Business Partnership Overview

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Questions and Answers

What is a characteristic of a limited partner in a partnership?

They can manage the business activities.

They are liable for all partnership debts.

They must actively participate in industry.

They contribute cash or property. (correct)

Which type of partnership can be terminated at the will of the partners?

Limited partnership

Partnership for a specific period

Partnership at will (correct)

Partnership by consent

What is a disadvantage of a partnership?

Limited capital contribution

Requires complex formation processes

Partners cannot dissolve the partnership easily

Partners are personally liable for debts (correct)

Which of the following is NOT a type of partner mentioned?

Silent partner Signup and view all the answers

What is one of the advantages of a partnership?

Easy to form and more capital available Signup and view all the answers

In a corporation, who among the following typically must also be a director?

Treasurer Signup and view all the answers

Which statement about capitalist partners is accurate?

They provide property or money but share liability. Signup and view all the answers

Who manages the business of a partnership?

Managing partner Signup and view all the answers

What is a key feature that distinguishes a corporation from other entities?

Limited liability for its shareholders Signup and view all the answers

Which type of corporation is governed by a board of directors?

Stock corporation Signup and view all the answers

What must happen for a One Person Corporation (OPC) to be validly created?

Only a natural person, trust, or an estate can form it Signup and view all the answers

What is a disadvantage often associated with forming a corporation?

More complex formation process Signup and view all the answers

In a corporation, what does perpetual existence imply?

The corporation continues to exist unless stated otherwise in its articles of incorporation. Signup and view all the answers

Which of the following is NOT a component of a One Person Corporation (OPC)?

Multiple shareholders Signup and view all the answers

What right does a corporation possess that enhances its legal capabilities?

The right of succession Signup and view all the answers

Which of these statements is accurate concerning the transfer of shares in a corporation?

There is free transferability of shares in a corporation. Signup and view all the answers

What is the main disadvantage of a sole proprietor regarding business decisions?

Liable for all business obligations Signup and view all the answers

Which type of partner cannot engage in business for themselves?

Industrial Partner Signup and view all the answers

What are the financial responsibilities of a limited partner in a partnership?

Liable only to the extent of their contribution Signup and view all the answers

Which statement accurately describes the role of a capitalist-industrial partner?

Shares in profits based on capital contribution Signup and view all the answers

What is a significant disadvantage of sole proprietorship related to capital?

Limited ability to raise capital Signup and view all the answers

Which of the following partners has unlimited liability for partnership debts?

General Partner Signup and view all the answers

Which advantage is true for sole proprietorship compared to corporations?

Complete decision-making control Signup and view all the answers

How is the share of profits determined for an industrial partner?

As may be just and equitable under the circumstances Signup and view all the answers

What is required for a partnership in regard to new partners?

Consent of all partners Signup and view all the answers

Which of the following is NOT an obligation of the vendor in a contract of sale?

To secure business permits Signup and view all the answers

What is the meaning of 'dissolution of corporation'?

Extinguishment of the franchise and termination of corporate existence Signup and view all the answers

What is the fiduciary nature of a partnership based on?

Trust and confidence Signup and view all the answers

Which of the following is an advantage of a sole proprietorship?

Sole enjoyment of profit Signup and view all the answers

In a contract of sale, what is NOT typically an obligation of the vendor?

To pay personally all debts of the business Signup and view all the answers

What principle ensures that no one can become a partner without the consent of existing partners?

Delectus Personae Signup and view all the answers

What is a key responsibility of a sole proprietor regarding business debts?

To pay personally all debts and obligations of the business Signup and view all the answers

What is an implied warranty associated with possession in a contract of sale?

Warranty against eviction Signup and view all the answers

What constitutes a double sale?

A sale where the first owner is the first to acquire Signup and view all the answers

Which of the following is NOT a person liable for breach of warranty?

Vendee Signup and view all the answers

In what type of sale does ownership remain with the vendor until full payment is made?

Conditional sale Signup and view all the answers

Which form of business organization features personal liability for all debts and obligations?

Sole proprietorship Signup and view all the answers

Which article outlines the transfer of ownership in a sale?

Article 1477 Signup and view all the answers

What type of organization exists when two or more persons share labor and resources?

Partnership Signup and view all the answers

Which of the following allows a buyer to avoid paying for hidden defects?

Warranty against hidden defects Signup and view all the answers

Study Notes

Partnership

A partnership is a business organization formed by two or more people who agree to combine their money, property, labor, and skills for a common business purpose.
A partnership can be formed by mutual consent and is generally easy to establish.
Partnerships have the advantage of sharing profits, increased capital resources, and collective decision-making.
Partners are liable for the actions of their co-partners, and the partnership is easy to dissolve.
If the partnership is unable to pay its debts, the general partners' personal assets can be used to cover those debts.
Partnerships can be classified based on duration:
- Partnership at will: Terminated at the will of the partners.
- Partnership for a specific period: Exists only for a predetermined term.
Partnerships can also be classified based on partner roles:
- Capitalist Partner: Contributes capital (money or property) and is not exempt from losses.
- Industrial Partner: Contributes industry or skills, cannot engage in business independently, and is not liable for partnership losses.
- Capitalist-Industrial Partner: Contributes both capital and industry.
- General Partner: Liable beyond their contribution and is responsible for the partnership's debts.
- Limited Partner: Liable only to the extent of their contribution.

Corporation

A corporation is an artificial being created by operation of law with a right of succession.
It has express and implied powers and is managed by a board of directors for stock corporations or a board of trustees for non-stock corporations.
Corporations have the advantage of legal personality, transferable shares, centralized management, limited liability, and perpetual existence.
Disadvantages of corporations include complicated formation, government regulation, and potential for internal conflict.
A one-person corporation (OPC) can only be formed by a natural person, trust, or estate.
The single stockholder in an OPC is the sole director and president.
Corporations that cannot be incorporated as OPCs include:
- Banks and quasi-banks
- Preneed providers (funeral industry)
- Trust and insurance companies
- Public and publicly-listed companies
- Non-chartered government-owned and controlled corporations

Sole Proprietorship

The oldest and simplest form of business enterprise.
The sole proprietor is personally liable for all the debts and obligations of the business.
Advantages include sole enjoyment of profits, low capitalization, ease of starting and stopping the business, and less complicated taxes compared to corporations.
Disadvantages include personal liability, sole decision-making responsibility, and limited ability to raise capital.

Contract of Sale

A contract of sale is perfected by mere consent of the buyer (vendee) and seller (vendor).
Ownership of the property is transferred to the buyer upon delivery of the thing sold in an absolute sale.
Ownership remains with the vendor until full payment in a conditional sale.
The Recto Law (RA 6652) governs installment sales of personal property.
Implied warranties are inherent in a contract of sale, including:
- Warranty against eviction: The buyer enjoys legal and peaceful possession of the thing.
- Warranty against hidden defects: The thing is free from concealed faults or defects.
Certain parties are not liable for breaches of warranty, such as:
- Sheriff's sales
- Auctioneers
- Mortgagees
- Pledgees
- Persons selling with authority in fact or law.

Fiduciary Nature of Partnership

Partnerships are based on trust and confidence.
Delectus personae principle: No one can become a partner without the consent of all partners.
Dissolution of a partnership refers to changes in the partners' relationship.
Dissolution of a corporation involves the extinguishment of the corporate franchise and its existence.

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Description

This quiz covers the fundamentals of partnerships in business, highlighting their formation, advantages, and classifications. Participants will explore various types of partners and understand the implications of partnership agreements, including liability and dissolution.