Exam 24: Sole Proprietorships and Partnerships

A and B have decided to carry on a business in partnership in Ontario,and A has his lawyer prepare a detailed partnership agreement setting out their respective rights and obligations.However,at the last minute,B refuses to sign the agreement and A,who trusts B,decides that the agreement is unnecessary.In this case,the partnership will be governed by

A partnership has no independent existence in law.

Which of the following is NOT true about partnerships?

Three men decided to form a partnership to look for buried treasure.Luke and Mark had expensive equipment,experience,and expertise,but the third partner,Cyrus,had a treasure map.Cyrus had his holidays start a few days earlier than the other two,so he went ahead "to set up camp." Lo and behold,before the others arrived,Cyrus found the treasure.So when Luke and Mark arrived,he immediately dissolved the partnership and claimed the entire treasure for himself.Do Luke and Mark have any legal claim to the treasure?

Is a well-drafted,carefully thought-out partnership agreement a guarantee of a successful partnership? If not,what is?

A partnership agreement

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

Tamara,Avery and Loewen have carried on business as partners for a number of years operating a small flower shop.None of the terms of the partnership agreement have ever been reduced to writing.One day Avery discloses to her partners that she is "bringing her daughter Samantha into the partnership".The following principle of law applies to the question of whether Samantha will become a partner in these circumstances.

Carter,a partner in a financial planning firm,solicited a client without reporting it to the firm.He used the letterhead,business cards,and facilities of the firm.He then defrauded the client out of $138 000 and left for Honduras.Will the firm be liable to this client?

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

Partners have fiduciary duties one to another,and if they are professionals they have fiduciary duties to their clients.How would these duties differ?

Two years ago the Citizens Bank lent the Carlin & Hickel Partnership $2 million.Now the firm is defaulting on their monthly payments.Which of the following partners will be liable on this loan?

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.

Partners are generally liable for the torts committed by another partner in the ordinary course of the business.Furthermore,each partner is jointly liable for the debts and obligations of the firm.A Limited Liability Partnership (LLP)limits a partner's liability as a result of the negligent acts or omissions of another partner.

Explain why partners should always have a partnership agreement.

Which of the following is TRUE about sole proprietorships?

A contractual joint venture differs from a partnership in that

A,a partner in a furniture business called A & B Furniture,causes an accident with the business's delivery truck and injures Alice,who is standing at a bus stop. Assume that in the law suit Alice will be entitled to $1 million in damages.Also assume that A has personal assets of $250 000.00 and B has personal assets of $450 000.00 and that the firm has assets of $1.5 million.In deciding who to sue,Alice will consider that

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

If there is no explicit partnership agreement,each partner will share in the profits of the partnership according to that partner's proportionate capital contribution.