Sole Proprietorships and Partnerships
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1. An entrepreneur is defined as:

a. someone who works for another person in a sales capacity.
b. someone who initiates, undertakes the financial risks of, and manages a new business enterprise.
c. someone who provides financial support for an existing business enterprise.
d. someone who purchases stock in a volatile stock market.

2. Which of the following IS NOT an important legal factor to consider when forming a business organization?

a. The liability of owners.
b. The accessibility of transportation.
c. Tax liabilities.
d. Ease of creation.

3. Traditionally, entrepreneurs may chose three major forms for structuring their enterprises. Which of the following is not a traditional form for a business enterprise?

a. A limited liability company.
b. A corporation.
c. A partnership.
d. A sole proprietorship.

4. In terms of percentages, which form of business enterprise is most prevalent in the U.S?

a. The corporation.
b. The limited liability partnership.
c. The sole proprietorship.
d. The partnership.

5. The advantages of a sole proprietorship DO NOT include which of the following?

a. The ability to raise capital is limited.
b. They are less costly to start.
c. In terms of management, they are quite flexible.
d. They may be created in conjunction with Keogh plans.

6. A partnership involves three essential elements. Which of the following IS NOT one of those elements?

a. An equal right in the management of the business.
b. Limited liability for breach of contract.
c. A joint ownership of the business.
d. Shared profits and losses.

7. For purposes of federal income taxation, a partnership is treated:

a. as an aggregate of individuals.
b. as a separate legal entity.
c. as a corporation.
d. as a tax-free institution.

8. When considering whether or not to operate a partnership in another country, U.S. citizens should investigate:

a. the impact of the Interstate Commerce Clause on this option.
b. local participation rules, if any.
c. equal Employment Opportunity Commission requirements.
d. the partnership rules of the International Monetary Fund.

9. Written agreement stating the rights and obligations of partners in a partnership are known as:

a. partnership bylaws.
b. letters of affirmation.
c. articles of partnership.
d. articles of incorporation.

10. If Mel and Frank enter into a partnership to produce lawnmowers and if this partnership has no fixed duration, if it is, in other words, open ended, it is known as:

a. a partnership for a term.
b. a partnership by estoppel.
c. a partnership at will.
d. a wound-up partnership.

11. The case of Atlas Tack Corp. v. DiMasi involved:

a. a partnership at will.
b. a partnership for a term.
c. a partnership by estoppel.
d. a partnership by operation of law.

12. The general rule provided for by the Uniform Partnership Act (UPA) with regards to profits and losses of partnerships is:

a. partners may assign their interests.
b. profits shall be shared according to seniority of partner.
c. profits shall be shared among initial partners only.
d. profits and losses shall be equally shared.

13. Under the UPA, the general rule concerning management rights is:

a. partners have equal rights in management regardless of the proportional size of their partnership interest.
b. partners have management rights only to the extent that they have contributed assets to the partnership.
c. senior partners only have management rights.
d. only the managing partner has partnership rights.

14. Which of the following actions requires the unanimous consent of all partners before it may be undertaken?

a. Hiring a new employee.
b. Purchasing new office equipment.
c. Admitting new partners.
d. Reviewing partnership accounts.

15. Why is it considered important for partners to have the right to inspect partnership books?

a. So that they may monitor third parties.
b. So that they are able to ensure that other parties abide by their fiduciary duties.
c. So that they are able quickly review contractual obligations with other parties.
d. So that they are able to create partnerships by estoppel at will.

16. In which of the following cases does a partner NOT have a right to a formal, court-compelled accounting?

a. When circumstances render it "just and reasonable."
b. When he suspects his partner of having an affair with his wife.
c. When a partner withholds profits.
d. When a partner is wrongfully excluded from possession of partnership property.

17. Bart and Lisa are partners in a landscaping business, "B&L Landscaping." Bart and Lisa own several lawnmowers and assorted other equipment. As a general rule, what property rights does each have in this equipment?

a. The senior partner owns all the property.
b. They own only their personal property, not partnership property.
c. They are co-owners of this partnership property.
d. They co-own this partnership property only if the partnership is a partnership at will.

18. In most states partners are subject to joint liability. This means:

a. a partner may not insist other partners are joined in lawsuits against her.
b. partners may be either sued individually or as a group.
c. partners may be sued only as a corporation.
d. a partner may insist that other partners are joined in lawsuits against her

19. If, in the case of B&L Landscaping, described in question #17, Bart tells Lisa that he can't bear to spend one more day in her company, looking at her, or otherwise dealing with her, this would constitute:

a. a winding up of the partnership.
b. a dissolution of the partnership.
c. an amending of the partnership.
d. an assignment of the partnership.

20. If, instead of telling Lisa that he can't bear to see or work with her any longer, Bart falls over dead from a heart attack, this means:

a. the partnership is terminated by judicial decree.
b. the partnership is terminated by operation of law.
c. the partnership is terminated by equity.
d. the partnership is terminated by agreement.

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