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Chapter 30. Formation and Internal Relations of General Partnerships
1. A corporation may not be a partner in a partnership.
a. True
b. False
2. Under the common law, a partnership is generally considered to be a legal entity rather than an aggregate of
individuals.
a. True
b. False
3. Partners may elect to have the partnership not be a separate taxable entity, so that only the partners are taxed.
a. True
b. False
4. A general partnership may be formed for a charitable purpose.
a. True
b. False
5. Michelle and Margaret agree to form a partnership. The partnership contract between Michelle and Margaret does
not have to be in writing in order to be enforceable in the courts.
a. True
b. False
6. What is considered "partnership property" is determined primarily by the partners' intentions.
a. True
b. False
7. Sharing of gross returns establishes a partnership.
a. True
b. False
8. In some corporations, only the shareholders are taxed; in others, both the corporation as an entity is taxed and the
shareholders are taxed as well.
a. True
b. False
9. A partner cannot assign his interest in the partnership without dissolving the partnership.
a. True
b. False
10. Under the RUPA, no person may become a member of a partnership without the consent of all the partners.
a. True
b. False
11. A person who receives a share of the profits of a business is presumed to be a partner.
a. True
b. False
12. A partnership name may be the name of the partners or any one of them.
a. True
b. False
13. Under the RUPA, a partnership agreement may be written or oral, but not implied.
a. True
b. False
14. A business trust, also called a Massachusetts trust, was devised to avoid burdens of corporate regulation, but it is no
longer in use today.
a. True
b. False
15. A limited liability company (LLC) provides limited liability to all of its owners and permits all of its owners to
participate in management.
a. True
b. False
16. The form of business association known as a partnership can be traced to ancient Babylonia and classical Greece
and was used in England during the Middle Ages.
a. True
b. False
17. Corporations today outnumber unincorporated business associations.
a. True
b. False
18. All states have authorized the formation of limited liability companies.
a. True
b. False
19. All 50 states have adopted the Revised Uniform Partnership Act.
a. True
b. False
20. In a business trust, the trustees are generally not personally liable for the debts of the business.
a. True
b. False
21. Because the statute of frauds does not apply expressly to a contract for the formation of a partnership, usually no
writing is required to create the relationship.
a. True
b. False
22. A joint venture is necessarily of short duration.
a. True
b. False
23. A sole proprietorship is formed without any formality, is not a separate taxable entity, is dissolved upon death of the
owner, and has unlimited liability for the owner.
a. True
b. False
24. The newly formed Bright Partnership cannot commence business until it meets its state’s required minimum amount
of capitalization.
a. True
b. False
25. The proportion in which partners bear losses depends upon their relative capital contributions.
a. True
b. False
26. In all types of business entities, the owners can fully share in the management and control of the business.
a. True
b. False
27. Income from some types of business entities is taxed twice.
a. True
b. False
28. General partnerships are frequently used in finance, accounting, real estate, and law.
a. True
b. False
29. If no specific agreement exists, the partners bear losses in the same proportion in which they share profits.
a. True
b. False
30. The choice of the most appropriate form of business enterprise cannot be determined in a general way, but depends
on the particular circumstances of the owners.
a. True
b. False
31. A judicial lien against a partner's transferable interest in a partnership is known as a(n):
a. legal aggregate.
b. delegation of assets.
c. charging order.
d. assignment.
32. A partner who has no right to participate in control of the business and who has limited liability is a:
a. general partner.
b. nominal partner.
c. secret partner.
d. limited partner.
33. Which of the following is NOT an advantage of a partnership?
a. Partners' income taxes may be less than the income taxes would be on a corporation.
b. Each partner has limited liability.
c. It is possible to bring together more managerial skills than in a sole proprietorship.
d. It is possible to bring together more capital than in a sole proprietorship.
34. A distinguishing characteristic of a business trust is that:
a. the trust estate is devoted to the conduct of a business.
b. each beneficiary must have the consent of all the other beneficiaries in order to sell or transfer his interest in
the trust.
c. the trustees and beneficiaries share the functions of management and control.
d. All of these.
35. Which of the following is not true regarding a partnership name?
a. The name selected may not be the same as or deceptively similar to the name of any other existing business.
b. It may be a fictitious name.
c. It may not be likely to indicate to the public that it is a corporation.
d. It may not be the name of any one of the partners.
36. Arthur, Betty, and Clara each inherit an undivided one-third of an apartment complex. Instead of selling it, they
decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can
earn some extra money. What are they?
a. A partnership
b. Co-owners only
c. A corporation
d. Tenants in common
37. Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of
transactions ordinarily results in a:
a. partnership.
b. joint venture.
c. corporation.
d. R & D partnership.
38. Which of the following would lack the capacity to become a partner?
a. A business trust
b. A retired person over 74
c. A corporation
d. None of these lack capacity; any of them could become a partner.
39. The RUPA treats a partnership as a legal entity in all but which of the following respects?
a. Title to partnership property
b. Continuity of existence
c. Legal actions by and against the partnership
d. Unlimited liability for partnership obligations
40. In which of the following situations would the persons be partners?
a. A and B jointly own shares of the capital stock of a corporation, have a joint bank account, and have
purchased real estate as tenants in common. They share the dividends on the stock, the interest on the bank
account, and the net proceeds from the lease of the real estate.
b. A and B buy and sell real estate continuously over a five-year period, conducting a business of trading in real
estate. They do not consider themselves partners.
c. A, B, and C each inherit an undivided one-third interest in a restaurant and decide to sell it because the market
is such that they are assured a good price.
d. All of these.
41. In which of the following situations will the inference of the existence of a partnership be drawn from the receipt of
profits of a business?
a. Where payments of a debt are made to a creditor in installments from the profits of the partnership
b. Where wages are paid to an employee who is not also an owner
c. Where an annuity is paid to the widow of a deceased partner from partnership profits
d. Neither the creditor, the employee, nor the widow in these situations will be considered a partner under the
guidelines in the RUPA.
