Review 4
Questions and Answers
- 1.
There are no formalities to being and operating a sole proprietorship.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A sole proprietorship is a type of business entity where a single individual owns and operates the business. Unlike other forms of business entities, such as partnerships or corporations, there are no formalities or legal requirements to establish and operate a sole proprietorship. The owner has complete control over the business and is personally responsible for all its debts and obligations. This flexibility and simplicity make sole proprietorships an attractive option for small businesses or individuals starting a business on their own. Therefore, the statement that there are no formalities to being and operating a sole proprietorship is true.Rate this question:
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- 2.
The biggest desadvantage of a sole propreitorship is that it may not continue after the owner's death.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because a sole proprietorship can continue after the owner's death. Unlike partnerships or corporations, sole proprietorships do not have a separate legal entity from the owner. However, upon the owner's death, the business can be transferred to a designated successor or sold to someone else who can continue its operations. Therefore, the continuity of a sole proprietorship is not dependent on the owner's lifespan.Rate this question:
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- 3.
Any person competent to make a contract has the competence to be a partner.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
This statement is true because in order to enter into a contract, a person must have the legal capacity to do so. This means they must possess the mental ability to understand the terms and consequences of the contract. Since being a partner in a partnership involves entering into a contractual relationship with other partners, it follows that a person who has the competence to make a contract also has the competence to be a partner.Rate this question:
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- 4.
A partnership can only be formed to run a lawful business
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A partnership can only be formed to run a lawful business because partnerships are legal entities that require compliance with laws and regulations. To establish a partnership, the partners must enter into a legal agreement, define their roles and responsibilities, and operate within the boundaries of the law. Engaging in unlawful activities would not only jeopardize the partnership but also expose the partners to legal consequences. Therefore, it is essential for a partnership to be formed for a lawful business to ensure compliance and protect the interests of the partners.Rate this question:
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- 5.
The main disadvantage of a corporation is that the people who own or control a majority of the voting stock have the sole voice in management.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The statement is true because in a corporation, the voting power is typically determined by the number of shares owned. This means that those who own or control a majority of the voting stock have the ability to make decisions and have the final say in the management of the corporation. This can lead to a concentration of power in the hands of a few individuals or entities, potentially excluding the input and influence of other shareholders or stakeholders.Rate this question:
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- 6.
A corporation does not have an existence separate and apart from the existence of its individual members.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A corporation is a legal entity that exists separately from its individual members. It has its own rights, liabilities, and legal status. This means that the corporation can enter into contracts, own property, and be held accountable for its actions independently of its shareholders or owners. Therefore, the statement that a corporation does not have an existence separate and apart from its individual members is false.Rate this question:
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- 7.
A corporate investor can never be held personally liable.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A corporate investor can be held personally liable because in certain situations, such as when a corporate veil is pierced or when the investor has personally guaranteed a debt, their personal assets can be at risk. This means that if the corporation is unable to fulfill its obligations, the investor may be personally responsible for the debts or liabilities of the company. Therefore, the statement that a corporate investor can never be held personally liable is false.Rate this question:
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- 8.
The owner of a sole proprietorship is a(n)
Correct Answer
ProprietorExplanation
The owner of a sole proprietorship is referred to as a proprietor. This term is commonly used to describe an individual who owns and operates a business on their own, without any partners or shareholders. As the sole proprietor, the individual has complete control and responsibility for the business, including its profits, losses, and decision-making. The term "proprietor" accurately captures the essence of this type of business ownership, highlighting the individual's ownership and control over the enterprise.Rate this question:
- 9.
When business debts are payable from personal, as well as business assets, there is
Correct Answer
sole proprietorship/unlimited liabilityExplanation
When business debts are payable from personal, as well as business assets, it indicates a sole proprietorship with unlimited liability. In a sole proprietorship, the business and the owner are considered one entity, and the owner is personally responsible for all debts and liabilities of the business. This means that if the business fails to repay its debts, the owner's personal assets can be used to satisfy those obligations. Therefore, the owner has unlimited liability for the business debts.Rate this question:
- 10.
A business relationship in which two or more persons combine their labor or property for a single undertaking only is called a(n)
Correct Answer
joint ventureExplanation
A joint venture is a business relationship where two or more individuals or entities come together to pool their resources, whether it be labor or property, to work on a specific project or venture. This arrangement allows for the sharing of risks, costs, and profits among the participants. Joint ventures are typically formed for a limited period of time or for a specific purpose, and each participant retains their individual identity and ownership. This type of partnership provides an opportunity for collaboration and leveraging of complementary skills and resources.Rate this question:
- 11.
A partnership with no limitation on a partner's rights, duties, or liabilities is called a(n) _________________ partnership.
Correct Answer
original or generalExplanation
An original or general partnership is a type of partnership where there are no limitations on the rights, duties, or liabilities of the partners. In this type of partnership, each partner has equal decision-making power and is fully responsible for the debts and obligations of the partnership. This means that each partner has unlimited liability, meaning they can be held personally responsible for any debts or legal actions taken against the partnership. Therefore, the correct answer for this question is "original or general".Rate this question:
- 12.
Can a partnership exist only if the parties have a written agreement?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
A partnership can exist without a written agreement. While a written agreement is recommended to establish the terms and conditions of the partnership, it is not a legal requirement. A partnership can be formed through an oral agreement or even through the actions and conduct of the parties involved. However, without a written agreement, it can be more difficult to resolve disputes or clarify the rights and responsibilities of each partner.Rate this question:
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- 13.
Can three persons who agree to contribute property to the running of a business as co-owners for the purpose of making a profit have formed a partnership even though they do no call themselves partners?
- A.
Yes
- B.
No
Correct Answer
A. YesExplanation
Three persons who agree to contribute property to the running of a business as co-owners for the purpose of making a profit can form a partnership, regardless of whether they call themselves partners or not. The key factor in determining a partnership is the intention to operate a business together and make a profit. The agreement to contribute property and work towards a common goal fulfills the requirements of a partnership, regardless of the title they give themselves.Rate this question:
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- 14.
May a partnership sue only in the name of the partners?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
A partnership may not sue only in the name of the partners because a partnership is considered a separate legal entity from its partners. As a separate entity, a partnership can sue or be sued in its own name. This means that the partnership can enter into contracts, own property, and take legal action without involving the individual partners. Therefore, the correct answer is no.Rate this question:
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- 15.
Can an individual partner who had not agreed to or participated in a crime be liable for it?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
An individual partner who had not agreed to or participated in a crime cannot be held liable for it. In criminal law, liability is based on the principle of individual culpability, meaning that a person can only be held responsible for their own actions or involvement in a crime. If a partner did not agree to or participate in the crime, they cannot be held legally accountable for it. Therefore, the correct answer is "No".Rate this question:
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- 16.
Does a partner have a duty to put the firm's interest above personal advantage?
- A.
Yes
- B.
No
Correct Answer
A. YesExplanation
A partner has a duty to put the firm's interest above personal advantage because as a partner, they have a fiduciary duty to act in the best interest of the partnership. This means that they must prioritize the success and well-being of the firm over their own personal gain. By doing so, they contribute to the overall growth and profitability of the partnership, fostering trust and collaboration among the partners. Additionally, prioritizing the firm's interest ensures fairness and transparency in decision-making processes, benefiting all partners involved.Rate this question:
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- 17.
Does a partnership have liability for the torts committed by a partner in the course of partnership business and in furtherance of partnership interests?
- A.
Yes
- B.
No
Correct Answer
A. YesExplanation
In a partnership, each partner is considered an agent of the partnership and has the authority to act on behalf of the partnership. Therefore, if a partner commits a tort (a wrongful act) while conducting partnership business and in furtherance of partnership interests, the partnership can be held liable for those torts. This is because the partnership is responsible for the actions of its partners within the scope of their partnership duties.Rate this question:
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- 18.
Is a general partnership liable even for illegal contracts made by a member of the firm?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
A general partnership is not liable for illegal contracts made by a member of the firm. In a general partnership, each partner is personally liable for the actions and obligations of the partnership, including any debts or liabilities incurred. However, this liability is limited to legal and valid contracts. If a partner engages in illegal activities or enters into illegal contracts without the knowledge or consent of the other partners, the partnership as a whole cannot be held liable for those actions. Each partner is responsible for their own actions and may face individual legal consequences for any illegal contracts they enter into.Rate this question:
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- 19.
The type of ownership a partner has in a partnership property is called a tenency in common.
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
The type of ownership a partner has in a partnership property is not called a tenancy in common. In a partnership, the partners have a joint ownership of the property, not a tenancy in common. A tenancy in common refers to a form of ownership where two or more individuals each have a separate and distinct share in the property.Rate this question:
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- 20.
If requested, trueand full information of all things affecting the partnership must be rendered to the legal representative of any deceased partner.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Partnership agreements typically require the legal representative of a deceased partner to be provided with complete and accurate information about all matters affecting the partnership. This ensures transparency and allows the legal representative to make informed decisions regarding the deceased partner's interest in the partnership. Therefore, it is true that true and full information must be rendered to the legal representative of any deceased partner.Rate this question:
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- 21.
The basis on which profits and losses are to be shared cannot be changed by a majority of the partners.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In a partnership agreement, the basis for sharing profits and losses is usually predetermined and agreed upon by all partners. This means that the majority of partners cannot unilaterally change this basis without the consent of all partners. Therefore, the statement is true, as the sharing of profits and losses cannot be altered by a majority of the partners.Rate this question:
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- 22.
A partner has a right to withdraw half of the original investment without the consent of the other partners.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
In a partnership, the partners typically have equal rights and responsibilities. This means that any major decisions, such as withdrawing funds, would require the consent of all partners. Therefore, it is not true that a partner can withdraw half of the original investment without the consent of the other partners.Rate this question:
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- 23.
The partnership is not liable for unauthorized acts beyond both the actual and apparent authority of one partner.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In a partnership, each partner has the authority to act on behalf of the partnership. However, this authority is limited to the scope of their actual and apparent authority. Actual authority refers to the express or implied powers granted to a partner, while apparent authority refers to the authority that a partner appears to have based on their actions or the partnership's representations. If a partner exceeds their actual or apparent authority and engages in unauthorized acts, the partnership is not liable for those actions. Therefore, the given statement is true.Rate this question:
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- 24.
A withdrawing partner has liability for all partnership debts incurred up to the time of withdrawal unless the creditors have expressly released the partner.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
When a partner withdraws from a partnership, they are still responsible for any debts that were incurred by the partnership before their withdrawal. This means that unless the creditors have specifically released the withdrawing partner from their liability, they are still legally obligated to pay off those debts. Therefore, the statement is true.Rate this question:
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- 25.
The majority of the partners bind the firm on all matters in the scope of the partnership business.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because in a general partnership, partners have unlimited liability, meaning they are personally responsible for all debts and obligations of the firm. However, this liability is limited to the scope of the partnership business. Partners are not personally liable for matters outside the scope of the partnership business.Rate this question:
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- 26.
In addition to authority expressly given by the partnership agreement, the partnership and by law, each partner has __________________________ authority.
Correct Answer
impliedExplanation
Partners in a partnership have implied authority, which means they have the power to act on behalf of the partnership even if it is not explicitly stated in the partnership agreement or by law. This authority is assumed to exist based on the nature of the partnership relationship and the usual course of business. Implied authority allows partners to make decisions and enter into contracts that are necessary or customary for the partnership's operations, even if they are not specifically authorized in writing.Rate this question:
- 27.
Unless the partnership agreement stipulates otherwise, partners have _____________________________________ liability on all partnership contractual liabilities.
Correct Answer
jointExplanation
Partners have joint liability on all partnership contractual liabilities. This means that each partner is equally responsible for fulfilling the obligations and debts of the partnership. Unless the partnership agreement states otherwise, all partners are liable together, and creditors can hold any partner accountable for the full amount owed. This joint liability ensures that partners are held collectively responsible for the partnership's obligations, promoting fairness and accountability among partners.Rate this question:
- 28.
As agents to a partnership firms, partners have a(n) ________________________ duty to the firm.
Correct Answer
fiduciaryExplanation
Partners in a partnership firm have a fiduciary duty to the firm. This means that they have a legal and ethical obligation to act in the best interests of the firm and its stakeholders. They are required to exercise loyalty, honesty, and good faith in their dealings with the firm, and to prioritize the firm's interests over their own personal interests. This duty ensures that partners act responsibly and in a manner that promotes the success and well-being of the partnership.Rate this question:
- 29.
May the remaining partners decide whether a partner has the capacity to continue as a partner?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
The remaining partners cannot decide whether a partner has the capacity to continue as a partner. The decision to continue as a partner or not is a personal choice that can only be made by the individual partner themselves. The remaining partners may have their opinions or concerns, but ultimately it is up to the partner in question to decide if they are able to continue in their role.Rate this question:
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- 30.
If a partnership agreement fixes a date for the dissolution of the partnership is it always dissolved on that date?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
A partnership agreement that fixes a date for the dissolution of the partnership does not necessarily mean that the partnership will be dissolved on that specific date. While the agreement sets a predetermined timeline for dissolution, there may be circumstances or events that could cause the partnership to continue beyond that date. These circumstances could include the agreement of all partners to extend the partnership, legal disputes, or other unforeseen factors that may delay the dissolution process. Therefore, the partnership is not always dissolved on the fixed date mentioned in the agreement.Rate this question:
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- 31.
Is notice of dissolution unnecessary when a partnership is dissolved by judicial decree?
- A.
Yes
- B.
No
Correct Answer
A. YesExplanation
In a partnership, dissolution can occur either voluntarily or by a judicial decree. When a partnership is dissolved by a judicial decree, it means that a court has ordered the dissolution of the partnership. In such cases, there is no need for a separate notice of dissolution because the judicial decree itself serves as a notice to all concerned parties. The court's decision is legally binding and effectively ends the partnership, making any additional notice redundant. Therefore, the answer is yes, notice of dissolution is unnecessary when a partnership is dissolved by judicial decree.Rate this question:
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- 32.
When a partnership dissolves, the losses will normally be shared equally by the partners.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In a partnership, the general rule is that profits and losses are shared equally among the partners unless otherwise stated in the partnership agreement. Therefore, when a partnership dissolves, it is expected that the losses incurred by the partnership will also be shared equally among the partners. This ensures fairness and equal responsibility among the partners in settling the financial obligations of the partnership.Rate this question:
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- 33.
A partner may withdraw from a partnership at any time without liability.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A partner may not withdraw from a partnership at any time without liability. When a partner wants to withdraw from a partnership, they are generally required to provide notice and follow the procedures outlined in the partnership agreement. Depending on the terms of the agreement, the withdrawing partner may still be held liable for any outstanding debts or obligations of the partnership. Thus, the statement is false.Rate this question:
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- 34.
If a partnership is formed to conduct a lawful business that later becomes illegal, the partnership may continue the business.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
If a partnership is formed to conduct a lawful business that later becomes illegal, the partnership cannot continue the business. This is because engaging in illegal activities goes against the law and can lead to legal consequences. Therefore, the correct answer is false.Rate this question:
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- 35.
Dissolution relieves the partners of their duties to each other.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because dissolution does not relieve the partners of their duties to each other. When a partnership is dissolved, the partners still have certain obligations towards each other, such as settling any remaining debts or obligations, distributing the partnership assets, and fulfilling any other contractual or legal obligations. Dissolution marks the end of the partnership, but it does not automatically release the partners from their duties and responsibilities towards each other.Rate this question:
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- 36.
A partner may obtain a decree of dissolution when a court declares another partner of unsound mind.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In a partnership, if one partner is declared to be of unsound mind by a court, the other partner can obtain a decree of dissolution. This means that the partnership can be legally dissolved due to the partner's mental incapacity. This is true because the mental health of a partner can significantly affect the functioning and success of a partnership, and it is necessary to protect the interests of the other partner(s) involved.Rate this question:
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- 37.
Dissolution prevents the performance of existing contracts.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Dissolution does not necessarily prevent the performance of existing contracts. In some cases, dissolution may lead to the termination of contracts, but it does not automatically prevent their performance. The ability to perform existing contracts may depend on various factors such as the terms of the contract, the nature of the dissolution, and any applicable laws or regulations. Therefore, the statement that dissolution prevents the performance of existing contracts is not accurate.Rate this question:
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- 38.
The name of a withdrawing partner should be removed from the firm name on all stationery.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
When a partner withdraws from a firm, it is important to update the firm's name on all stationery to reflect this change. This is necessary to maintain accurate and up-to-date branding and to avoid any confusion among clients or business partners. By removing the name of the withdrawing partner from the firm name on all stationery, the firm can ensure consistency and clarity in its communication materials. Therefore, the statement is true.Rate this question:
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- 39.
Notice of dissolution of a partnership is not necessary to third persons who have done business with the firm.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false. Notice of dissolution of a partnership is necessary to third persons who have done business with the firm. This is because third parties need to be informed about the dissolution in order to protect their interests and avoid any potential liabilities or complications. Without notice, third persons may continue to conduct business with the dissolved partnership, unaware of the change in its legal status. Therefore, it is important for the partnership to provide notice of dissolution to third parties.Rate this question:
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- 40.
The death of one member of a partnership automatically dissolves the partnership unless the agreement provides it shall not be dissolved.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
In a partnership, the death of one member usually results in the dissolution of the partnership. This is because a partnership is a legal relationship between two or more individuals, and the death of one partner fundamentally changes the nature of the partnership. However, if the partnership agreement specifically states that the death of a partner will not dissolve the partnership, then the partnership can continue to exist even after the death of a member. Therefore, the statement that the death of one member of a partnership automatically dissolves the partnership unless the agreement provides otherwise is true.Rate this question:
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- 41.
A corporation can only be used to run really large businesses.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
This statement is false. A corporation can be used to run businesses of any size, not just really large ones. A corporation is a legal entity that is separate from its owners, providing limited liability protection to its shareholders. It allows for the issuance of stock to raise capital and has a formal structure with a board of directors. Corporations can be used by small, medium, and large businesses alike to enjoy the benefits of limited liability and access to capital markets.Rate this question:
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- 42.
A corporation’s powers are only limited by its bylaws.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A corporation's powers are not only limited by its bylaws. In addition to the bylaws, a corporation's powers are also limited by the laws and regulations of the jurisdiction in which it operates, as well as any other legal agreements or contracts it may have entered into. Therefore, the statement that a corporation's powers are only limited by its bylaws is incorrect.Rate this question:
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- 43.
Corporate document stating rules that govern the internal affairs of a corporation are called ground laws.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The correct answer is False. Corporate documents that govern the internal affairs of a corporation are called bylaws, not ground laws. Bylaws outline the rules and regulations that guide the company's operations, including the roles and responsibilities of its directors, officers, and shareholders, as well as procedures for meetings and decision-making processes. Ground laws do not exist in the context of corporate governance.Rate this question:
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- 44.
The death of a stockholder does not dissolve a corporation.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
When a stockholder of a corporation passes away, it does not lead to the dissolution of the corporation. A corporation is a separate legal entity from its shareholders, and its existence is not dependent on the life or death of any individual stockholder. Even if a stockholder dies, the corporation continues to exist, and the ownership of the deceased stockholder's shares can be transferred to their heirs or beneficiaries.Rate this question:
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- 45.
An ultra vires contract generally is binding on the parties to the contract.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
An ultra vires contract is a contract that is beyond the legal authority or power of the parties involved. Despite being outside their authority, such contracts are generally considered binding on the parties. This means that even though the contract may have been entered into without the proper legal authority, the parties are still obligated to fulfill their obligations under the contract. Therefore, the statement that an ultra vires contract is binding on the parties is true.Rate this question:
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- 46.
A corporation can be sued in the corporate name.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A corporation can be sued in its corporate name because a corporation is considered a legal entity separate from its owners or shareholders. This means that it can be held liable for its actions and can be sued in its own name. Suing a corporation in its corporate name allows for the legal process to be directed towards the entity itself, rather than the individuals associated with the corporation.Rate this question:
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- 47.
A stock option is beneficial because the price at which stock may be bought is always less than the fair market value.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The explanation for the answer being False is that a stock option does not guarantee that the price at which the stock may be bought will always be less than the fair market value. The price at which the stock may be bought through a stock option is determined by the terms of the option contract, which can vary and may or may not be below the fair market value. Therefore, it is not always beneficial in terms of price.Rate this question:
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- 48.
The two principal classes of stock are common and uncommon.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The given statement is false because the two principal classes of stock are actually common and preferred, not common and uncommon. Common stock represents ownership in a company and gives shareholders voting rights and the potential for dividends, while preferred stock represents a higher claim on the company's assets and earnings but usually does not come with voting rights. Uncommon stock is not a recognized class of stock.Rate this question:
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- 49.
A corporation may declare a stock dividend even if the corporation has no surplus.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
A corporation cannot declare a stock dividend if it has no surplus. A stock dividend is a distribution of additional shares to existing shareholders, and it is usually paid out of the corporation's retained earnings or surplus. If the corporation has no surplus, it does not have the financial resources to issue additional shares as a dividend. Therefore, the statement that a corporation may declare a stock dividend even if it has no surplus is false.Rate this question:
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- 50.
Profits of a corporation are called dividends.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Profits of a corporation are distributed among its shareholders in the form of dividends. Dividends are a portion of the company's earnings that are paid out to the shareholders as a return on their investment. Therefore, it is correct to say that profits of a corporation are called dividends.Rate this question:
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Current Version
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Mar 18, 2023Quiz Edited by
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Apr 19, 2012Quiz Created by
Starekm23
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