LGS EXAM 3 questions with complete
solutions graded A+
In order to capitalize a sole proprietorship, an owner is likely to:
1. Pay out of their own pocket or undertake personal debt.
2. Sell membership shares.
3. Sell stock.
4. Take out a bank loan without a personal guarantee. - correct answer ✔✔1. Pay out of their own
pocket or undertake personal debt.
Which of the following are TWO disadvantages of a sole proprietorship?
1. Ease of tax filing
2. Limited capital
3. Personal liability for debts
4. Ease of formation - correct answer ✔✔2. Limited capital
3. Personal liability for debts
You and your buddy want to start a new landscaping business. You equally invest in the equipment you
need to get started. You will both be equally responsible for the work and will share the profits equally.
After investigating the possible forms of business entities available, you decide a partnership would be
the best for your landscaping business.
What do you think you might need to do to form a partnership?
1. You and your buddy just need to agree to be partners.
2. You and your buddy must - correct answer ✔✔1. You and your buddy just need to agree to be
partners.
,A written agreement outlining the roles of partners, their rights, and their duties are called:
1. Operating agreements.
2. Articles of Organization.
3. A partnership agreement.
4. Articles of Incorporation. - correct answer ✔✔3. A partnership agreement.
Any partner:
1. May act as an agent who binds the partnership.
2. May encumber the property of the partnership to satisfy personal debt.
3. Is entitled to compensation for their time, skill, and effort.
4. May create a business in direct competition with the partnership. - correct answer ✔✔1. May act as
an agent who binds the partnership.
Partners have which of the following duties?
1. Record keeping
2. Fiduciary duties
3. Capital contribution
4. Litigating on behalf of the partnership - correct answer ✔✔1. Record keeping
2. Fiduciary duties
3. Capital contribution
The formation of a partnership without a partnership agreement requires which of the following (choose
2 answers)?
1. Five or more partners
2. The intent to form a partnership
, 3. Sharing of management duties
4. Sharing of profits and losses - correct answer ✔✔3. Sharing of management duties
4. Sharing of profits and losses
Which of the following are advantages of operating as a partnership? Choose 2 answers.
1. Partnerships are not taxed.
2. Forming a partnership is simple and relatively inexpensive.
3. The partners are not personally liable for business debts if the partnership is registered with the state.
4. Any partner may add a new partner at any time to help decrease the workload and liability and to
bring in more capital. - correct answer ✔✔1. Partnerships are not taxed.
2. Forming a partnership is simple and relatively inexpensive.
Which of the following is a disadvantage of operating as a partnership?
1. Partnerships are taxed at the same rate as corporations.
2. A partnership may not own real or personal property.
3. Partners may suffer financial loss if the partnership is not profitable.
4. A partnership may be formed for only one year at a time and the registration must be renewed
annually. - correct answer ✔✔3. Partners may suffer financial loss if the partnership is not profitable.
In a distributorship:
1. A manufacturer licenses a dealer to sell its product.
2. A franchisor transmits to the franchisee the essential ingredients to make a particular product.
3. Franchisee operates under a franchisor's trade name.
4. Management rights belong to the FTC. - correct answer ✔✔1. A manufacturer licenses a dealer to sell
its product.
When a new partner joins a previously existing partnership, the new partner is personally liable for:
solutions graded A+
In order to capitalize a sole proprietorship, an owner is likely to:
1. Pay out of their own pocket or undertake personal debt.
2. Sell membership shares.
3. Sell stock.
4. Take out a bank loan without a personal guarantee. - correct answer ✔✔1. Pay out of their own
pocket or undertake personal debt.
Which of the following are TWO disadvantages of a sole proprietorship?
1. Ease of tax filing
2. Limited capital
3. Personal liability for debts
4. Ease of formation - correct answer ✔✔2. Limited capital
3. Personal liability for debts
You and your buddy want to start a new landscaping business. You equally invest in the equipment you
need to get started. You will both be equally responsible for the work and will share the profits equally.
After investigating the possible forms of business entities available, you decide a partnership would be
the best for your landscaping business.
What do you think you might need to do to form a partnership?
1. You and your buddy just need to agree to be partners.
2. You and your buddy must - correct answer ✔✔1. You and your buddy just need to agree to be
partners.
,A written agreement outlining the roles of partners, their rights, and their duties are called:
1. Operating agreements.
2. Articles of Organization.
3. A partnership agreement.
4. Articles of Incorporation. - correct answer ✔✔3. A partnership agreement.
Any partner:
1. May act as an agent who binds the partnership.
2. May encumber the property of the partnership to satisfy personal debt.
3. Is entitled to compensation for their time, skill, and effort.
4. May create a business in direct competition with the partnership. - correct answer ✔✔1. May act as
an agent who binds the partnership.
Partners have which of the following duties?
1. Record keeping
2. Fiduciary duties
3. Capital contribution
4. Litigating on behalf of the partnership - correct answer ✔✔1. Record keeping
2. Fiduciary duties
3. Capital contribution
The formation of a partnership without a partnership agreement requires which of the following (choose
2 answers)?
1. Five or more partners
2. The intent to form a partnership
, 3. Sharing of management duties
4. Sharing of profits and losses - correct answer ✔✔3. Sharing of management duties
4. Sharing of profits and losses
Which of the following are advantages of operating as a partnership? Choose 2 answers.
1. Partnerships are not taxed.
2. Forming a partnership is simple and relatively inexpensive.
3. The partners are not personally liable for business debts if the partnership is registered with the state.
4. Any partner may add a new partner at any time to help decrease the workload and liability and to
bring in more capital. - correct answer ✔✔1. Partnerships are not taxed.
2. Forming a partnership is simple and relatively inexpensive.
Which of the following is a disadvantage of operating as a partnership?
1. Partnerships are taxed at the same rate as corporations.
2. A partnership may not own real or personal property.
3. Partners may suffer financial loss if the partnership is not profitable.
4. A partnership may be formed for only one year at a time and the registration must be renewed
annually. - correct answer ✔✔3. Partners may suffer financial loss if the partnership is not profitable.
In a distributorship:
1. A manufacturer licenses a dealer to sell its product.
2. A franchisor transmits to the franchisee the essential ingredients to make a particular product.
3. Franchisee operates under a franchisor's trade name.
4. Management rights belong to the FTC. - correct answer ✔✔1. A manufacturer licenses a dealer to sell
its product.
When a new partner joins a previously existing partnership, the new partner is personally liable for:
