal government.
T
Each partner has an interest in the partnership, which includes his share of profits and losses and his management rights.
T
Each partner, unless otherwise agreed, has equal rights in the management and conduct of the business of a general partnership.
T
Former partners, as well as current partners, have some rights to access partnership books and records.
T
General partnerships are used frequently in finance, insurance, accounting, real estate, law, and other services.
T
If beneficiaries of a business trust participate in management or control, they will become personally liable for the obligations of the business
T
Michelle and Margaret agree to form a partnership. The partnership contract between Michelle and Margaret does not have to be in writing in order to be enforceable in the courts.
T
Owners of interests in businesses with unlimited liability place their entire estate at risk.
T
Owners of some business forms have unlimited liability.
T
Partners can be classified as either general or limited.
T
Partners may elect whether or not the partnership will be taxed as a separate entity.
T
States have authorized the formation of limited liability companies.
T
The receipt by a person of a share of profits of a business is prima facie evidence he is a partner.
T
The type of business enterprise with the most entities is the sole proprietorship, followed by the corporation; but the type of business enterprise with the greatest total revenue generation per year is the corporation.
T
Under the RUPA, no person may become a member of a partnership without the consent of all the partners.
T
Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a tenant in partnership.
T
Whether an individual partner or the partnership owns certain property determines who gets it upon dissolution of the partnership and who shares in income from it.
T
