Sole Proprietorship and Partnerships – Flashcards
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The Factors an Entrepreneur Must Consider When Selecting an Organizational Form:
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1. Ease of creation 2. The liability of the owners 3. Tax considerations 4. The ability to raise capital
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What is the simplest form of business?
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Sole proprietorship
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Pressler wants to be his own boss and wants to start a business. He has to decide which form of business organization to adopt and will likely consider all of the following EXCEPT:
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Publicity and public relations
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Celia has convinced Maria to start a new business as a partnership rather than as a sole proprietorship. Celia wants to avoid:
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Bearing the burden of all losses and liabilities
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Collette is a sole proprietor of a 3-D printing shop. She has considered changing her business organizational structure but cannot find an alternative that would give her the main advantage she enjoys as a sole owner, which is...
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Receives all the profits
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One basic difference between partnership and agency law is that:
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each partner has an ownership interest in the firm
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When there is no expressed partnership agreement what governs the operation of partnership?
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The Uniform Partnership Act
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Pass through entity
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any entity that does not have its income taxed at the level of that entity; example are partnerships, S corporations, and limited liability companies
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Information return
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A tax return submitted by a partnership that only reports the income earned by the business
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Partnership
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An agreement by 2 or more persons to carry on as co-owners, a business for profit
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Three Essential Elements to Determine Whether a Partnership Exists
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1. A sharing of profits or losses 2. A joint ownership of the business 3. An equal right to be involved in the management of the business
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The sharing of both profits and losses creates a legal inference that a partnership exists.
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True
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A Partnership Probably Does Not Exist if Shared Profits Were Received as Payment of Any of the Following:
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1. Debt by installments or interest on a loan 2. Wages of an employee or for the services of an independent contractor 3. Rent to a landlord 4. An annuity to a surviving spouse or representative of a deceased partner 5. A sale of the goodwill [the valuable reputation of a business viewed as an intangible asset.] of a business or property.
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Under the common law, a partnership was treated only as
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an aggregate of its members
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In all cases, joint ownership of property creates a partnership.
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false
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Which of the following does NOT represent a major difference between an agency relationship and a partnership?
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An agent is liable for the acts of the principle, but partners are not liable for the act of the partnership.
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A partner's profit from the partnership is taxed as individual income to the individual partners.
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True
