Question 1

Arian is a sole proprietor and owes a number of business creditors.The business creditors may sue to:
A)only take Arian's business assets.
B)only take Arian's personal assets.
C)take both Arian's business and personal assets.
D)not take any assets,but only the profits of the business.

Accepted Answer

As a sole proprietor, Arian and the business are considered one in the same for legal and financial purposes. Therefore, business creditors can sue to take both Arian's personal and business assets to satisfy outstanding debts.

Question 2

In a limited partnership,general partners:
A)take an active part in management,but have unlimited liability for the firm's debts.
B)take an active part in management,but have no liability for the firm's debts.
C)take an active part in management,but are nonparticipating investors.
D)take no part in management,but contribute cash or property.

Accepted Answer

In a limited partnership, there are both general partners and limited partners. General partners take an active role in managing the partnership and have unlimited liability for the partnership's debts. Limited partners, on the other hand, do not take an active role in management and have limited liability for the partnership's debts. Therefore, choice A is the correct answer.

Question 3

Under the UPA,a partner in a tenancy in partnership has all the following rights except:
A)an equal right to possess and use specific partnership property for partnership purposes,but not for that partner's personal use.
B)rights in partnership property that are not subject to attachment for personal debts.
C)in the case of a partner's death,the right to have the deceased partner's interest in real property held by the partnership pass to the surviving partners.
D)the right to be a co-owner of partnership property with no interest in partnership property which can be transferred,either voluntarily or involuntarily.

Accepted Answer

Under the UPA, a partner in a tenancy in partnership has the right to be a co-owner of partnership property but the partner's interest in partnership property cannot be transferred either voluntarily or involuntarily. Therefore, option D is incorrect as it states that a partner has no interest in partnership property which can be transferred. Options A, B, and C are all correct statements of a partner's rights under the UPA.

Question 4

A partner's ________ is her share of the ________ plus any ________,which is any remaining funds after dissolution.
A)vested property right;profits;surplus
B)economic interest;profits and losses;surplus
C)property;surplus;losses
D)economic interest;surplus;vested property rights

Accepted Answer

The partner's economic interest includes her share of the profits and losses, as well as any remaining funds after dissolution (surplus). This is different from vested property rights, and the choice of "property" and "losses" in option C is inaccurate. Option D includes "vested property rights" but does not include the share of profits and losses. Therefore, option B is the most accurate choice.

Question 5

When forming a limited partnership,it is critical to know that:
A)general partners have limited liability for the firm's debts.
B)a certificate of limited partnership must be filed with the Secretary of State's office.
C)limited partners are participating investors.
D)general partners can only take a limited part in the management of the firm.

Accepted Answer

General partners have unlimited liability for the firm's debts, not limited. Limited partners are the ones with limited liability and typically do not participate in the management of the firm, which contradicts choices A, C, and D. The correct statement is B, as forming a limited partnership usually requires filing a certificate of limited partnership with the Secretary of State or similar official body to legally establish the entity.

Question 6

The RUPA has eliminated:
A)all management rights enjoyed by partners.
B)the concept of tenancy in partnership.
C)partnership entity status.
D)each partner's interest in the firm.

Accepted Answer

The RUPA has eliminated the concept of tenancy in partnership, meaning that partners no longer have joint ownership of partnership assets. Instead, they now have an equal right to manage partnership affairs and share in profits and losses.

Question 7

Susan and Stanley are in a partnership called Easy Partnership.Susan purchases a truck with her personal funds with title to the truck naming Easy Partnership.Who owns the truck?
A)Susan
B)Susan and Stanley
C)Easy Partnership only
D)Both Susan and Easy Partnership

Accepted Answer

The truck is owned by Easy Partnership only because the title to the truck names Easy Partnership, indicating that the partnership is the legal owner of the truck, regardless of whose funds were used to purchase it.

Question 8

Thomas invests $10,000 in the Thomas and Trudy partnership named Tremendous Enterprise.Thomas needs $2,000 for medical expenses and insists that he is entitled to withdraw that amount immediately from what he has invested.Trudy asserts that the $10,000 investment is partnership property.Under the RUPA,who owns the $10,000?
A)Tremendous Enterprise
B)Thomas only
C)Thomas individually and Trudy individually
D)The $10,000 is owned by no one,but is merely a future interest of Thomas.

Accepted Answer

Under the Revised Uniform Partnership Act (RUPA), once Thomas invests the $10,000 into the Tremendous Enterprise partnership, that money becomes partnership property. This means it is owned by the partnership itself, not by Thomas or Trudy individually.

Question 9

Charlotte is declared mentally incompetent by a court and is unable to participate as a partner in AMLAP Enterprises.Charlotte wants to leave the AMLAP partnership,but is contractually obligated for three more years.Can Charlotte leave the AMLAP partnership?
A)Yes,she can do so without any liability to the partnership.
B)No,there is no right to leave.
C)Yes,she has a right to leave,but is liable for breach of contract.
D)No,there is no right to leave unless all the partners agree.

Accepted Answer

Charlotte can leave the partnership without liability because being declared mentally incompetent by a court typically voids her contractual obligations, including those related to the partnership.

Question 10

Jack has an auto accident while on business for Small Enterprises,an RLLP consisting of Jack and Alex.Who is liable for damages resulting from the auto accident?
A)Small Enterprises only
B)Jack only
C)Jack and Alex only
D)Small,Jack,and Alex

Accepted Answer

The answer of Jack has an auto accident while on...

Question 11

Jackie is interested in the property of the Big Partnership,in which Jackie is a full partner.She wants to mortgage the property in order to collateralize loans for the organization.However,not all the partners agree with Jackie.What is Jackie's legal position with regard to the mortgage under UPA?
A)Her partners' non-agreement is legally irrelevant.
B)Jackie's interest in the partnership property cannot be assigned.
C)Jackie can mortgage her share of the organization's property.
D)UPA does not address this issue,and a court will decide on a case by case basis.

Accepted Answer

Under the Uniform Partnership Act (UPA), a partner's interest in partnership property is not assignable, meaning Jackie cannot mortgage the partnership property without the consent of all partners.

Question 12

Alan and Baker are disappointed in the profitability of their A and B Partnership.They want to join their partnership with the X and Y Partnership.Is it possible for a partnership to be a partner?
A)Yes
B)No
C)Yes,if the partners agree to personally guarantee the debts of the new partnership
D)No,because a partner must be an entity

Accepted Answer

It is possible for a partnership to be a partner in another partnership as it is a legal entity. The partnership will be treated as a separate entity from the individual partners.

Question 13

Under RUPA,a ________ takes place whenever a partner is no longer associated with the running of the firm.
A)dissolution
B)dissociation
C)rescission
D)devolution

Accepted Answer

RUPA defines dissociation as the event that occurs when a partner is no longer associated with the running of the firm, but the partnership continues to exist. Dissolution, on the other hand, refers to the termination of the partnership as a whole. Rescission is not a term commonly used in the context of partnership law, and devolution does not have a clear meaning in this context.

Question 14

Under the RUPA,a partnership:
A)has continuity of existence.
B)is considered an entity in all situations.
C)is no longer viewed as an aggregate in relation to liability.
D)has no liability for the obligations made by its partners.

Accepted Answer

The answer of Under the RUPA,a partnership:
A)has continuity of existence.
B)is...

Question 15

Tina is a limited partner in Aon Enterprises,a limited partnership,while Mark is a general partner.Tina assumes management duties for three weeks,while Mark is recovering from heart surgery.Most likely,who or what has liability for partnership actions during this period?
A)Aon Enterprises only
B)Mark only
C)Tina only
D)Mark and Tina

Accepted Answer

Tina, by assuming management duties, may lose her limited liability protection and be treated as a general partner during that period, making both her and Mark liable for partnership actions.

Question 16

In a general partnership,which of the following is true of limited partners?
A)Limited partners take an active part in the management of the firm.
B)A limited partner's nonpartnership property can be used to satisfy any debts owed by the firm.
C)Limited partners are nonparticipating investors.
D)Limited partners have unlimited liability for the firm's debts.

Accepted Answer

Limited partners are passive investors and do not take an active part in the management of the firm. They have limited liability for the firm's debts, meaning their liability is limited to the amount of their capital contribution. Additionally, a limited partner's personal assets cannot be used to satisfy any debts owed by the firm beyond their capital contribution. Therefore, option B is not correct. Option D is also incorrect as limited partners have limited liability.

Question 17

John knows that The Franklin Enterprises Partnership,in which John is a partner,is interested in purchasing a particular tract of land for a business location.Can John lawfully have his aunt buy the land,so that she may resell the land to Franklin Partnership?
A)No,it violates John's duty of care.
B)Yes,assuming the price to Franklin was a fair market price.
C)No,it violates John's duty of loyalty.
D)Yes,the aunt is not a Franklin partner and has no loyalty to it.

Accepted Answer

John has a duty of loyalty to his partnership, which means he must act in the best interest of the partnership and cannot engage in self-dealing. By having his aunt purchase the land and then resell it to the partnership, John would be using his position to benefit himself, which violates his duty of loyalty.

Question 18

The Titanic Partnership's loan from Big Bank is structured so that payments on the loan are made out of profits and the amounts of the payments vary according to profitability.Which of these best describes this arrangement?
A)This is evidence of a partnership between Titanic and Big Bank;additional evidence may overcome this assumption.
B)This is conclusive evidence of a partnership between Titanic and Big Bank.
C)This may be evidence of a partnership between Titanic and Big Bank.
D)This is not evidence of a partnership between Titanic and Big Bank.

Accepted Answer

The answer of The Titanic Partnership's loan from Big Bank...

Question 19

Alan and Delen enter into a partnership agreement with a $10,000 capital contribution.Six months later,Delen loans Alan $1,000.The loan is a:
A)partnership capital contribution.
B)loan to the partnership,rather than to Alan.
C)loan to both the partnership and to Alan.
D)personal loan to Alan only.

Accepted Answer

The loan from Delen to Alan is considered a personal loan to Alan only, as it is made directly to him and not to the partnership or on behalf of the partnership. This distinction is important for accounting and legal purposes, as it affects how the loan is treated in the partnership's financial statements and obligations.

Question 20

Which of the following is an advantage of a sole proprietorship?
A)The owner of a sole proprietorship has no liability.
B)The owner of a sole proprietorship has complete control over the business.
C)The sole proprietorship's existence does not depend entirely upon the sole proprietor.
D)Owners of sole proprietorships can raise a lot of cash quickly for expansion purposes.

Accepted Answer

The advantage of a sole proprietorship is that the owner has complete control over the business. Option A is incorrect because the owner of a sole proprietorship is personally liable for the business's debts and actions. Option C is incorrect because the sole proprietorship's existence is entirely dependent on the sole proprietor. Option D is incorrect because it is difficult for sole proprietors to raise capital quickly as they have limited access to sources of funding.

Quiz 25: The Business Entity: an Introduction

Arian is a sole proprietor and owes a number of business creditors.The business creditors may sue to:

In a limited partnership,general partners:

Under the UPA,a partner in a tenancy in partnership has all the following rights except:

A partner's is her share of the plus any ,which is any remaining funds after dissolution.

When forming a limited partnership,it is critical to know that:

The RUPA has eliminated:

Susan and Stanley are in a partnership called Easy Partnership.Susan purchases a truck with her personal funds with title to the truck naming Easy Partnership.Who owns the truck?

Charlotte is declared mentally incompetent by a court and is unable to participate as a partner in AMLAP Enterprises.Charlotte wants to leave the AMLAP partnership,but is contractually obligated for three more years.Can Charlotte leave the AMLAP partnership?

Jack has an auto accident while on business for Small Enterprises,an RLLP consisting of Jack and Alex.Who is liable for damages resulting from the auto accident?

Jackie is interested in the property of the Big Partnership,in which Jackie is a full partner.She wants to mortgage the property in order to collateralize loans for the organization.However,not all the partners agree with Jackie.What is Jackie's legal position with regard to the mortgage under UPA?

Alan and Baker are disappointed in the profitability of their A and B Partnership.They want to join their partnership with the X and Y Partnership.Is it possible for a partnership to be a partner?

Under RUPA,a ________ takes place whenever a partner is no longer associated with the running of the firm.

Under the RUPA,a partnership:

Tina is a limited partner in Aon Enterprises,a limited partnership,while Mark is a general partner.Tina assumes management duties for three weeks,while Mark is recovering from heart surgery.Most likely,who or what has liability for partnership actions during this period?

In a general partnership,which of the following is true of limited partners?

John knows that The Franklin Enterprises Partnership,in which John is a partner,is interested in purchasing a particular tract of land for a business location.Can John lawfully have his aunt buy the land,so that she may resell the land to Franklin Partnership?

The Titanic Partnership's loan from Big Bank is structured so that payments on the loan are made out of profits and the amounts of the payments vary according to profitability.Which of these best describes this arrangement?

Alan and Delen enter into a partnership agreement with a $10,000 capital contribution.Six months later,Delen loans Alan $1,000.The loan is a:

Which of the following is an advantage of a sole proprietorship?