Business Law & Ethics Final Exam
Review (Comm 315) Questions with
100% Correct Answers Latest Versions
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Who is Liable in a Sole Proprietorship?
The owner has unlimited and personal liability
When can a Sole Proprietorship be terminated?
Upon the death of the owner, or when the owner ceases to do
business
What are the advantages of a sole proprietorship?
Simple Registration - easily done by owner
Inexpensive to start - costs under $50 to register
All profits belong to the owner
All decisions made by the owner
Flexibility
Simple to dissolve
Enjoyment and challenge of personal involvement
Operations and Results can be kept secret
What are the disadvantages of a sole proprietorship?
- Owner is personally liable for all debts (unlimited liability)
- Difficult to obtain outside financing (capital)
- Depend only on skills of owner (might be too specialized)
- Lack of Continuity
- No legal distinction between owner and business
- Restrictions on hiring members of owner's family including
spouse and children under 19, under income tax regulations
- May be difficult to sell "goodwill" if reputation depends heavily on
the personality of the owner
,- All profits are considered to be earned by the sole proprietor
personally and are taxed at full personal income tax rates
What is the definition of "Good will?"
The Value of the reputation, credibility, and reliability that a
business has built up over a period of time. It is an intangible
factor, and thus it is often very difficult to assign a financial value
to it
What is a partnership?
When two or more people agree to operate a business together,
this agreement forms a contract between them known as the
Contract of Partnership
What is a Partnership Agreement?
Not required by law, it is a written contract that reduces any
potential future disagreements since the owners wrote down the
details of their business relationship here.
How do you start up a Partnership?
All partnerships are required to register a Partnership Declaration
that identifies the partners, the location, and the type of business
Is transfer of ownership possible in Partnerships?
Yes, within limits: either when one partner dies or wishes to cease
doing business
T/F: Each partner has unlimited, personal liability for the
debts of their enterprise.
True, partners are solidarily liable for the partnership debts (any
one or more of the partners may be required to pay all or part of
any debt owed)
What should be included regarding the management of the
enterprise in the Partnership Agreement?
- How much time each partner will devote to the business
- What responsibilities each partner will have
- What happens if one of the partners becomes too ill to work in
the business
,What is the one arrangement of profits in a Partnership not
allowable under the QCC?
One which excludes a person from any share of the profits (a
partner must have some share in the profits, no matter how small)
In a Sole Proprietorship or Partnership, are you taxed on
earnings reinvested into the enterprise?
Yes, it is still considered personal earnings
How can a Partnership be terminated?
Being a relatively fragile form of business:
- By the agreement of the partners
- By the bankruptcy of the business
- Upon the accomplishment of its objective
- Some by the death/bankruptcy of 1 partner
How does a limited partnership differ from a general
partnership?
It differs in the liability for debts and in the right to participate in
the management of the business. The special partners are liable
for the debts only to the extent of a stipulated amount they
contributed, as stated in the partnership declaration. If not stated,
they are soldarily liable, just like the general partners.
How can a special partner check on the business?
They can meet periodically with their partners to discuss the
business, but cannot partake in any day-to-day operations
What are the advantages of a partnership?
- Simple registration
- Inexpensive to start - under $50
- Profits shared only between partners
- Partners able to assist each other
- Partners pool their talents
- Quite flexible
- Simple to dissolve
- More scope for specialization
, - Enjoyment of personal involvement
- Limited Partnership allows for some limitation in liability
What are the disadvantages of a partnership?
- Partners personally liable for all debts and the liability is solidary
- Potential for conflict between partners
- Lack of continuity
- Difficult to transfer ownership
- May be difficult to recover one's investment
- Required a written agreement if partners do not share equally or
if some partners are to be excluded from carrying out some of the
functions of the business
- Partner's share of the profits taxed at full personal income tax
rates
- Restriction on hiring members of their families
What is the main difference between the corporation and
other forms of business?
Corporations are created by the government as separate legal
persons (a fiction of the law)
What is meant by a corporation acting as an incorporator?
A corporation can form or simply buy another corporation in whole
or in part with other corporations
Can the owners of a corporation sue the company?
Yes, because they are seen as separate entities
How did John Marshall define a corporation in the case
Dartmouth College v. Woodward?
A corporation is an artificial being, invisible, intangible, and
existing only in contemplation of law. Being the mere creature of
law, it possesses only those properties which the charter of its
creation confers upon it, either expressly, or as incidental to its
very existence... immortality and individuality...
How do you start a corporation?
Review (Comm 315) Questions with
100% Correct Answers Latest Versions
2025 Top Rated A+
Who is Liable in a Sole Proprietorship?
The owner has unlimited and personal liability
When can a Sole Proprietorship be terminated?
Upon the death of the owner, or when the owner ceases to do
business
What are the advantages of a sole proprietorship?
Simple Registration - easily done by owner
Inexpensive to start - costs under $50 to register
All profits belong to the owner
All decisions made by the owner
Flexibility
Simple to dissolve
Enjoyment and challenge of personal involvement
Operations and Results can be kept secret
What are the disadvantages of a sole proprietorship?
- Owner is personally liable for all debts (unlimited liability)
- Difficult to obtain outside financing (capital)
- Depend only on skills of owner (might be too specialized)
- Lack of Continuity
- No legal distinction between owner and business
- Restrictions on hiring members of owner's family including
spouse and children under 19, under income tax regulations
- May be difficult to sell "goodwill" if reputation depends heavily on
the personality of the owner
,- All profits are considered to be earned by the sole proprietor
personally and are taxed at full personal income tax rates
What is the definition of "Good will?"
The Value of the reputation, credibility, and reliability that a
business has built up over a period of time. It is an intangible
factor, and thus it is often very difficult to assign a financial value
to it
What is a partnership?
When two or more people agree to operate a business together,
this agreement forms a contract between them known as the
Contract of Partnership
What is a Partnership Agreement?
Not required by law, it is a written contract that reduces any
potential future disagreements since the owners wrote down the
details of their business relationship here.
How do you start up a Partnership?
All partnerships are required to register a Partnership Declaration
that identifies the partners, the location, and the type of business
Is transfer of ownership possible in Partnerships?
Yes, within limits: either when one partner dies or wishes to cease
doing business
T/F: Each partner has unlimited, personal liability for the
debts of their enterprise.
True, partners are solidarily liable for the partnership debts (any
one or more of the partners may be required to pay all or part of
any debt owed)
What should be included regarding the management of the
enterprise in the Partnership Agreement?
- How much time each partner will devote to the business
- What responsibilities each partner will have
- What happens if one of the partners becomes too ill to work in
the business
,What is the one arrangement of profits in a Partnership not
allowable under the QCC?
One which excludes a person from any share of the profits (a
partner must have some share in the profits, no matter how small)
In a Sole Proprietorship or Partnership, are you taxed on
earnings reinvested into the enterprise?
Yes, it is still considered personal earnings
How can a Partnership be terminated?
Being a relatively fragile form of business:
- By the agreement of the partners
- By the bankruptcy of the business
- Upon the accomplishment of its objective
- Some by the death/bankruptcy of 1 partner
How does a limited partnership differ from a general
partnership?
It differs in the liability for debts and in the right to participate in
the management of the business. The special partners are liable
for the debts only to the extent of a stipulated amount they
contributed, as stated in the partnership declaration. If not stated,
they are soldarily liable, just like the general partners.
How can a special partner check on the business?
They can meet periodically with their partners to discuss the
business, but cannot partake in any day-to-day operations
What are the advantages of a partnership?
- Simple registration
- Inexpensive to start - under $50
- Profits shared only between partners
- Partners able to assist each other
- Partners pool their talents
- Quite flexible
- Simple to dissolve
- More scope for specialization
, - Enjoyment of personal involvement
- Limited Partnership allows for some limitation in liability
What are the disadvantages of a partnership?
- Partners personally liable for all debts and the liability is solidary
- Potential for conflict between partners
- Lack of continuity
- Difficult to transfer ownership
- May be difficult to recover one's investment
- Required a written agreement if partners do not share equally or
if some partners are to be excluded from carrying out some of the
functions of the business
- Partner's share of the profits taxed at full personal income tax
rates
- Restriction on hiring members of their families
What is the main difference between the corporation and
other forms of business?
Corporations are created by the government as separate legal
persons (a fiction of the law)
What is meant by a corporation acting as an incorporator?
A corporation can form or simply buy another corporation in whole
or in part with other corporations
Can the owners of a corporation sue the company?
Yes, because they are seen as separate entities
How did John Marshall define a corporation in the case
Dartmouth College v. Woodward?
A corporation is an artificial being, invisible, intangible, and
existing only in contemplation of law. Being the mere creature of
law, it possesses only those properties which the charter of its
creation confers upon it, either expressly, or as incidental to its
very existence... immortality and individuality...
How do you start a corporation?
