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Business Law Chapter 16 Study Guide
True/False
Indicate whether the statement is true or false.
1. Business profits or losses are combined with the sole proprietor's other
income for income tax purposes.
2. In a general partnership, each partner is liable for the other partners'
actions within the scope of the partnership.
3. A secret partner has limited liability for the partnership's debts.
4. The biggest advantage to a sole proprietorship is the limited liability
regarding losses and lawsuits.
5. A partner cannot personally transfer ownership of property.
6. Unless otherwise stated in the partnership agreement, partners share
equally in the profits.
7. The difference between a joint venture and a partnership is that there is no
ongoing relationship in a joint venture.
8. A public corporation can be either a C corporation or an S corporation.
9. The articles of incorporation is a legal document filed with the state in
order to establish a corporation.
10. The dissolution of an LLC is similar to a partnership and can occur for
any of the same reasons.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
11. Most partnership law is set forth in the
a. Articles of Partnership.
c. Uniform Partnership Act.
b. Uniform Commercial Code.
d. Tenancy in Partnership Act.
12. A partnership that is formed simply by the way two or more people
conduct their business together is called
a. partnership by estoppel.
c. apparent partnership.
b. partnership by proof of
d. limited partnership.
existence.
13. A partner who takes no active role, but is known publicly and has
unlimited liability is a
a. silent partner.
c. dormant partner.
b. secret partner.
d. limited partner.
14. Co-ownership of all real and personal property included in the partnership
is referred to as
a. joint tenancy.
c. tenancy by estoppel.
b. uniform tenancy.
d. tenancy in partnership.
15. When a partnership ends, the firm's assets are first paid to
a. partners who lent money to the firm.
b. partners who put money into the firm.
c. surplus due partners.
d. creditors other than partners.
16. Which of the following partnership rights was added when the UPA was
revised?
a. the right to share in the profits
b. the right to manage the firm
c. the right to use partnership property
d. the right to sue a partner or the partnership
17. Which of the following is NOT a way that a partnership can be dissolved?
a. by the acts of the partners
c. by the RUPA
b. by operation of law
d. by court order
18. A corporation that formed in Texas but operates in Florida is called a(n)
a. domestic corporation.
c. alien corporation.
b. foreign corporation.
d. S corporation.
19. An example of a public corporation is
a. the local school district.
c. Habitat for Humanity.
b. Microsoft.
d. McDonald’s.
20. In a corporation, the shareholder’s liability is
a. limited to the amount of money paid for the shares in the
corporation.
b. unlimited based on the articles of incorporation.
c. limited to $100,000.
d. unlimited based on the most recent vote by the board of directors.
Completion
Complete each statement.
21. The owners of an LLC escape ____________________ taxation.
22. Every partnership must have at least one ____________________ partner.
23. A(n) ____________________ partner has an active role and unlimited
liability but is not publicly known to be a partner.
24. A ____________________ is the easiest type of business to form.
25. Before a partnership ends, there must be ____________________ period
to close down business operations.
26. Courts will sometimes ____________________ and hold shareholders
personally liable.
27. An LLC must have a(n) ____________________ in the state where it is
organized.
28. Property contributed to the partnership when it is established is called
____________________.
29. A(n) ____________________ corporation is formed for educational,
religious, charitable, or social purposes.
Matching
Match each term with its definition.
a. sole proprietorship
f.
b. dissociation
g.
c. limited partnership
h.
d. limited liability partnership
i.
(LLP)
e. shareholder
j.
S corporation
limited liability company (LLC)
corporation
joint liability
C corporation
30. A business entity that combines the best features of a partnership and a
corporation
31. Allows the business to continue doing business when a partner leaves the
firm
32. An entity with the legal authority to act as a single person, distinct from
its owners
33. Form of business that is owned and operated by one person
34. A partnership with one or more general partners and one or more limited
partners
35. An individual who has one vote for every share of stock held
36. Subject to double taxation
37. A business in which each partner is not responsible for the acts of the
other partners
38. In a partnership, all the partners must be sued together in a lawsuit
39. Avoids double taxation but has limitations on the number of shareholders
allowed
Short Answer
40. Compare and contrast a sole proprietorship and a partnership. Include
advantages, disadvantages, how each is established, how each is
dissolved, and the rights and duties of those involved. Then discuss an
LLC and how it is the same or different from a partnership.