Chapter 34 Quiz
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." A. expatriation B. winding down C. winding up D. dissolution E. expropriation
D
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? A. Heidi's heirs now have the right to receive Heidi's one-quarter of the partnership's profits and other partnership distributions. B. All of the partnership assets transfer to Heidi's heirs. C. Heidi's share of profits is split among the remaining 3 partners. D. Heidi's heirs receive nothing. E. One quarter of the partnership assets transfer to Heidi's heirs.
A
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. A. Schedule C B. Schedule S C. Form 2664 D. Schedule EZ E. Form 2553
A
Which of the following is NOT a duty of general partners? A. duty of divergent purpose B. duty of care C. duty of obedience D. duty of loyalty E. duty to inform
A
Which of the following is an INCORRECT statement regarding formation of a general partnership? A. Stock of the partnership, representing ownership, must be publicly traded on a well-known stock exchange (for example, NASDAQ). B. All partners must agree to the participation of each co-partner. C. A general partnership may be formed with little or no formality. D. A person cannot be forced to accept another person as a partner. E. A person cannot be forced to be a partner.
A
According to the UPA, a general partner is entitled to _____ for expenses reasonably incurred in the ordinary and proper conduct of the business. A. ratification B. indemnification C. exemplification D. subrogation E. certification
B
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 _______. A. the partnership only. B. Aisha, Carlo, or Chantel separately, or any two of them, or all of them. C. Carlo only. D. Aisha or Carlo only. E. Carlo and the partnership only.
B
Which of the following is NOT a major form for conducting businesses and professions? A. limited liability partnership B. sole partnership C. sole proprietorship D. limited liability company E. corporation
B
Which of the following is NOT an advantage of a sole proprietorship? A. The owner has the right to make all management decisions concerning the business, including those involving hiring and firing employees. B. The sole proprietorship "veil" shields the sole proprietor from personal liability for business debts. C. A sole proprietorship can be easily transferred or sold if and when the owner desires to do so; no other approval is necessary. D. Forming a sole proprietorship is easy and does not cost a lot. E. The sole proprietor owns all of the business and has the right to receive all of the business's profits.
B
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? A. Teena is liable under the business judgment rule. B. Teena is not liable because the duty of care was not breached. C. Teena has violated her duty to inform. D. Teena has violated her duty of care. E. Teena must repay the partnership for the lost profits.
B
A sole proprietor has _____ personal liability. Question content area bottom Part 1 A. qualified B. conditional C. unlimited D. secondary E. limited
C
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, _______. A. Maude receives $30,000, Diego receives $5,000, Tisa receives $50,000, and Shen receives $15,000 B. no one can take a profit until the capital contributions have been paid back C. each partner receives $25,000 D. Tisa receives the $100,000. E. Maude receives $3,000, Diego receives $500, Tisa receives $5,000, and Shen receives $1,500
C
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. A. Schedule S B. Form 2664 C. Schedule C Your answer is correct. D. Form 2553 E. Schedule EZ
C
Which of the following is an INCORRECT statement regarding formation of a general partnership? A. According to the UPA, a limited partnership can be a person who may be a general partner. B. The organization or venture must have a profit motive in order to qualify as a partnership. C. The organization or venture must actually make a profit in order to qualify as a partnership. D. According to the UPA, a corporation can be a person who may be a general partner. E. Co-ownership of a business is essential to create a partnership.
C
Which of the following is an INCORRECT statement regarding the Uniform Partnership Act (UPA)? A. The UPA covers most problems that arise in the formation, operation, and dissolution of general partnerships. B. The UPA is a model act that codifies general partnership law. C. The UPA has been adopted in whole or in part by a minority of states. D. A Revised Uniform Partnership Act (RUPA) has been issued by the National Conference of Commissioners on Uniform State Laws. E. The goal of the UPA was to establish consistent partnership law that was uniform throughout the United States.
C
_____ are personally liable for the debts and obligations of the partnership. A. Limited partners B. A partnership's board of directors C. General partners D. Partnership employees E. Partnership shareholders
C
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? A. Nathan is entitled to recover his $25,000 capital contribution, and he is not responsible for the $100,000 debt owed to the bank and the $25,000 owed to others, since those debts were undertaken for the benefit of the business. B. Nathan loses his $25,000 capital contribution, and he is responsible for the $100,000 debt owed to the bank, but not the $25,000 debt owed to others. C. Nathan loses his $25,000 capital contribution, and he is responsible for the $25,000 debt owed to others, but not the $100,000 debt owed to the bank since that debt was undertaken for the benefit of the business. D. 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. D E. Nathan loses his $25,000 capital contribution, but he is not responsible for the $100,000 debt owed to the bank and the $25,000 owed to others, since those debts were undertaken for the benefit of the business.
D
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? A. Nathan loses his $25,000 capital contribution, and he is responsible for the $100,000 debt owed to the bank, but not the $25,000 debt owed to others. B. Nathan loses his $25,000 capital contribution, but he is not responsible for the $100,000 debt owed to the bank and the $25,000 owed to others, since those debts were undertaken for the benefit of the business. C. Nathan is entitled to recover his $25,000 capital contribution, and he is not responsible for the $100,000 debt owed to the bank and the $25,000 owed to others, since those debts were undertaken for the benefit of the business. D. 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. E. Nathan loses his $25,000 capital contribution, and he is responsible for the $25,000 debt owed to others, but not the $100,000 debt owed to the bank since that debt was undertaken for the benefit of the business.
D
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? A. competing with the partnership B. making secret profits C. usurping a partnership opportunity D. keeping partnership information confidential E. self-dealing
D
Which of the following is NOT a duty of general partners? A. duty of obedience B. duty to inform C. duty of care D. duty of divergent purpose E. duty of loyalty
D
Which of the following is NOT a major legal form in which to conduct a business? A. limited liability partnership B. sole proprietorship C. limited partnership D. limited sole proprietorship E. general partnership
D
Which of the following is an INCORRECT statement regarding the creation of a sole proprietorship? A. Creating a sole proprietorship is easy. B. There are no formalities required for the creation of a sole proprietorship. C. If no other form of business organization is chosen, the business is by default a sole proprietorship. D. Creation of a sole proprietorship utilizes the same procedure for the creation of a corporation. E. No federal or state government approval is required for the creation of a sole proprietorship.
D
A sole proprietor has _____ personal liability. A. secondary B. qualified C. conditional D. limited E. unlimited
E
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? A. Carlo is not liable for the $100,000 debt, but would be personally liable for the $500,000 loan. B. Carlo's capital contribution will go to paying the $100,000 debt, but Carlo is not personally liable for the $500,000 loan. C. Carlo can get out of paying the $500,000 loan by withdrawing from the partnership by June 1st. D. Carlo is not liable for neither the $100,000 debt nor the $500,000 loan. E. Carlo's capital contribution will go to paying the $100,000 debt and Carlo will become personally liable for the $500,000 loan.
E
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 _____. A. double taxation B. de facto corporate taxation C. taxation without representation D. add-on taxation E. flow-through taxation
E
The process of _____ consists of the liquidation (sale) of partnership assets and the distribution of the proceeds to satisfy claims against the partnership. A. winding down B. expropriation C. dissolution D. expatriation E. winding up
E
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. A. individual, but not collective B. collective, but not individual C. neither joint nor several D. joint, but not several E. joint and several
E
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? Question content area bottom Part 1 A. making secret profits B. competing with the partnership C. usurping a partnership opportunity D. self-dealing E. keeping partnership information confidential
E
Which of the following is NOT a criterion to qualify as a general partnership under the UPA? A. as co-owners B. an association of two or more persons C. carrying on a business D. for profit E. the issuance of publicly-traded stock
E
Which of the following is an INCORRECT statement regarding the name of a general partnership? A. 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. B. The name selected for the partnership cannot be similar to the name used by any existing business entity. C. A general partnership can operate under the names of any one or more of the partners. D. A general partnership can operate under a fictitious business name. E. The name selected by the partnership can indicate that it is a corporation.
E
