Sole Proprietorship and Partnerships

Flashcard maker : Lily Taylor
The Factors an Entrepreneur Must Consider When Selecting an Organizational Form:
1. Ease of creation
2. The liability of the owners
3. Tax considerations
4. The ability to raise capital
What is the simplest form of business?
Sole proprietorship
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:
Publicity and public relations
Celia has convinced Maria to start a new business as a partnership rather than as a sole proprietorship. Celia wants to avoid:
Bearing the burden of all losses and liabilities
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…
Receives all the profits
One basic difference between partnership and agency law is that:
each partner has an ownership interest in the firm
When there is no expressed partnership agreement what governs the operation of partnership?
The Uniform Partnership Act
Pass through entity
any entity that does not have its income taxed at the level of that entity; example are partnerships, S corporations, and limited liability companies
Information return
A tax return submitted by a partnership that only reports the income earned by the business
An agreement by 2 or more persons to carry on as co-owners, a business for profit
Three Essential Elements to Determine Whether a Partnership Exists
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
The sharing of both profits and losses creates a legal inference that a partnership exists.
A Partnership Probably Does Not Exist if Shared Profits Were Received as Payment of Any of the Following:
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.
Under the common law, a partnership was treated only as
an aggregate of its members
In all cases, joint ownership of property creates a partnership.
Which of the following does NOT represent a major difference between an agency relationship and a partnership?
An agent is liable for the acts of the principle, but partners are not liable for the act of the partnership.
A partner’s profit from the partnership is taxed as individual income to the individual partners.

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