Chapter 16: Small Business and General Partnerships

Vocabulary flashcards covering the concepts, terminology, requirements, and legal structures of small businesses, sole proprietorships, and general partnerships from Chapter 16.

Entrepreneur

One who initiates a business for the purpose of making a profit.

EIN

State tax registration number that functions like a business’s social security number through the IRS.

Sole Proprietorship

A business form where there is no separation between the owner and the business, meaning the proprietor owns the entire business, receives all profits, and assumes all risks and personal liability for debts.

General Partnership

An agreement, express or implied, between two or more persons to carry on as co-owners of a business for a profit.

Uniform Partnership Act (UPA)

A statute that governs the operation of partnerships in the absence of express agreements.

Essential Elements of Partnership

The three criteria used to determine a partnership: joint ownership of business, sharing of profits or losses, and an equal right to be involved in the management of the business.

Pass-Through Entity

A business entity that has no tax liability; profits and losses pass through directly to the owners.

Information Return

A tax return submitted by a partnership to report its income and losses to the IRS, rather than paying taxes directly as an entity.

Partnership Agreement (Articles of Partnership)

An agreement establishing the terms of the partnership that can be oral, written, or implied by conduct, containing terms the parties choose unless illegal.

Partnership at Will

A partnership for which no fixed duration is specified in the partnership agreement.

Accounting of Partnership

A proceeding that determines the value of each partner's share in the partnership.

Charging Order

An order granted by a court to a judgment creditor that entitles the plaintiff to a partner’s share of profits.

Duty of Care

A partner's fiduciary duty to refrain from grossly negligent conduct, illegal activities, or willful misconduct.

Duty of Loyalty

A partner's fiduciary duty to refrain from competing with the partnership or dealing with the firm as an adverse party, which cannot be waived.

Joint and Several Liability

A doctrine under which a plaintiff may sue all partners together or one or more of the partners separately for partnership obligations.

Dissociation

The severance of the relationship between a partner and a partnership.

Wrongful Dissociation

A dissociation where a partner has the power to leave the partnership but lacks the legal right to do so, making them liable for a civil lawsuit if the departure causes harm.

Dissolution

The formal disbanding of a partnership.

Articles of Dissolution

A formal document declaring the partnership is over and unable to act except to wrap up business, required to be posted in the county where headquarters are located.

Winding Up

The stage of dissolution where the firm's assets are collected, liquidated, and distributed, and liabilities are discharged.