Exam 24: Sole Proprietorships and Partnerships

Where there is no fixed end date of an existing partnership,any partner may terminate the partnership at any time

Explain how a partnership can be formed by implication.

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.

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?

Lou,Pete,and Carl are all partners in a feed store business.Carl would like to retire but wants his son,Carl Jr.,to take his place as partner.Is there any way Carl can have his son become a partner?

John and George have been talking about going into business together.John wants the business as an investment and has the money necessary to set it up,but wants no responsibility and little liability.On the other hand,George wants to run the business and is prepared to accept the liability that goes with it.In this case,the agreement that John and George will enter into to do business together is

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

The greatest risk of liability to which a partner subjects her- or himself results from

The most important restriction on a limited liability partnership is that it may carry on business only for the purpose of practicing an "eligible profession".

Compared to a sole proprietorship,what are some disadvantages in carrying on business as a partnership?

Mike,James,and Mary,advertising consultants,enter into a partnership and name it Sensational Adverts.About a year a year after the partnership is established,Mike and Mary have an argument and Mike tells the other partners that he will soon be leaving the partnership.A week later,Sensational Adverts is invited to submit a bid to produce an advert for a local beer company.Mike,who is the member of the partnership in charge of beer adverts,sees this as an opportunity to start his own business.Mike resigns from Sensational Adverts,starts his own company,and then submits a bid.Mike's bid is accepted.There is nothing legally wrong with Mike's conduct.

What are two important factors in determining the type of partnership that parties may wish to enter into?

What protection does a limited partnership offer to the limited partner,and how can the benefit be destroyed by the limited partner?

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

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

An existing partnership may convert itself into a limited liability partnership if two-thirds of the existing partners agree.

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.

What are the advantages of carrying on a business venture as a partnership rather than as a sole proprietorship?

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