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LEGL210 - Corporate Law > Module 1 - Sole Proprietorships and Partnerships > Flashcards

Module 1 - Sole Proprietorships and Partnerships Flashcards

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1
Q

What business organization is managed by oneself?

A

Sole proprietorship

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2
Q

No legislation pertaining to ___________

A

Sole proprietorship

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3
Q

If sole proprietorship chooses to operate under a name other than their own it must be registered with the (a)___________ by filing (b)___________

A

(a) Registrar of Corporations
(b) declaration of trade name

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4
Q

Sole proprietorships are liable for

A
  1. All contracts entered in course of business
  2. Tort committed by oneself
  3. Tort committed by employees during employment
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5
Q

To avoid unlimited personal liability as a sole proprietor

A
  1. Obtain “non-recourse loan”
  2. By contract
  3. Through insurance
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6
Q

Advantages of sole proprietorship

A
  1. Easy and inexpensive to start
  2. Few licensing and registration requirements
  3. Complete control of business
  4. Tax benefits (can apply business losses against other sources of income)
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7
Q

Disadvantages of sole proprietorship

A
  1. Unlimited liability
  2. Limited management expertise
  3. Limited ability to raise money
  4. Limited lifespan (proprietorship cannot be transferred)
  5. Taxed at personal tax rate (much higher than business rate)
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8
Q

Legal relationship which arises from two or more people doing business together to make profit

A

General partnership

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9
Q

In a general partnership, the (a)_________ enter into contracts (not the (b)_________)

A

(a) Partners
(b) Partnership

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10
Q

When is a partnership in a general partnership separate from its partners?

A

In the case of GST

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11
Q

To admit new partners in a general partnership, a partner must _________

A

Receive consent from all existing partners

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12
Q

Business organizations governed by Partnership Act

A

General partnership
Limited partnership
Limited liability partnership

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13
Q

What does the Partnership Act govern?

A

Relationship between:
Partners
Partners and third parties
Partnership agreement drawn up by partners

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14
Q

When do rules of Partnership Act apply?

A

Only when partners have not created their own partnership agreement

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15
Q

When must trade name be registered for general partnership?

A

When operating under a name different from that of the partners’

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16
Q

Implied terms in Partnership Act

A
  1. Partners share equally profits and losses
  2. Partners will compensate each other for expenses incurred in business
  3. Partners are not entitled to interest for advances of capital
  4. All partners are entitled to manage business
  5. No new partners may enter without consent of existing partners
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17
Q

Indicators that an individual is involved in partnership

A
  1. Receiving business profits
  2. Has joint ownership of property
  3. Shares gross returns of business
  4. Lends money in return for share of profits
  5. Exercises control over business
  6. Represents relevant parties as partners
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18
Q

Liability of partners in general partnership

A

Jointly and vicariously liable for obligations and debts

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19
Q

General partners are _______ liable for each other’s torts

A

Jointly

20
Q

General partners are ________liable for employee’s torts

A

Vicariously

21
Q

Are new partners in general partnership liable for obligations occurring before their entrance?

A

No, they are not liable

22
Q

General partnership will automatically dissolve:

A
  1. When any partner gives notice to dissolve
  2. By death, bankruptcy, or insolvency of any partner
  3. By an event that makes it unlawful to continue business
23
Q

General partnership can apply for dissolution when any partner is:

A
  1. Of permanently unsound mind
  2. Guilty of conduct prejudicial (detrimental) to partnership
  3. Persistently in breach of partnership agreement
24
Q

Are retiring partners still liable for liabilities incurred during and after their partnership?

A

They are liable for all past liabilities.
They are liable for future obligations if they do not give third parties notice of retirement.

25
Q

Advantages of general partnership:

A
  1. Greater access to capital (through their partners)
  2. Additional sources of revenue and expertise
  3. After-tax profits and assets accrue to partners according to partnership interest
26
Q

Disadvantages of general partnership

A
  1. Unlimited liability (one’s own as well as their partner’s obligations)
  2. Loses are shared equally
  3. Profits taxed at personal income rate
  4. Not entitled to remuneration
27
Q

What is remuneration?

A

Payment for services done

28
Q

What is a limited partnership?

A

A partnership consisting of 1 or more general partners and 1 or more limited partners

29
Q

Is an LP a separate entity from its general partners?

A

No, it is not a separate entity

30
Q

What is a limited partner’s contribution to partnership?

A

Capital

31
Q

Do limited partners provide services or manage business?

A

No, they have no role in the business besides providing capital

32
Q

What is a limited partners limited liability restricted to?

A

Restricted to the amount personally invested into LP

33
Q

General partners in an LP have _______ liability

A

Full

34
Q

Limited partners have the right to:

A
  1. Inspect books of partnership
  2. Obtain dissolution of LP by court order
35
Q

LP can only begin by:

A

Filing certificate with Registrar

36
Q

Name of LP cannot include __________

A

Names of limited partners

37
Q

Advantages of LP

A
  1. Limited liability protection for limited partners
  2. Limited partners have same tax benefits
  3. Same advantages of general partnership
38
Q

Disadvantages of LP

A
  1. General partners are also liable for limited partners
  2. Limited partners have no control of business
39
Q

A limited liability partnership is:

A

A partnership consisting of partners practicing in an eligible profession

40
Q

Examples of professions eligible for LLP

A
  1. Chartered accountants
  2. Lawyers
  3. Dentists
  4. Doctors
41
Q

Partners in an LLP may be either

A

Individuals or professional corporations

42
Q

To register an LLP a partnership must:

A
  1. Apply to registrar with details of partnership and eligible profession(s)
  2. Include statement from governing body of applicable profession stating that partners are covered by liability insurance and meet all eligibility requirements
43
Q

Are partners in an LLP liable for all partnership obligations?

A

No, they are not liable for their partner’s obligations except when they were supervising or aware of the wrongdoing at the time and did not try to prevent it

44
Q

Advantages of LLP

A
  1. Liability protection for all partners
  2. Same as LP
45
Q

Disadvantages of LLP

A

Same as LP

46
Q

Why are only certain professions eligible to become an LLP?

A

They can be insured

LEGL210 - Corporate Law (4 decks)

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