Business Orgs

Question 1

What is a Sole Proprietorship?

Answer 1

The most common form; An unincorporated business consisting of 1 person who owns an completely controls the business. Is not a taxable entity and therefore the sole proprietor is taxed, they have unlimited liability for debts.

Question 2

What is a General Partnership?

Answer 2

• An unincorporated business association consisting of 2 or more person who co-owns the business FOR PROFIT.
• Governed by the uniform partnership act
• Each partner has an equal right to control of the partnership

Question 3

The intent to associate as partners may be based upon ________?

Answer 3

1) Formal written agreement
2) Oral agreement
3) conduct of the partners

Question 4

What does the definition of a General Partnership exclude?

Answer 4

Charitable, fraternal, religious, trade association or labor union purposes.

Question 5

What does it mean when we say that a partnership is a “pass-through” entity for taxation purposes?

Answer 5

Each partner is taxed on his, her or its proportionate share of deductions, credits, profits, and losses at the personal income tax rate applicable to that partner. The partnership is not taxed separately

Question 6

What happens if there is no partnership agreement or if there exists an agreement that fails to address a specific issue?

Answer 6

Terms are supplied by the UPA

Question 7

How long may a General Partnership exist?

Answer 7

any length of time to which the partners agree

Question 8

To comply with the statute of frauds, if the partnership is intended to exist for 1 year or more, the agreement must be ______

Answer 8

In writing

Question 9

What is meant that a partnership is “at will”?

Answer 9

The partnership may be terminated by any partner upon notice to the other partners. Done if no term is stated.

Question 10

When is registration of the partnership’s business name required?

Answer 10

If less than all of the partners names are used or if an entirely different name is used.

Question 11

What is the difference between a Legal Entity and a Legal Aggregate?

Answer 11

A legal entity is a unit subject capable of possessing legal rights and of being subject to legal duties. A legal aggregate is a group of individuals having no legal existence apart from that of its members.

The UPA incorporates both theories in provisions for partnerships. The entity theory is used particularly to matters concerning title to property, legal actions by and against the partnership and continuity of existence. Aggregate theory is utilized for partnership obligations (Debts)

Question 12

What are the 2 most important factors for identifying a business co-ownership?

Answer 12

1) The sharing of profits

2) The right to manage and control the business

Question 13

What is Partnership capital?

Answer 13

The total money and property that the partners contribute and dedicate to use in the enterprise

Question 14

How may property of the partnership be held?

Answer 14

in the partnership’s name or the name of any partner as an agent of the partnership

Question 15

May a partner sell partnership property?

Answer 15

Not without the consent of all other partners

Question 16

Can creditors reach partnership property to satisfy an individual partner’s individual debt?

Answer 16

No

Question 17

If a a partner in a General Partnership dies, what becomes of their partnership property?

Answer 17

It belongs to the surviving partners

Question 18

Where do initial capitalization of the General Partnership come from?

Answer 18

Contributions made by its partners

Question 19

A partner may NOT sell or assign ______ but can sell or assign ________

Answer 19

Partnership property, Partnership interest

Question 20

What is a silent partner?

Answer 20

One who assumes all benefits and burdens of the partner status, except in the area of management decisions.

Question 21

What does “winding up” refer to?

Answer 21

When a partnership is liquidated. involves completing unfinished business, collecting debts, taking inventory, reducing assets to cash, auditing the partnership books, paying creditors, and distributing the remaining assets to the partners.

Question 22

What is a Limited Partnership?

Answer 22

Partnership of 2 or more people formed in compliance with a state’s limited partnership statute with one or more general partners and one or more limited partners as members of the firm.

• Governed by the ULPA

Question 23

How is a limited partnership different from a general partnership?

Answer 23

Need to comply with specific statutory requirements which include filing a certificate. Limited partners may not participate in the management of the business.

Question 24

The Revised Uniform Limited Partnership act requires an LP to maintain an office in _______?

Answer 24

The state of incorporation, which need not be its place of business

Question 25

How are profits, loses, and distributions allocated among the partners?

Answer 25

according to the LP agreement. If the agreement is silent, then the profits, losses and distributions are allocated on the basis of the value of contributions made by each partner.

Question 26

How is the LP managed?

Answer 26

General managers manage the business and incur liability to creditors. Limited partners are investors only and generally have no voice in management. They may have voting rights (BUT ONLY IF THE AGREEMENT STIPULATES THAT!)

Question 27

Can the surname of the LP be used as part of the firm name?

Answer 27

No, unless it is also the name of a General Partner or unless the firm has used the named before admitting the limited partner.

Question 28

What is an LLC?

Answer 28

• Limited Liability Company
• non-corporate business organization that provides limited liability to ALL of its owners (MEMBERS) and permits all of its members to participate in the management of the business.
• Requires a certificate of organization filed with the state and an operating agreement (which should include the LLC’s purpose, the type/amount of member investment, allocation of income, transferability of members interest in the LLC, and the procedure to be followed in the event of dissolution

Question 29

How long may an LLC exist?

Answer 29

for a specific period of time or perpetual as prescribed within the certificate of organization

Question 30

What are the 2 components of a member’s interest in an LLC?

Answer 30

1) Financial Interest –> right to share profits and to receive distributions
2) Management interest –> consists of all other rights granted to a member by the LLC operating agreement and the LLC statute.

Question 31

Does the LLC member have an interest in property owned by the LLC

Answer 31

NO

Question 32

What is a joint venture?

Answer 32

involves the combining of efforts by 2 or more persons for one transaction or for one event only. Does not contemplate a continuing relationship between or among the parties.