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LEGL 3000 Chapter 17

The simplest form of business is a sole proprietorship.
T
A sole proprietor owns the entire business but does not receive all of the profit.
F
A sole proprietorship lacks continuity on the death of the proprietor.
T
An association cannot be a partnership without an express agreement.
F
A sole proprietor has unlimited liability for all obligations that arise in doing business.
T
In raising capital, a sole proprietor is limited to his or her personal funds—a personal loan is not possible.
F
The Uniform Partnership Act governs the operation of partnerships.
T
A sharing of profits from the ownership of property creates a presumption that a partnership exists.
F
Federal law permits a partnership to be treated as an entity in suits in federal courts.
T
A partner’s profit from a partnership is taxed as income to the firm.
F
Withdrawal from a partnership for a term prematurely does not constitute a breach of the partnership agreement.
F
Under no circumstances can a non-partner be regarded as an agent whose acts are binding on the partnership.
F
In a general partnership, all partners have equal rights in managing the partnership.
T
A partner owes to the partnership and the other partners a duty of loyalty.
T
A partner who pursues his or her own interests automatically violates the partner’s fiduciary duties to the partnership.
F
In a general partnership, the partners are personally liable for the debts of the partnership.
T
A partner always has the power and the right to dissociate from the partnership.
F
On a partner’s dissociation, his or her duty of loyalty to the partnership ends.
T
Any event that makes its unlawful for a partnership to continue its business will result in dissolution.
T
A limited liability company can be taxed as a partnership.
T
Limited liability companies (LLCs) are governed by state LLC statutes.
T
A limited liability company (LLC) formed in one state but doing business in another state is referred to in the second state as a foreign LLC.
T
A limited liability company is not a citizen of any state.
F
The liability of the members of a limited liability company is limited to the amount of their investments.
T
In many states, an operating agreement is not required for a limited liability company to exist.
T
A limited liability company must be managed by non-member managers.
F
Most limited liability company statutes have no provisions regarding members’ meetings.
T
Some states provide that in the absence of an agreement to the contrary each member of a limited liability company has one vote.
T
When a member dissociates form a limited liability company, the member’s duty of loyalty continues.
F
Normally, a dissociated member of an limited liability company (LLC) has the right to force the LLC to dissolve.
F

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