9 Organizaiton of business

A person starting a business can protect their personal assets and keep them separate from their business assets by forming

• A)  a sole proprietorship

• B)  a general partnership

• C)  a corporation

• D)  a franchise

• E)  a joint venture

Ingrid, Bridgit, and Manuel want to start a business selling used computers. Which of the following statements respecting their possible business name is true?

• A)   They can use the name “I.B.M. Used Computers” because they are using the initials of their own first names.

• B)   They cannot use the name “I.B.M. Used Computers” because they are not incorporated.

• C)   They can use the name “I.B.M. Used Computers” if they apply to incorporate the business.

• D)   They can use the name “I.B.M. Used Computers” if they register the name as a partnership.

• E)    They cannot use the name “I.B.M. Used Computers” because it would likely mislead the public.

Which of the following with respect to partnership is TRUE?

• A)   Partnership is a separate legal entity.

• B)   General partners have limited liability

• C)   General partners have unlimited liability

• D)   Partners are not agents for each other.

• E)  Partners must make an equal financial contribution to the partnership.

Tony Gennaro and Sal Mineola buy old cars and repair and sell them. They split the cost of buying the cars and the proceeds of sale. They never agree to be partners. One car has defective brakes and a pedestrian is injured as a result. Tony worked alone on buying, repairing, and selling this car. The pedestrian sues the car owner, who in turn sues Tony and Sal. Which of the following is TRUE?

• A)   As there was no express partnership agreement, there is no partnership between Tony and Sal.

• B)   As Tony did the defective repair work, only he is liable.

• C)   As there was no written partnership agreement, there is no partnership between Tony and Sal.

• D)   There is a partnership between Tony and Sal implied by law and Sal is liable as a partner.

• E)    Both B and C

Which of the following is a violation of the fiduciary duty of a partner?

• A)   One partner, without the consent of the other partners, starts another business which is similar to or in competition with the partnership business.

• B)   One partner, without the consent of the other partners, uses information that he has gained from the partnership for his own advantage.

• C)   One partner, without the consent of the other partners, uses the partnership property for his own personal use.

• D)   Both B and C

• E)    A, B and C

Maury Slater and Harry Katz operate a clothing store as a partnership. They agree that they will not order over $10,000 without having both signatures on the order. Maury is on vacation when Harry orders $20,000 worth of shirts and $5,000 worth of CDs. Maury objects to both purchases and wants to return the goods. The suppliers sue Maury and Harry. What are the partnership’s obligations?

• A)   The partnership is responsible to pay the shirt supplier only.

• B)   The partnership is responsible to pay the CD supplier only

• C)   The partnership is responsible to pay both suppliers

• D)   The partnership is responsible to pay neither supplier.

• E)    Only Harry is responsible, and to both suppliers.

Heinz Klein is a mechanic. Bettina Lopez has some money to invest. They agree that Bettina will lend money to Heinz to buy cars at government sales, fix them up and sell them. They will split the profits. Bettina says that she wants to have nothing to do with the operation of the business. They agree that they will not be partners. Which of the following is TRUE?

• A)   They are not partners because they have specifically agreed not to be partners.

• B)   They are partners because they are sharing profits from a business on a continual basis.

• C)   Bettina is a limited partner and will not be liable for partnership debts beyond her investment.

• D)   The partnership is not registered as a limited partnership so Bettina will be liable for partnership debts.

• E)    Both B and D

A fiduciary duty exists in which of the following business relationships?

• A)   business partners to each other

• B)   directors of a corporation to the corporation

• C)   a professional advisor such as an accountants to their clients

• D)   agent to a principal

• E)    all of the above

Mumtaz, Badia and Ilya are partners in a business partnership, called MBI.  Mumtaz contributes $15,000 to the business, Badia contributes $10,000 and Ilya contributes $5,000.  There is no agreement of how they will share partnership profits and losses.  In addition, the partnership borrows A $30,000 from the bank.  The business doesn’t work out, and MBI is unable to repay   the loan.  The bank sues Mumtaz personally.  The amount Mumtaz can legally recover from Ilya is:

• A) nothing

•    B) $5,000

•  C) $10,000

• D) $15,000

• E) $30,000

Brant Ranger, Paula Potts and Matthew Lane are all tax lawyers and partners in Ranger Potts & Lane LLP. They practiced together and were successful for many years before the partnership ran into difficulties. Lane was retained by Phillip Schooner, a wealthy client. Lane acted negligently for Schooner in several income tax transactions which breached the Income Tax Act and caused millions of dollars in losses to Schooner. Schooner brought a legal action over this. Which of the followings statements is TRUE? Schooner can claim against

• A)   the firm’s assets

• B)   none of the partners’ personal assets

• C)   the firm’s assets and the personal assets of  Lane only

• D)   the firm’s assets and all of the partners’ personal assets

• E)    only the insurance provider for the firm