Partnerships (Introduction) Part 2

Question 1

What are the advantages of a partnership?

Answer 1

1. Protected and regulated by law
2. Unlimited Liability of the partners is positively viewed by the creditors
3. Higher capital raised & better management than sole proprietorship
4. Easier to organize and more freedom in decision-making than in corporations

Question 2

What are the disadvantages of a partnership?

Answer 2

1. Easily dissolved
2. Unlimited Liability may prevent potential partners from investing
3. May be subject to personal liability
4. Mutual consent is needed to transfer ownership interest to other parties
5. More regulatory requirements than sole proprietorship
6. Cannot raise large amounts from public sources, unlike in corporations

Question 3

What are the classifications of a partnership?

Answer 3

1. As to activities or purpose
2. As to duration
3. As to publicity
4. As to legality of existence
5. As to representation of others
6. As to liability of partners
7. As to object

Question 4

What are the different types of partners?

Answer 4

1. As to contribution - capitalist and industrial partners
2. As to liability - limited and general partners
3. As to management - managing and silent partners
4. As to knowledge of the public and as to management - ostensible, silent, secret, and dormant/sleeping partners

Question 5

What are capitalist partners?

Answer 5

Contributes cash and non-cash properties

Question 6

What are industrial partners?

Answer 6

Contributes industry (employees, expertise, knowledge, resources, etc.) to the partnerships

Question 7

How many general and limited partners are required in the following partnership?

A. General partners = At least one in a general partnership; None in a limited partnership
B. General partners = None in a general partnership; At least one in a limited partnership
C. Limited partners = At least one in a general partnership; At least one in a limited partnership
D. Limited partners = None in a general partnership; At least one in a limited partnership

Answer 7

D. Limited partners = None in a general partnership; At least one in a limited partnership

Question 8

What are general partners?

Answer 8

They are unlimited partners. They are liable for partnership debts that extends up to their personal assets.

Question 9

What are limited partners?

Answer 9

They are limited partners. They are liable for the partnership debt limited to one’s contributed capital.

Question 10

What is a managing partner?

Answer 10

Actively participates in the management and operations of the partnership

Question 11

What is a silent partner?

Answer 11

Does not actively participate in the management and operations of the partnership

Question 12

What is an ostensible partner?

Answer 12

Known to be a partner and actively participates in the management and operations of the partnership

Question 13

What is a silent partner?

Answer 13

Known to be a partner but does not actively participates in the management and operations of the partnership

Question 14

What is a secret partner?

Answer 14

Not known to be a partner but actively participates in the management and operations of the partnership

Question 15

What is a dormant partner?

Answer 15

They are sleeping partners, not known to be a partner and does not actively participates in the management and operations of the partnership

Question 16

What is a trading partnership?

Answer 16

It is a commercial partnership. Makes use of merchandising and manufacturing

Question 17

What is a non-trading partnership?

Answer 17

Renders services and is a professional partnership

Question 18

What is the duration of a partnerships’ existence when partnership is at will?

Answer 18

It exists indefinitely under the Articles of Partnership.

Question 19

What is the duration of a partnerships’ existence when partnership is at a fixed duration/term?

Answer 19

It exists within the time frame agreed upon.

Question 20

What is a secret partnership?

Answer 20

It is when at least one partner is not made known to the public

Question 21

What is an open partnership?

Answer 21

It is when all partners are made known to the public

Question 22

What is the partnership’s legality existence of De jure?

Answer 22

It has complied with all the legal requirements for its existence

Question 23

What is the partnership’s legality existence of De facto?

Answer 23

It has not complied with some or all of the legal requirements in its formation