Exam 24: Sole Proprietorships and Partnerships

James and John go into business together as partners.They each decide to make contributions to the business of the partnership.James has two vans worth $15 000,which he gives to the partnership.John owns an old farmhouse worth $60 000 that they decide can be used as a warehouse,and John gives it to the partnership.Five years later,there is a falling out and they decide to end the partnership.By this time the warehouse is worth $80 000 and the vans are worth $12 000.John will be entitled to $80 000 and James will be entitled to the depreciated value of the vans,namely $12 000.

A Limited Liability Partnership (LLP)protects a partner from some personal liability.Even though a partner in an LLP is not liable for debts,liabilities,or obligations arising from the negligent acts or omissions of other partners or employees,a partner is subject to all of the following EXCEPT

The type of unincorporated business that is usually owned by one person is called a partnership.

Albert and Edward have just become lawyers and wish to set up a practice together.In order to best protect themselves,they should conduct the practice as a

Johnson,Michael & Associates is a partnership of accountants.One evening,Bosco,the truck driver for the firm,during the course of performing his duties,gets into an accident with James.James is injured and later commences a personal injury action against the partnership.James obtains judgment of $250 000 against the partnership.The partnership is not insured and has only $150 000 in its account.James may recover the balance of $100 000 from the personal assets of any of the individual partners.

What steps should a retiring partner take to ensure that his or her liability as a partner is at an end?

Which of the following is NOT a fiduciary duty owed by one partner to another?

Chartered accountants can carry on a limited liability partnership without a limited liability partnership agreement.

Three women form a partnership.They contribute the same amount of capital and they have agreed to share equally on the profits.If a loss occurs,need they share equally on the loss? If they each put in roughly the same amount of time,can their salaries be different? Explain your answer in both cases.

Fred is a partner in a land development partnership.He has learned independently of an opportunity to pursue a land development project with Nelly.Nelly refuses to be involved in business with Fred if he associates his partnership in the project.Nelly will do business with Fred only if he is independent of his partners.Fred will have no liability to his partners if

A contractual joint venture differs from a partnership in that

In a contractual joint venture,how do the participants protect themselves from the liabilities of their partners?

Chico and Amos decide to be partners in the storage and delivery business.Chico has some land with buildings to contribute,and Amos has a large van and a small truck to contribute.After two years (and sharing profits equally),they decide that the business is not worth all the trouble,so they liquidate.The land and buildings bring $45 000,and the two vehicles bring $7000.How should the proceeds be divided?

A partnership has no independent existence in law.

For the last 14 months,Greer has been a junior partner in a Vancouver law firm.Until now he was receiving a monthly salary of $5000.Senior partners have just decided to stop all salaries because of a pending lawsuit against the firm.It was determined the firm would not make profits for at least the next eight months.Is the firm obliged to continue Greer's salary?

A Limited Liability Partnership (LLP)is different from a limited partnership.Which of the following is NOT true?

Explain why partners should always have a partnership agreement.

In a limited partnership,although the limited partner actively engages in the management of the partnership business,only the general partner has unlimited liability.

Why should you register the partnership with the province?

A partnership incurs no liability for a breach of trust committed by one of its partners.