Question 1

In a sole proprietorship, the business is considered a separate legal entity.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following is true of the liability of an incoming partner?

Accepted Answer

A)  An incoming partner is liable for the previous debts of the partnership. 
B)  An incoming partner is equally liable for all existing debts of the partnership. 
C)  An incoming partner is liable for the debts of the partnership only to the extent of his or her capital contribution. 
D)  An incoming partner is not liable for the future debts of the partnership. 
A)  An incoming partner is liable for the previous debts of the partnership. 
B)  An incoming partner is equally liable for all existing debts of the partnership. 
C)  An incoming partner is liable for the debts of the partnership only to the extent of his or her capital contribution. 
D)  An incoming partner is not liable for the future debts of the partnership. C

Question 3

Laura is an investor limited partner in a limited partnership. Two years after she becomes a limited partner, Laura thinks that the general partners are not doing a very good job managing the affairs of the limited partnership and participates in the management of the limited partnership. While she is doing so, a bank loans $1 million to the limited partnership, believing that Laura is a general partner. If the limited partnership defaults on the $1 million loan, which of the following holds well?

Accepted Answer

A)  Laura is not personally liable as she is a limited partner on paper. 
B)  Laura is personally liable as the bank, in good faith, thought she is a general partner. 
C)  Laura has unlimited personal liability as a limited partner. 
D)  Laura's liability is restricted to the value of her capital investment in the partnership. 
A)  Laura is not personally liable as she is a limited partner on paper. 
B)  Laura is personally liable as the bank, in good faith, thought she is a general partner. 
C)  Laura has unlimited personal liability as a limited partner. 
D)  Laura's liability is restricted to the value of her capital investment in the partnership. B

Question 4

Which of the following must be in writing even if it is below the time stipulation of the Statute of Frauds?

Accepted Answer

A)  businesses that have more than one commercial venture 
B)  partnerships authorized to deal real estate 
C)  businesses that are authorized to lend money 
D)  enterprises which deal with health and medicine 
A)  businesses that have more than one commercial venture 
B)  partnerships authorized to deal real estate 
C)  businesses that are authorized to lend money 
D)  enterprises which deal with health and medicine

Question 5

The creation of a limited partnership is formal and requires public disclosure.

Accepted Answer

A) True 
 B)False

Question 6

An entrepreneur is a person who forms and operates a business.

Accepted Answer

A) True 
 B)False

Question 7

Why does a sole proprietorship not pay taxes at the business level?

Accepted Answer

A)  It does not have a separate legal personality. 
B)  It is a small business that is exempted from taxation. 
C)  It is a not-for-profit organization. 
D)  It is generally an institution with no business dealings. 
A)  It does not have a separate legal personality. 
B)  It is a small business that is exempted from taxation. 
C)  It is a not-for-profit organization. 
D)  It is generally an institution with no business dealings.

Question 8

Which of the following is true of general partnership?

Accepted Answer

A)  A business should make a profit in order to qualify as a general partnership. 
B)  The general partners need not be the co-owners of the business. 
C)  General partnerships can be either oral or implied from the conduct of the parties. 
D)  Charity organizations and schools are mostly formed from general partnerships. 
A)  A business should make a profit in order to qualify as a general partnership. 
B)  The general partners need not be the co-owners of the business. 
C)  General partnerships can be either oral or implied from the conduct of the parties. 
D)  Charity organizations and schools are mostly formed from general partnerships.

Question 9

Under partnership law, ________ have the right to manage the affairs of the limited partnership.

Accepted Answer

A)  investors 
B)  sole proprietors 
C)  limited partners 
D)  general partners 
A)  investors 
B)  sole proprietors 
C)  limited partners 
D)  general partners

Question 10

Which of the following is a major form of conducting a business?

Accepted Answer

A)  institution 
B)  charity 
C)  corporation 
D)  trust 
A)  institution 
B)  charity 
C)  corporation 
D)  trust

Question 11

The earnings and losses from a sole proprietorship are reported on ________.

Accepted Answer

A)  the federal income tax filing document 
B)  the business license that is renewed each year 
C)  the proprietor's personal income tax filing 
D)  the state income tax filing document 
A)  the federal income tax filing document 
B)  the business license that is renewed each year 
C)  the proprietor's personal income tax filing 
D)  the state income tax filing document

Question 12

Which of the following partners of a limited partnership invest capital but do not participate in management?

Accepted Answer

A)  specific partners 
B)  limited partners 
C)  general partners 
D)  sole proprietors 
A)  specific partners 
B)  limited partners 
C)  general partners 
D)  sole proprietors

Question 13

Which of the following is true in the creation of a general partnership?

Accepted Answer

A)  The business name has to have the names of all the partners. 
B)  The business name cannot be a fictitious name. 
C)  The name selected by the partnership cannot indicate that it is a corporation. 
D)  The business cannot operate under a trade name. 
A)  The business name has to have the names of all the partners. 
B)  The business name cannot be a fictitious name. 
C)  The name selected by the partnership cannot indicate that it is a corporation. 
D)  The business cannot operate under a trade name.

Question 14

General partners are not personally liable for partnership debts beyond their capital contributions.

Accepted Answer

A) True 
 B)False

Question 15

The process of liquidating a partnership's assets and distributing the proceeds to satisfy claims against the partnership is known as winding up.

Accepted Answer

A) True 
 B)False

Question 16

The dissolution of a general partnership discharges the liability of an outgoing partner for existing partnership debts and obligations.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true of creating a sole proprietorship?

Accepted Answer

A)  No state government approval is required. 
B)  Federal taxation is levied upon sole proprietorship. 
C)  No licenses are required to do business within a city or state. 
D)  Special permission must be obtained to receive a sole proprietorship status. 
A)  No state government approval is required. 
B)  Federal taxation is levied upon sole proprietorship. 
C)  No licenses are required to do business within a city or state. 
D)  Special permission must be obtained to receive a sole proprietorship status.

Question 18

Which of the following partners in a limited partnership invest capital, manage the business, and are personally liable for partnership debts?

Accepted Answer

A)  specific partners 
B)  limited partners 
C)  general partners 
D)  sole proprietors 
A)  specific partners 
B)  limited partners 
C)  general partners 
D)  sole proprietors

Question 19

Which of the following types of liability do general partners of a limited partnership have for the debts and obligations of the limited partnership?

Accepted Answer

A)  unlimited personal liability 
B)  limited capital liability 
C)  liability of termination as partner 
D)  limited personal liability 
A)  unlimited personal liability 
B)  limited capital liability 
C)  liability of termination as partner 
D)  limited personal liability

Question 20

Which of the following is true of a sole proprietorship?

Accepted Answer

A)  A business operated under sole proprietorship cannot be transferred. 
B)  Large businesses cannot be operated under sole proprietorship. 
C)  A business operated under sole proprietorship should be owned by one or more people of the same family. 
D)  Creditors can recover claims against the business from the sole proprietor's personal assets. 
A)  A business operated under sole proprietorship cannot be transferred. 
B)  Large businesses cannot be operated under sole proprietorship. 
C)  A business operated under sole proprietorship should be owned by one or more people of the same family. 
D)  Creditors can recover claims against the business from the sole proprietor's personal assets.

Exam 14: Small Business and General and Limited Partnerships

In a sole proprietorship, the business is considered a separate legal entity.

Which of the following is true of the liability of an incoming partner?

Which of the following must be in writing even if it is below the time stipulation of the Statute of Frauds?

The creation of a limited partnership is formal and requires public disclosure.

An entrepreneur is a person who forms and operates a business.

Why does a sole proprietorship not pay taxes at the business level?

Which of the following is true of general partnership?

Under partnership law, ________ have the right to manage the affairs of the limited partnership.

Which of the following is a major form of conducting a business?

The earnings and losses from a sole proprietorship are reported on ________.

Which of the following partners of a limited partnership invest capital but do not participate in management?

Which of the following is true in the creation of a general partnership?

General partners are not personally liable for partnership debts beyond their capital contributions.

The process of liquidating a partnership's assets and distributing the proceeds to satisfy claims against the partnership is known as winding up.

The dissolution of a general partnership discharges the liability of an outgoing partner for existing partnership debts and obligations.

Which of the following is true of creating a sole proprietorship?

Which of the following partners in a limited partnership invest capital, manage the business, and are personally liable for partnership debts?

Which of the following types of liability do general partners of a limited partnership have for the debts and obligations of the limited partnership?

Which of the following is true of a sole proprietorship?

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