Types of Business Partnerships Quiz

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Questions and Answers

Which document outlines the terms and conditions between partners in a partnership?

Articles of Partnership (correct)

Bylaws of Partnership

Corporation Agreement

Partnership Reviewer

What is the main purpose of the Bylaws of Partnership?

To govern the internal operations and management of a partnership (correct)

To raise capital by issuing shares of stock

To determine the share of ownership in a partnership

To protect personal assets from debts and liabilities

In a corporation, what are the owners called?

Board of Directors

Shareholders (correct)

Partners

Managing Members

How many people can typically form a partnership according to the text?

5 Signup and view all the answers

What is the purpose of issuing shares of stock in a corporation?

To raise capital Signup and view all the answers

What differentiates general partners from limited partners in a partnership?

Responsibility for management and liability Signup and view all the answers

What is the main purpose of a partnership agreement?

To outline the roles and responsibilities of key individuals Signup and view all the answers

Which of the following is typically NOT mentioned in a partnership agreement?

Number of partners in the agreement Signup and view all the answers

What is the main difference between general partners and limited partners?

Limited partners are only liable up to their personal property Signup and view all the answers

Which type of partner typically contributes intelligence and skills to the partnership?

Industrial partner Signup and view all the answers

In a partnership agreement, what does 'Extent of drawings' refer to?

The amount that partners can withdraw for personal use Signup and view all the answers

What happens if a general partner becomes unable to pay for partnership obligations?

The general partner's personal property is used to settle debts Signup and view all the answers

What is the term for an individual or entity that invests capital in a business partnership but does not actively participate in its day-to-day operations or management?

Silent Partner Signup and view all the answers

Which term is used to describe a partner who is not actually a business partner but is considered as one due to their actions as representatives?

Estoppel Partner Signup and view all the answers

What are the two stages of partnership formation mentioned in the text?

Formation and Operation Signup and view all the answers

In a partnership dissolution, which of the following is NOT a reason for dissolution as per the text?

Death of an active partner Signup and view all the answers

Which type of partnership can be formed by an individual with no experience in business and an individual in business as a single proprietorship?

Partnership between an existing single proprietorship and a partnership Signup and view all the answers

What is the stage of partnership where partners work together to manage and operate the partnership according to the terms of the agreement?

Operation Signup and view all the answers

Study Notes

Partnership Types

Silent Partner (also known as Sleeping Partner): an individual or entity that invests capital in a business partnership but does not actively participate in its day-to-day operations or management.
Estoppel Partner (also known as Holding Out Partner): an individual who is not actually a business partner but is considered as one due to their actions as representatives (proxy/appointed only).

Partnership Formation

A partnership can be formed by:
- Two experienced individuals
- An individual with no experience in business and an individual in business as a single proprietorship
- Two individuals in business as single proprietorship
- An existing single proprietorship joining an existing partnership
- Two existing partnerships in business forming a new partnership

4 Stages of Partnership

Formation: partners agree to form a partnership and create a written agreement outlining the terms and conditions of the partnership, which may need to be registered with the appropriate government authority.
Operation: partners work together to manage and operate the partnership, carrying out activities outlined in the partnership agreement, and share profits and losses according to agreed-upon terms.
Dissolution: partnership can be dissolved by:
- Expiration of partnership term or mutual agreement among partners
- Partners winding up the partnership's affairs
- Settling debts
- Liquidating assets
Partnership Reviewer Partnership: an agreement between two or more (not more than 5) people who determine the share of ownership and operation of a business, contributing money, property, or industry with a common fund, with the intention to divide the profits and losses between or among them.

Corporation

Owned by 5 or more persons, corporations are legal entities that are separate from their owner, called "Shareholders".
The capital is divided into shares of stocks.
Their personal assets are protected from the corporation's debts and liabilities.
They can raise capital by issuing shares of stock and have perpetual existence.

Partnership Documents

Articles of Partnership: a legal document for partnership's agreements, outlining the terms and conditions between the partners, which is registered under the Security and Exchange Commission (SEC).
Bylaws of Partnership: a set of rules and regulations that govern the internal operations and management of an organization, providing guidance on various aspects of the organization's structure and operations.

Partnership Agreement Contents

Partnership name
Firm name and place of business
Character of the business
Partnership Capital and investment of each partner
Accounting method to be adopted
Sharing of profit and losses in partnership
Extent of drawings
Continuation of the business in case of death, retirement of a partner, or admission of a new partner

Kinds of Partners

According to Liability for Partnership Obligations:
- General Partners: liable up to the extent of their personal property.
- Limited Partners: liability is only to the extent of their investment in the partnership.
According to Nature of Contributors to the Partnership Capital:
- Capitalist Partner: contributes money or property to the partnership.
- Industrial Partner: contributes intelligence and skills, entitled to the profits of the business but not entitled to the loss.

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Description

Test your knowledge on different types of business partnerships including Silent Partner and Estoppel Partner. Explore various combinations in partnership formations and learn about the roles of partners in a business setup.