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Entrepreneur

answer

person who forms and operates a business, alone or with others

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Sole proprietorship

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1. owner is the business 2. east to form and does not cost a lot 3. owner has right to make all management decisions 4. owns all of business, receives all profit and carries tax liability on personal income tax 5. can easily be transferred or terminated at any time

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Disadvantages to a sole proprietorship

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1. access to capital which is generally limited to person funds and loans 2. owner is personally liable for all contracts and torts

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Creation of a sole proprietorship

answer

No formalities, no government approvals but may need to purchase business license

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D.B.A.

answer

trade names are designated as ____ to conduct business and usually require the filing of a fictitious name certificate with the state

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True or False Sole proprietor has no personal liability?

answer

False the owner has unlimited personal liability

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Taxation of a sole proprietorship

answer

taxed on owner's income tax for both state and local taxes

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General Partnership

answer

1. recognized since ancient times 2. voluntary association of two or more persons for the purpose of carrying on a business for profit

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Uniform Partnership Act

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Codifies partnership law, basing the rules on the entity theory of partnership, and has been adopted in whole or in part by 48 states

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Formation of a general partnership

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business must be a voluntary association of at least two persons that are carrying on a business as co-owners for profit. the formation requires little or no formality. the courts will consider receipt of a share of the business profits and losses as prima facie evidence of a partnership, as opposed to right management

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Name of the General partnership

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can operate under the name of any one or more of the partners or under a fictitious name, if a proper filing has been made with the appropriate governmental body

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general partnership agreement

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the agreement may be oral, written, or implied by the conduct of the partners. the statute of frauds will require a written partnership agreement if the partnership is to exist for over a year or deal with real estate

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taxation of general partnerships

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incomes and losses flow through to the partners' personal income tax returns

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Right to participate in management

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absent to an agreement to the contrary, all partners have equal rights to participate in management

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right to share in profits

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unless there is an agreement stating otherwise, all partners have right to an equal share in the profits and losses. If the agreement explains the share of profits, but is silent as to the losses, the losses are shared in the same percentage. If the agreement details the share of losses but not profits the profits are shared evenly

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Right to compensation

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unless stated otherwise no partner is entitled to remuneration because they are supposed to devote their full time and energy to the partnership. however, they can be reimbursed for business expenses incurred in the service of partnership

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Right to return of loans

answer

a partner who makes a loan to the partnership becomes a creditor of the partnership. the partner is entitled to repayment of the loan, but this right is subordinated to the claims of creditors who are not partners

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right to return of capital

answer

upon termination of a general partnership, the partners are entitled to have their capital contribution returned to them

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right to information

answer

each partner has the right to information about the partnership, including financial records and taxes

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duty of loyalty

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partners have fiduciary duty to each other: duty not to self-deal, usurp partnership opportunities, not to compete with the partnership, not to make secret profits, to to breach the confidentiality of the partnership. and not to misuse partnership property if partnership is breached they will be forced to disgorge profits made and are liable for damages

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duty of care

answer

partners must use the reasonable skill and care that would be expected for someone in their position, but are not liable for honest business errors

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Duty to inform

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partners must inform co-partners of any information that they have, since the knowledge is imputed on the others

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duty of obedience

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partners must adhere to rules of partnership, or they will be liable for any damages caused by the breach

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Right to an accounting

answer

partners cannot sue partnership but can bring an action for an accounting, wherein he court will review the partnership to determine and award each partner their share

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Tort liability of general partners

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partnership is liable for any acts caused by a partner, employee, or agent within the ordinary course of business. Each partner is jointly and severally liable for torts and breaches of trust. A third party may sue one or more of the partners and recover a judgment against them. A release of one partner does not release the others. The partner sue or recovered against may seek indemnification from the other partners

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Contract liability of general partners

answer

partners are jointly liable for contracts. a party must name all partners in a lawsuit in order to collect against any of the partners or the partnership. Releasing a single partner releases all. If a partner is made to pay more than their share, they may seek indemnification from the other partners

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Liability of incoming partners

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A new partner is only liable for the antecedent debts to the amount of their capital contribution, but will be personally liable for all debts incurred after they become a partner

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Liability of outgoing partners

answer

If a general partnership is dissolved, each general partner is personally liable for debts and obligations of the partnership that exist at the time of dissolution

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Dissolution of a general partnership

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a partnership for a term is for a fixed term or until particular event occurs, while a partnership at will is for an unspecified period. with the former the partnership automatically dissolves at the time proscribed or upon the occurrence of the event. A partnership at will can be dissolved at any time

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Winding up of the partnership

answer

unless it is agreed that the partnership will continue the ______ follows the dissolution

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Wrongful dissolution

answer

although a partner has the power to withdraw at any time, he many not have the right, and will be held liable for any damages the ________ caused

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Notice of dissolution

answer

_______ must be given to certain parties, or the partners will be deemed to have apprent authority to continue to bind the partnership. Third parties who dealt with the partnership must be given actual or constructive notice. third parties who had neither dealt or had knowledge of the partnership are owed no notice

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Distribution of assets

answer

partnership assets should be liquidated, and payment made first to creditors and then creditor partners. If assets remains, the capital contribution of each partner should be returned and any remaining moneis should be distributed as profits

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Continuation of a general partnership after dissolution

answer

remaining partners may enter into a continuation agreement disolving the old partnership and creating a new one

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Action for an accounting

answer

a formal judicial proceeding in which the court is authorized to: 1. review partnership and partnerships' actions 2. award each partner his or her share of the partnership assets

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actual notice

answer

third parties who actually dealt with the partnership must be given actual notice of dissolution or have acquired knowledge of the dissolution from another source

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antecedent debt

answer

a new partner who is admitted to a general partnership is liable for the existing debts and obligations of the partnership only to the extent of his or her capital contribution

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apparent authority

answer

if proper notice is not given to a required third party after the dissolution of a partnership, and a partner enters into a contract with the third party, liability may be imposed on the previous partners on the grounds of apparent authority

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Breach of confidentiality

answer

general partners owe a duty to keep partnership information confidential. Failure to do so is ______

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Competing with the partnership

answer

a general partner may not compete with the partnership without the permission of the other partners

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constructive notice

answer

publishing a notice of dissolution in a newspaper of general circulation serving the area where the business of the partnership was regularly conducted

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continuation agreement

answer

agreement that expressly sets for the events that allow for continuation of the partnership, the amount to be paid outgoing partners and other details

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contract liability

answer

a general partner who is made to pay more than his or her proportionate share of _____ may seek indemnification from the partnership and from those partners who have not paid their share of the loss

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d.b.a.

answer

a designation for a business that is operating under a trade name "doing business as."

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dissolution

answer

the change in the relationship of the partners caused by any partner ceasing to be associate in the carrying on of the business

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fictitious business name statement

answer

a document that is filed with the state that designates a trade name of a business, the name and address of the applicant, and the address of the business

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fiduciary relationship

answer

general partnerships have a ____ relationship

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flow-through taxation

answer

general partnerships do not pay federal income taxes. instead, the income and losses of the partnership flow onto and have to be reported on the individiual partners' personal income tax returns

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Form 1040 U.S. individual income tax return

answer

reports income or loss from the sole proprietorship on his or her personal income tax form for federal income tax purposes

question

general partner

answer

persons liable for the debts and obligations of a general partnership

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imputed knowledge

answer

if a partner fails his duty to inform partners with knowledge then other partners are ______ of all notices concerning any matters relating to the partnership affairs

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joint and several liability

answer

plaintiff can sue one or more partners separately

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joint liability

answer

partners have _____ for contracts and debts of the partnership. this means plaintiff must name the partnership and all of the partners as defendants in a lawsuit

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misuse of partnership property

answer

if a general partner uses partnership property for personal use

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negligence

answer

breach of duty of care

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partnerships at will

answer

a partnership with no fixed duration

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partnership for a term

answer

partnership with a fixed duration

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right of survivorship

answer

a rule which provides that upon death of a general partner, the deceased partner's right in specific partnership property vests in the remaining partner or partners; the value of the deceased general partner's interest in the partnership passes to his or her beneficiaries or heirs

question

right to participate in management

answer

a situation in which, unless otherwise agreed, each partner has the right to participate in the management and an equal vote on matters

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schedule C

answer

the income or loss from the sole proprietorship is reported on ______ which must be attached to the taxpayer's form 104o

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tenant in partnership

answer

a general partner is a co-owner with the other partners of the specific partnership property as a ______

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unlimited personal liability of a general partner

answer

a general partner's personal liability for debts and obligations of the general partnership

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unlimited personal liability of a sole propreitor

answer

the personal liability of a sole proprietor for all debts and obligations of a sole proprietorship

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winding up

answer

process of liquidating the partnerships' assets and distributing the proceeds to satisfy claims against the partnership

question

wrongful dissolution

answer

when a partner withdraws from a partnership without having the right to do so at the time

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