Exam 28: Types of Business Organizations

A partner's interest in the partnership is a personal asset.

Rosalee is a general partner in Silver Dragon, a partnership consisting of the owners of a restaurant. Silver Dragon incurs debt for new dining tables and chairs. With respect to this debt, Rosa is

A partner cannot pursue his or her own interest without violating the partner's fiduciary duties to the partnership.

Delany and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. I n most states, a limited partnership will be created when Delaney and Efron

A partner can be held liable for a partnership obligation only if he or she participated in, or knew about, whatever it was that gave rise to the obligation.

Lee wants to go into the business of construction contracting. Among the reasons that would probably convince Lee to set up his business as a sole proprietorship would be

Bev owns and operates City Delivery Service as a sole proprietorship. When she dies, the business will automatically

A limited liability partnership allows professionals to avoid personal liability for the malpractice of other partners.

When there is no formal, written partnership agreement, an agreement to form a partnership is unenforceable .

Fact Pattern 28-1 Ann starts up Bowls Bistro to sell soups and salads. Ann leases space in an office building owned by Carly. The lease requires a base rent of $1,250, plus 10 percent of Bowls Bistro's profits, each month. The term is two years. Ann hires Demi to take and fill customers' orders at an hourly wage of $15.00, plus tips. Refer to Fact Pattern 28-1. Ann and Demi are

Laura owns and operates Meditation Center without creating a separate business organization. She receives all the profits from the fees for the classes and the sales of the center's merchandise. This is most likely

Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that partners can avoid personal liability for

Dissociation occurs when a partnership's customer ceases to carry on business with the firm.

The Uniform Partnership Act governs the operation of partnerships in spite of a different agreement among the partners.

During the winding up stage of dissolution, no party can make a claim on the partnership assets.

I n a limited partnership, a limited partner has the right to participate in the operation of the partnership.

Sally and Tom decide to go into business, selling discounted merchandise through their Web site "e-Buy." They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm. The agreement says nothing about the management of the firm or a division of profits. Without Sally's knowledge, Tom tells United Computer Products, Inc., that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy. In the first year, e-Buy makes a profit of $50,000. What are the partners' rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year's profits?  If so, how much is each entitled to?

Fact Pattern 28-2 Kristin and Lindsey are partners in Mobile Devise, a marketing firm. Refer to Fact Pattern 28-2. Lindsey dissociates from Mobile. This ends Lindsey's

Dissolution of a partnership can be brought about only by operation of law.

There are two basic types of partnerships- general partnerships and specific partnerships.