STUDY UNIT FOURTEEN NONCORPORATE BUSINESS ENTITIES

Question 1

Which of the following is not a characteristic of both a sole proprietorship and a general partnership?

A. Equity capital may not be raised by selling shares of the business.
B. The death of an owner causes the termination of the business.
C. The business’s profits and losses are passed through to the owner(s).
D. A “doing business as” filing is usually required if the owner(s) will conduct business under a fictitious name.

Answer 1

B. The death of an owner causes the termination of the business.
Answer (B) is correct.
In a sole proprietorship, the death of the proprietor causes the automatic termination of the business. However, the death of a general partner results in dissociation, not the termination of the partnership.
(14.2.12)

Question 2

Fox, Harrison, and Dodge are the general partners of a limited partnership. If the limited partnership certificate is silent on these matters, the general partners

A. Can admit additional limited partners if a majority of the general and limited partners consent to do so.
B. Cannot admit additional limited partners absent unanimous written consent or ratification by the limited partners.
C. Cannot admit any general or limited partners without amending the partnership agreement.
D. Can admit additional general partners without consent of the limited partners if the general partners vote unanimously to do so.

Answer 2

B. Cannot admit additional limited partners absent unanimous written consent or ratification by the limited partners.
Answer (B) is correct.
Without a provision to the contrary in the partnership agreement, the general partners cannot admit additional limited partners without the unanimous written consent or ratification of all partners (limited and general). This requirement protects the existing partners’ proportionate interest in the partnership.
(14.3.99)

Question 3

Which of the following is necessary content of the limited partnership certificate?

I The name of the limited partnership
II The address of its office
III The latest date upon which the limited partnership is to dissolve

A. I and II.
B. I and III.
C. I, II, and III.
D. None of the answers are correct.

Answer 3

C. I, II, and III.
Answer (C) is correct.
The limited partnership certificate must be signed by all general partners and contain the following: (1) the name of the limited partnership, (2) the address of its office, (3) the name and address of its agent for service of process, (4) the name and business address of each general partner, (5) the latest date upon which the limited partnership is to dissolve, and (6) any other matters the general partners determine to include.
(14.3.87)