Business Structures 1 of 3 (38)

Question 1

General Partnership

Answer 1

An association between two or more parties to operate a business as co-owners for a profit. It is informally created since all partners have unlimited liability for contracts and debts. It is not taxed as a separate entity but instead, treated as a pass-through entity with its owners responsible for taxes on its taxable activities.

Question 2

Partner Rights

Answer 2

Three basic rights of a partner, which include:

• The right to an equal share of profits, referred to as the partnership interest (fully transferable);
• The right to use partnership property for partnership purposes; and
• The right to participate in the management of the business (voting, contracts, and debts).

Question 3

Actual Rights

Answer 3

The ability to bind the partnership and the partners, which may be expressed when the partnership has explicitly stated that the partner has the authority, or implied when the partner’s duties and responsibilities cannot be fulfilled otherwise.

Question 4

Apparent (Ostensible) Authority

Answer 4

The ability to bind the partnership and the partners without the actual authority to do so but as a result of a third party in good faith reasonably assuming that the partner has the authority based on actions of the partnership and the other partners.