Chapter 7 - Part 1

1.     Which of the following is not an advantage of a sole proprietorship?

• a.      Liability is limited.

• b.     It is inexpensive to set up.

• c.      Losses incurred by the business can be set off against the owner’s income from other sources to reduce income tax.

• d.     Changes to the owner’s business plan can be made easily.

A partnership is a legal entity.

• True

• False

A general partnership does not require a partnership agreement.

• True

• False

Which of the following best describes a general partnership?

• Two or more people carrying on an unincorporated business

• Members or officers carrying on a business that is a separate legal entity

• Agents operating businesses independently of each other

• An individual owning and running a business

 

Which of the following is the main disadvantage of forming a general partnership?

• Responsibility for the day-to-day running of the business is shared.

• Profits and losses are shared.

• There is unlimited personal liability for the debts of the business.

• Creating a partnership agreement is an expensive and time-consuming legal requirement.

Which of the following best describes a limited partnership?  

• A business consisting of one or more general partners and one or more limited partners

• A business consisting of 50 percent general and 50 percent limited partners

• A business consisting of all general partners

• A business consisting of all limited partners