Chapter 13. Choice of Business Entity, Sole Proprietorships, and Partnerships

True or false: A partnership may not sell ownership rights through the public markets.

true

The RUPA provides for expulsion of a partner from a partnership by the what kind of vote of the other partners.

unanimous

Which of the following is a correct statement regarding general partner liability under general partnership law?

A partner's personal assets are subject to partnership debt.

Which of the following does not require any formal documents to be filed with the government in order to legally exist?

General partnership

Which of the following is not a source of funding for partnerships?

Selling ownership rights through the public markets

Which of the following is not a way in which a limited partnership can be funded?

Selling ownership rights through the public markets

When a principal wishes to leave a partnership, the RUPA defines this act of separation as which of the following:

dissociation

The extent to which principals are personally responsible for the debts of the business is which of the following factors?

liability

A(n) partnership has at least one general partner and at least one limited partner.

limited

In a limited partnership, the partner's liability is limited to what he or she contributed to the business.

limited

In a limited partnership, the limited partner's liability is

limited to the extent of the limited partner's contribution in the business.

Which of the following may a limited partner perform for a limited partnership?

Contribute expertise

Which of the following typically follows the business name to signify that it operates as a general partnership?

GP

Which of the following are typically used to denote a limited partnership?

LP

Which of the following is the simplest multiple-person business entity?

Partnership

In the absence of an agreement, which of the following are used as default provisions for a limited partnership?

Revised Uniform Limited Partnership Act

A(n) is the easiest single-person ownership entity to form and maintain.

Sole proprietorship

Which choice of business entity is the top choice for a start-up business with low annual revenues and expenses?

Sole proprietorship

Which of the following is true of limited partners in a partnership?.

They remain primarily investors.

States that have not adopted the RUPA follow the provisions found in the

Uniform Partnership Act

When forming a limited partnership, name, address, and partner capital contribution are typically items found in the

certificate of limited partnership

The RUPA provides that partners have the power to bind the partnership to obligations regardless of the knowledge of the other partners.

contractual

Voluntary separation, expulsion, and a partner's incapacity are recognized events under RUPA that are considered to be events of

dissociation

Which of the following is a partnership where the principals agree to an ongoing business relationship.

express

True or false: A written partnership agreement is required for an entity to be able to exist as a partnership.

false

Duties requiring partners to act in the best interest of the partnership are known as duties

fiduciary

Loyalty, care, and good faith are

fiduciary duties owed by partners

An arrangement of a continuing commercial relationship for the right to operate a business pursuant to the franchisor's trade name or to sell the seller's branded goods is a(n):

franchise

Two or more people operating as co-owners of a business for profit is called a:

general partnership

Parties who may not intend to become partners can still have liability as partners through a theory of partnership

implied

In a limited partnership, tax is paid based on the

individual partner's tax rate.

If a limited partner engages in activities reserved for general partners, the limited partner may

jeopardize the limited partnership status.

Unless the parties otherwise agree, the RUPA states that partners providing labor to the partnership are:

not entitled to any compensation other than a share of profits

In the context of business organizations, the principals of the business are the

owners

A general is where two or more principals have demonstrated an intent to carry on as co-owners of a business for profit.

partnership

Approximately forty states have adopted all or substantial portions of the Revised Uniform Act

partnership

Limited and general are the two traditional subcategories of which of the following business entities?

partnerships

Limited partnerships are entities for tax purposes, meaning the entity itself does not pay taxes.

pass - through

Which of the following is the term used to describe an entity that, for tax purposes, means that the partnership entity pays no level of corporate tax.

pass through

In a limited partnership, the general partner is

personally liable for the debts of the partnership.

A partnership is taxed like a sole which means the partnership itself does not pay taxes, but rather taxes are accounted for on individual partner tax returns.

proprietorship

When a limited partnership interest is sold to the public, the transaction is subject to federal and state laws

security

When it comes to liability, general partners are personally exposed to liability similar to

sole proprietors