BULE 303 Exam 3 questions and
answers graded A+
Advantages of the Sole Proprietorship - correct answer ✔✔Owner receives all profits
Easier and less costly to start
More flexibility
Disadvantages of the Sole Proprietorship - correct answer ✔✔Owner is responsible for all losses
Lacks continuity after death
Difficult to raise capital
Partnership Formation - correct answer ✔✔Can be written, oral, or implied unless a writing is
required by the Statute of Frauds
Articles of partnership: Sets forth rights and obligations of the parties
Partnership by estoppel: When persons who are not partners hold themselves out to be so, the
court may decide to impose liability as if a partnership did exist
Rights of Partners - correct answer ✔✔Management: all partners have equal rights; each
partner has one vote
Interest in partnership: profits are shared equally unless contracted differently
Compensation: usually none
Inspection of books: accessible to all
Accounting of assets is required
Property is owned by the partnership
, Duties and Liabilities of Partners - correct answer ✔✔Fiduciary - owes the other partners the
duty of care and loyalty
Binds the partnership to contracts and torts
Joint liability - partners share liability for obligations and debt
Joint and several liability - a third party can sue the partners individually or the partnership
Partnership Termination - correct answer ✔✔Dissolution - disbanding the partnership
Occurs in the following situations:
Acts of the partners
The subsequent illegality of the firm's business
The expiration of a time period stated in a partnership agreement
Judicial decree
Winding up - ending business after the dissolution
Limited Liability Partnership - correct answer ✔✔A hybrid form of business
Like a partnership, an LLP is a pass-through entity for tax purposes.
Formation
Must be formed and operated in compliance with state statutes
Liability
The personal liability of the partners is limited.
Allows partners to avoid personal liability for the wrongful acts of other partners
Limited Partnership - correct answer ✔✔Limits liability of some of its owners
General partner: responsible for managing the partnership and liable for debts
Limited partner: contributes capital but doesn't participate in the management; assumes no
liability for debts
Formation of the Limited Partnership
answers graded A+
Advantages of the Sole Proprietorship - correct answer ✔✔Owner receives all profits
Easier and less costly to start
More flexibility
Disadvantages of the Sole Proprietorship - correct answer ✔✔Owner is responsible for all losses
Lacks continuity after death
Difficult to raise capital
Partnership Formation - correct answer ✔✔Can be written, oral, or implied unless a writing is
required by the Statute of Frauds
Articles of partnership: Sets forth rights and obligations of the parties
Partnership by estoppel: When persons who are not partners hold themselves out to be so, the
court may decide to impose liability as if a partnership did exist
Rights of Partners - correct answer ✔✔Management: all partners have equal rights; each
partner has one vote
Interest in partnership: profits are shared equally unless contracted differently
Compensation: usually none
Inspection of books: accessible to all
Accounting of assets is required
Property is owned by the partnership
, Duties and Liabilities of Partners - correct answer ✔✔Fiduciary - owes the other partners the
duty of care and loyalty
Binds the partnership to contracts and torts
Joint liability - partners share liability for obligations and debt
Joint and several liability - a third party can sue the partners individually or the partnership
Partnership Termination - correct answer ✔✔Dissolution - disbanding the partnership
Occurs in the following situations:
Acts of the partners
The subsequent illegality of the firm's business
The expiration of a time period stated in a partnership agreement
Judicial decree
Winding up - ending business after the dissolution
Limited Liability Partnership - correct answer ✔✔A hybrid form of business
Like a partnership, an LLP is a pass-through entity for tax purposes.
Formation
Must be formed and operated in compliance with state statutes
Liability
The personal liability of the partners is limited.
Allows partners to avoid personal liability for the wrongful acts of other partners
Limited Partnership - correct answer ✔✔Limits liability of some of its owners
General partner: responsible for managing the partnership and liable for debts
Limited partner: contributes capital but doesn't participate in the management; assumes no
liability for debts
Formation of the Limited Partnership
