Exam 34: Small Businesses, Entrepreneurs, and General Partnerships

Martha started a flower shop as a sole proprietor.After 1 year,she was forced to close the shop because business was so bad.At that time,the business assets totaled $50,000,but the business liabilities totaled $125,000.Which of the following statements is true?

If a business,having one owner,is started without the owner choosing any particular form of business organization,that business will be:

Each partner's vote is based on his or her capital contribution or share in the partnership profits.

Partnerships that exist for more than one year must be in writing.

A partner is entitled to indemnification of his or her expenses on behalf of the partnership.

The process of winding up involves the liquidation of the partnership's assets.

Partners are allowed to bring an action for an accounting against other partners.

Patty owned a sole proprietorship.She had four salespersons selling the company's products.One of her salespersons made false statements about a competitor's products while trying to sell Patty's products.The competitor sues Patty's business and wins the lawsuit.Under what circumstances could Patty be personally responsible to pay the judgment?

The dissolution of a partnership discharges the liability of the outgoing partners for the existing partnership's debts and obligations.

State approval is needed in order to form a sole proprietorship.

Fred and Ginger are general partners in a business.They decide to purchase a building for the partnership.Ginger will put up the money for the building,and Fred will complete the remodeling.While inspecting the building,Fred is informed that the building is packed full of asbestos.He fails to tell Ginger of the presence of the substance.They buy the building and go into business.During remodeling of the building,people from the neighborhood begin complaining about the dust from the building.Some of them even threaten to sue! Who is liable?

Betty starts up a business selling party supplies from a retail store.This business is very successful.She opens several other stores in the same city.She eventually has six similar stores in her city.She has a manager for each store who is paid a fixed annual salary.All her other employees are paid on an hourly basis.She has never chosen any particular form of business organization for this business.This business is most likely:

A general partnership is a voluntary association of two or more persons for carrying on a business as co-owners for profit.

The shareholders are the owners in a sole proprietorship.

Ease and cost of formation have little to do with the selection of the form under which a business should operate.

In order to form a sole proprietorship,the owner must:

A sole proprietor's access to capital is unlimited.

The major disadvantage of a sole proprietorship is:

The "fictitious name statutes" require all sole proprietorships to file a statement indicating whether or not they use a trade name.

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