Ch. 17 Sole Proprietorships and Partnerships

Three Essential Elements to Determine Whether a Partnership Exists:

1. A sharing of profits or losses. 2. A joint ownership of the business. 3. An equal right to be involved in the management of the business.

A Partnership Probably Does Not Exist if Shared Profits Were Received as Payment of Any of the Following:

1. a debt by installments or interest on a loan. 2. wages of an employee or for the services of an independent contractor. 3. rent to a landlord. 4. an annuity to a surviving spouse or representative of a deceased partner. 5. a sale of the goodwill (the valuable reputation of a business viewed as an intangible asset.) of a business or property.

The Factors an Entrepreneur Must Consider When Selecting an Organizational Form:

1. ease of creation. 2. the liability of the owners. 3. tax considerations. 4. the ability to raise capital.

In all cases, joint ownership of property creates a partnership.

False

A partner's profit from the partnership is taxed as individual income to the individual partners. T or F

True

The sharing of both profits and losses creates a legal inference that a partnership exists. T or F

True

Which of the following does NOT represent a major difference between an agency relationship and a partnership? a. An agent is liable for the acts of the principle, but partners are not liable for the act of the partnership. b. Agents do not usually have an ownership interest in the business; partners do. c. Partners have a greater range of implied powers than agents have.

a. An agent is liable for the acts of the principle, but partners are not liable for the act of the partnership.

One basic difference between partnership and agency law is that: a. each partner has an ownership interest in the firm. b. each partner does not have an ownership interest in the firm. c. in a partnership, partners are not deemed to be agents of the other partners.

a. each partner has an ownership interest in the firm.

Under the common law, a partnership was treated only as

an aggregate of its members. (Under the common law, a partnership was treated only as an aggregate of the individual members. Thus, a common law lawsuit could never be brought by or against the firm in its own name. Each individual partner had to sue or be sued.)

Celia has convinced Maria to start a new business as a partnership rather than as a sole proprietorship. Celia wants to avoid:

bearing the burden of all losses and liabilities.

Pressler wants to be his own boss and wants to start a business. He has to decide which form of business organization to adopt and will likely consider all of the following EXCEPT:

publicity and public relations

Collette is a sole proprietor of a 3-D printing shop. She has considered changing her business organizational structure but cannot find an alternative that would give her the main advantage she enjoys as a sole owner, which is

receives all the profits

What is the simplest form of business?

sole proprietorship

When there is no expressed partnership agreement what governs the operation of partnership?

the Uniform Partnership Act