chapter 31

Question 1

Which form of business association is best?

Answer 1

•It depends on your goals.•

Question 2

Sole proprietorship is the most

Answer 2

common form of business formation in the US.

Question 3

But corporations are by far

Answer 3

more important for the US economy.

Question 4

Corporations are the

Answer 4

key creators of wealth in this country.

Question 5

The corporation is a

Answer 5

business entity form that allows a large number of people to join together to create wealth.

Question 6

Factors affecting the choice

Answer 6

there is no size fits all. •A person seeking legal advice on which choice of legal entity to go with for business- the choice depends on a number of factors.

Question 7

Factors

Answer 7

•Ease of formation•Taxation•External liability•Management and control•Transferability•Continuity

Question 8

Forms of business associations

Answer 8

•Sole proprietorship•General partnership•Limited partnership•Limited liability company•Limited liability partnership•Corporation•Other forms

Question 9

General partnership

Answer 9

An unincorporated business association consisting of two or more persons who co-own a business for profit.•It is formed without any formality.•No documents need to be filed•Unlimited liability for partners•Partners share profit and control.

Question 10

Limited Partnership

Answer 10

An unincorporated business association consisting of at least one general partner and at least one limited partner.

Question 11

Limited partner has

Answer 11

no right to control

Question 12

Liability of limited partner

Answer 12

is the extent of their ownership interest.

Question 13

LLC

Answer 13

Limited Liability Company
Provides limited liability to all its owners
Permits all owners/members to participate in the management/control of the business

Question 14

Corporation

Answer 14

•Is a legal entity separate and distinct from its owners•It is formed by filing its articles of incorporation with the state.•Limited liability•Double taxation•Shares are freely transferrable

Question 15

Partnership

Answer 15

The association of 2 or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the parties intend to form a partnership.•Formation may be done consciously or unconsciously.•

Question 16

A partner shares

Answer 16

the profit and the control of the business.

Question 17

An employee

Answer 17

does not share the profit and the control of the business.

Question 18

Partner status

Answer 18

exposes one to the liabilities of the business.

Question 19

Partnership agreement

Answer 19

A written agreement is not required.•It is advisable to make the understanding clear in case one forgets.•A written agreement brings a clearer and more reliable understanding of the partners respective rights and obligations.

Question 20

A partnership may result from

Answer 20

an oral or written agreement between the parties, from an informal arrangement, or from the conduct of the parties.