Test Prep BUSINESS-ENVIRONMENT-AND-CONCEPTS - Questions & Answers

Choice "d" is correct. A joint venture is formed for a single business undertaking such as building and designing freight containers to be sold specifically to one company. Each company coming together in this joint venture has its own business outside of this one endeavor.
Choice "a" is incorrect. A general partnership is more broad in its business purpose than a joint venture is.
Choice "b" is incorrect. A limited liability partnership is primarily designed for professionals who want to work as partners but with limited personal liability.
Choice "c" is incorrect. Sole proprietorships have only one person in the business.

Choice "b" is correct. A sole proprietor is free to transfer or sell the business at will.
Choice "a" is incorrect because a sole proprietor is personally liable for all obligations of the business.
Choice "c" is incorrect. A sole proprietorship is not considered an entity separate from the sole proprietor.
Choice "d" is incorrect because a sole proprietorship ends with the death of the sole proprietor.

Choice "c" is correct. A sole proprietorship can be formed without filing with the state. Formation of either a corporation or a limited partnership requires a filing.
Choices "a", "b", and "d" are incorrect per the Explanation above.

Choice "b" is correct. A sole proprietorship and (in most states) a limited liability company can be formed with only one owner. A partnership requires two or more partners.
Choices "a", "c", and "d" are incorrect per the Explanation above.

Choice "a" is correct. The legal requirements, the consequences, the advantages, and disadvantages of forming a joint venture generally are identical to those of a general partnership. Joint ventures are treated as a partnership in most important legal aspects.
Choice "b" is incorrect. A joint venture need not be dissolved upon the completion of a single undertaking.
Joint ventures may be formed for a single transaction or for a related series of transactions.
Choice "c" is incorrect because a joint venture would be taxed like a partnership, not a corporation.
Choice "d" is incorrect because a joint venture, like a partnership, may be formed without filing with the state.

Choice "d" is correct. A partnership at will is a partnership with no definite term (i.e., without specified duration). Such a partnership can be terminated at any time. Choice "a" is incorrect. A partnership without a specified duration is called a partnership at will, not a perpetual partnership. There is no such thing as a perpetual partnership because a partnership is not perpetual. A partnership may be dissolved after a partner dies or otherwise dissociates from the partnership.
Choice "b" is incorrect. A partnership by estoppel is the appearance of a partnership when there is no formal partnership. If parties who are not partners give the appearance to third parties that they are partners, the law may deem the parties to be a partnership by estoppel. The parties will be treated as partners, even though they are not.
Choice "c" is incorrect. The legal term for a partnership of indefinite duration is a partnership at will, not an indefinite partnership.

Choice "b" is correct. A partnership is an organization of two or more persons who carry on a business for a profit.
Choice "a" is incorrect. Partnerships do not pay federal income taxes; the partners report their shares of the partnership's income on their individual returns.
Choice "c" is incorrect. A partnership agreement need not be in writing.
Choice "d" is incorrect. If the partnership agreement is silent on the apportionment of liability for partnership debts, state law or the Uniform Partnership Act will cover the omission.

Choice "b" is correct. "Yes - No."
Rule: The authority of partners is governed by agency law. Under agency law, a principal is not bound to the third party unless the agent had actual authority or apparent authority. When the agent has no actual authority and no apparent authority, the principal (in this case the partnership) will only be liable if it chooses to adopt the agreement (i.e., ratify). Rule: Amending the partnership agreement (presumably to grant authority) will not cause the partnership to be bound because authority must exist at the time the contract is made or the partnership must ratify the contract.
Choices "a", "c", and "d" are incorrect, per the above rules.

Choice "c" is correct. The bankruptcy of a partner will result in the dissociation of a partner.
Choice "a" is incorrect, because although joining the city hospital medical partnership could be construed as a breach of fiduciary duty owed to the other partners in ABC medical partnership, standing alone, it would not result in a dissociation.
Choice "b" is incorrect. All that was attached was the partner's right to distributions, which does not cause dissociation.
Choice "d" is incorrect, because although being sued might cause Dr. Bradley to resign, which would cause dissociation, standing alone, being sued by the other partners does not cause dissociation.

Choice "b" is correct. "Yes - No."
Rule: A partnership is an agreement between two or more persons to carry on, as co-owners, a business for profit; partners share management and profits and losses, not gross receipts.
Choices "a", "c", and "d" are incorrect, per the above rule.