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Exam 24: Sole Proprietorships and Partnerships

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Question 1

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In a limited partnership,although the limited partner actively engages in the management of the partnership business,only the general partner has unlimited liability.

A) True
B) False

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Question 2

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Why should you register the partnership with the province?

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Beside the fact that you may be fined if...

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Question 3

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Johnson,Michael & Associates is a partnership of accountants.One evening,Bosco,the truck driver for the firm,during the course of performing his duties,gets into an accident with James.James is injured and later commences a personal injury action against the partnership.James obtains judgment of $250 000 against the partnership.The partnership is not insured and has only $150 000 in its account.James may recover the balance of $100 000 from the personal assets of any of the individual partners.

An individual who decides to carry on business in his or her name need not register the business.

For three years,John,Michael,and Mary have carried on a business that is charitable in nature.Each of them contributed capital to the business and has his or her duties set out in an agreement.The form of business that they have created is

Explain why partners should always have a partnership agreement.

Partners are generally liable for the torts committed by another partner in the ordinary course of the business.Furthermore,each partner is jointly liable for the debts and obligations of the firm.A Limited Liability Partnership (LLP)limits a partner's liability as a result of the negligent acts or omissions of another partner.

A partnership agreement falls under the Statute of Frauds

Explain how a partnership can be formed by implication.

A Limited Liability Partnership (LLP) protects a partner from some personal liability.Even though a partner in an LLP is not liable for debts,liabilities,or obligations arising from the negligent acts or omissions of other partners or employees,a partner is subject to all of the following EXCEPT

The court may upon an application by one or more partners order the partnership dissolved under which circumstance?

Three women form a partnership.They contribute the same amount of capital and they have agreed to share equally on the profits.If a loss occurs,need they share equally on the loss? If they each put in roughly the same amount of time,can their salaries be different? Explain your answer in both cases.

Chartered accountants can carry on a limited liability partnership without a limited liability partnership agreement.

Which of the following is true about sole proprietorships?

If there is no explicit partnership agreement,each partner will share in the profits of the partnership according to that partner's proportionate capital contribution.

A partnership is a business relationship between two or more persons,but not all business relationships between two or more persons are partnerships.

In Ontario,in the absence of a partnership agreement,the provisions of the Partnership Act apply to a general partnership.

Carter,a partner in a financial planning firm,solicited a client without reporting it to the firm.He used the letterhead,business cards,and facilities of the firm.He then defrauded the client out of $138 000 and left for Honduras.Will the firm be liable to this client?

Two years ago the Citizens Bank lent the Carlin & Hickel Partnership $2 million.Now the firm is defaulting on their monthly payments.Which of the following partners will be liable on this loan?

Albert and Edward have just become lawyers and wish to set up a practice together.In order to best protect themselves,they should conduct the practice as a