Week 1 Knowledge Check Study Guide
Sole proprietorships and
Limited partnerships and
Score: 18 / 18
Limited liability companies
and limited liability
and joint ventures
Alternative forms of
Concept: Sole proprietorships and general partnerships
Identify an accurate statement about a sole proprietorship.
A. It is a form of business that is seldom found in the
B. It is a form of business that has only one owner.
C. It is a separate legal entity, distinct from an owner.
D. It is a business form in which the owner enjoys limited
The Correct Answer is: B.
A sole proprietorship is a form of business that has a single owner, known as the sole proprietor. The business is not a separate legal entity distinct from the owner. 2.
Sara and Cilia run a cafÃ© together. They share ownership of and liability for the cafÃ© and have come to an agreement about how the profits from the cafe should be divided between them. If the cafe runs into debt, both Sara and Celia are responsible for the debt. What form of business is best demonstrated in this scenario?
A. A sole proprietorship
B. A corporation
C. A general partnership
D. A limited liability company
The Correct Answer is: C.
A general partnership is a form of business that involves two or more individuals acting as co-owners. The Uniform Partnership Act codifies law for general partnerships.
What criterion under the Uniform Partnership Act (UPA) must be met by a business, for it to qualify as a general partnership?
A. The objective of the partnership should be to create
B. One of the owners must be willing to assume
completely liability of the business.
C. The partnership should not involve more than two
D. Only one owner should take up the legal responsibility
The Correct Answer is: A.
According to the UPA, a partnership needs to be an association between two or more persons who act as co-owners to carry out a business to create profits.
Concept: Limited partnerships and special partnerships
What is true about a limited partnership?
A. All the partners are personally liable for partnership
B. The partnership cannot involve more than two
C. The general partners do not invest capital or participate in the management of the business.
D. The limited partners are not personally liable for
partnership debts beyond the amount invested by them.
The Correct Answer is: D.
In a limited partnership, the general partners participate in the management of the business and invest capital; they are also personally liable for the debts of the partnership. Limited partners invest capital in the partnership but are not personally liable for the debts of the partnership beyond their capital contributions. 5.
Who among the following is most likely to be a limited partner in a limited partnership?
A. David, who takes up the task of work delegation in the
B. Kiara, who makes contracts with suppliers for the
C. Kevin, who does not have to make up for losses if a
contract made by the partnership fails.
D. Nelson, who is required to use his personal wealth to
pay for any debts incurred by the partnership.
The Correct Answer is: C.
Limited partners in a limited partnership are liable only for the contributions they make. They are not personally liable for the contracts and debts made by the partnership.
Who has unlimited liability for the debts and...
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