Deck 27: All Forms of Partnership

Question 1

A partner has a duty to devote time, skill and energy on behalf of the partnership business.

Answer 1

True

Question 2

A partner's profit from a partnership is taxed as income to the firm.

Answer 2

False

Question 3

A third party can sue one of the partners of a partnership without suing all members of the partnership.

Answer 3

True

Question 4

A partnership is a pass-through entity and a taxpaying entity.

Question 5

The intent to associate is a key element of a partnership.

Question 6

A partner is liable for honest errors in judgment in conducting partnership business.

Question 7

A partner may pursue his or her own interests without automatically violating the partner's fiduciary duties to the partnership and the other partners.

Question 8

In a general partnership, the senior partner controls decisions on ordinary matters connected with partnership business.

Question 9

Under some circumstances a non-partner can be regarded as an agent whose acts are binding on the partnership.

Question 10

A sharing of profits from a business creates a presumption that a partnership exists.

Question 11

The Uniform Partnership Act governs the operation of partnerships.

Question 12

A majority of the states treat a partnership as an entity for most purposes.

Question 13

A partner always has the power but he or she may not have the right to dissociate from the partnership.

Question 14

Limits on a partner's authority normally are effective only with respect to third parties who are notified of the limitation.

Question 15

In a general partnership, the acts of one partner in the ordinary course of business do not subject the other partners to personal liability.

Question 16

Most states treat a partnership as an aggregate for most purposes.

Question 17

If no fixed duration of the partnership is specified, the partnership is a partnership at will, which means that it cannot be dissolved.

Question 18

In a general partnership, the senior partner manages the partnership.

Question 19

Unlike most agents, each partner in a partnership has an ownership interest in the business.

Question 20

A partner's devoting time, energy, and skill to partnership business is a compensable service.

Question 21

Ralph and Simone do business as Tech Troubleshooters, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, Tech Troubleshooters would be treated as

A)an aggregate of individuals.
B)a person.
C)an entity.
D)a non-entity.

Question 22

Dissociation normally entitles the partner to buy his or her interest from the partnership.

Question 23

In a limited partnership, no partner has full responsibility for the partnership and for all its debts.

Question 24

In a limited partnership, a general partner's dissociation from the firm normally will lead to dissolution unless all partners agree to continue the business.

Question 25

In a limited partnership, limited partners have essentially the same rights as general partners to participate in management.

Question 26

Withdrawal from a partnership before the end of its express term constitutes a breach of the partnership agreement.

Question 27

For two years after a partner dissociates from a continuing partnership, the partnership may be bound by the acts of the dissociated partner based on apparent authority.

Question 28

The death of a limited partner dissolves a limited partnership.

Question 29

On a partner's dissociation, his or her right to participate in the management and conduct of the business terminates.

Question 30

Refer to Fact Pattern 27-1. Abby and Devin are

A)not partners, because Devin does not have an ownership interest or management rights in Bowls Bistro.
B)not partners, because the pay includes an hourly wage.
C)not partners, because the pay includes only 10 percent of the profits.
D)partners in a partnership.

Question 31

Refer to Fact Pattern 27-1. Abby and Carmen are

A)not partners, because Carmen does not have an ownership interest or management rights in Bowls Bistro.
B)not partners, because the lease includes a “base rental.”
C)not partners, because the rent includes only 10 percent of the profits.
D)partners in a partnership for two years.

Question 32

In winding up a general partnership, creditors are paid before partners receive their capital contributions.

Question 33

A limited partnership cannot be dissolved by court decree.

Question 34

On dissolution, the creditors of the partnership, but not the creditors of the individual partners, can make claims on the partnership's assets.

Question 35

Luke and Maya form Northeast Air Express, a general partnership. The essential elements of this partnership do not include

A)a sharing of profits and losses.
B)a joint ownership of the business.
C)an equal right to management in the business.
D)goodwill.

Question 36

Gwen and Hugo do business as Gwen & Hugo Civil Engineers, a partnership. This firm is governed by the Uniform Partnership Act​

A) ​in the absence of an express agreement.
B) ​in the absence of an implied agreement.
C) ​only under an express agreement.
D) ​under all circumstances.

Question 37

Some states have passed laws prohibiting the withdrawal of limited partners from a limited partnership.

Question 38

A partnership is forced to terminate every time a partner dissociates from the firm.

Question 39

Generally, each state limits the liability of partners in a limited liability partnership in some way.

Question 40

A limited liability partnership must be formed in compliance with state statutes.

Question 41

Fact Pattern 27-2
Kristin and Lindsey are partners in Mobile Devise, an online marketing firm.
Refer to Fact Pattern 27-2. Kristin signs a contract with Nature's Best Chocolate, a candy maker and seller, apparently on Mobile's behalf. The contract is binding on​

A) ​Kristin, Lindsey, and Mobile.
B) ​Kristin only.
C) ​Mobile only.
D) ​Nature's Best only.

Question 42

Erwin, a partner in Farm Equipment Rentals & Sales, applies for a loan with Garden Valley Bank allegedly on Farm Equipment's behalf but without the authorization of the other partners. The bank knows that Erwin is not authorized to take out the loan. Liability in the event of default will be imposed on​

A) ​none of the choices.
B) ​Erwin.
C) ​Farm Equipment.
D) ​Garden Valley Bank.

Question 43

Blythe and Cali do business as Diamond Investments. In acting on the firm's behalf, Blythe makes an honest error in overestimating the value of a particular stock purchase. To her firm, Blythe is

A) ​liable for breach of the duty of care.
B) liable for breach of the duty of accounting.
C) ​liable for breach of the duty of loyalty.
D) ​not liable.

Question 44

Rosalee is a partner in Silver Dragon, a partnership consisting of the owners of a Chinese and American restaurant. Silver Dragon incurs debt for new dining tables and chairs. With respect to this debt, Rosalee is​

A) ​not liable.
B) only liable to the amount of her capital contribution.
C) only liable in proportion to the number of partners in the firm.
D) ​personally liable to the full extent.

Question 45

Fact Pattern 27-2
Kristin and Lindsey are partners in Mobile Devise, an online marketing firm.
Refer to Fact Pattern 27-2. Lindsey dissociates from Mobile. Kristin signs a contract with Organic Olives, a food seller, apparently on Mobile's behalf. Organic Olives does not know of Lindsey's dissociation. The contract is binding on​

A) ​Kristin, Lindsey, and Mobile.
B) ​Kristin only.
C) ​Mobile only.
D) ​Organic Olives only.

Question 46

Emily is one of three partners in Fast Work, a commercial janitorial service. With respect to Emily's interest in the firm, when she dies, her heirs are most likely entitled to​

A) ​nothing.
B) a payout of Emily's capital contribution without more.
C) ​the buyout price paid by the firm for the interest.
D) ​one-third of the value of the interest.

Question 47

Bo and Clancy decide to do business as Marketing & Promotion Services. To be a partnership, this association can result from an agreement that is

A) ​express, but not from an agreement that is implied.
B) ​implied, but not from an agreement that is express.
C) ​oral, written, or implied by conduct.
D) ​written, but not from an agreement that is oral or implied.

Question 48

Nora and Owen do business as Profit & Property, a real estate investment partnership. In acting on the firm's behalf in a deal with Quaint Village Mall, Nora takes advantage of an opportunity to make a secret profit on her own behalf. To her firm, Nora is liable for​

A) ​breach of the duty of care.
B) ​breach of contract.
C) breach of the duty of loyalty.
D) ​nothing.

Question 49

Chet is a partner in Diligent Accounting Service. Chet can inspect Diligent's books and records​

A) ​in their entirety.
B) ​only as the firm's management permits.
C) ​only for a reasonable purpose.
D) ​only in relation to Chet's capital contribution.

Question 50

Fact Pattern 27-3
​Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 27-3. The partners decide to dissolve Equity Lending. Duke collects and distributes the firm's assets. This results in

A) ​nothing with respect to the firm's existence.
B) ​the continuation of the firm's business.
C) ​the termination of the firm's legal existence.
D) ​the temporary suspension of the firm's business.

Question 51

Oliana is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Oliana does not participate in, know about, or ratify, Oliana would be liable for​

A) ​none of the obligations.
B) ​all of the obligations, jointly and severally.
C) ​all of the obligations, jointly but not severally.
D) ​only the contractual obligations.

Question 52

Quisa and Reilly are partners in Sport Bikes, which rents and sells bikes, bike accessories, and related gear. Quisa manages the business. Unless the partnership agreement states otherwise, Quisa is​

A) ​entitled to compensation in proportion to her effect on the business.
B) ​entitled to compensation in proportion to her effort.
C) ​entitled to compensation in proportion to her capital contribution.
D) ​not entitled to compensation.

Question 53

Craig, Donna, and Eve do business as FastTrak Career Consultants. Eve's relationship to FasTrak ends, but the firm continues to do business. This is​

A) ​dissociation.
B) ​dissolution.
C) ​disestablishment.
D) ​disrespectful.

Question 54

Fact Pattern 27-3
​Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 27-3. Cornell's assignment of his interest in Equity Lending to Financial Consultants Corporation results in

A) ​nothing with respect to Cornell or Equity Lending.
B) ​the automatic termination of Equity Lending's legal existence.
C) ​Cornell's liability for all of Equity Lending's debts.
D) Cornell's wrongful dissociation and liability for any damages.

Question 55

Stefani and Tyler agree in an exchange of e-mail to form a partnership to buy and sell real property. Their partnership agreement is legally binding​

A) ​only if a copy of the agreement is filed in the appropriate state office.
B) ​only if the agreement is printed in hard copy and signed by the parties.
C) ​only if the parties exchange valid consideration.
D) ​without more.

Question 56

Sweet Selections, a general partnership, operates as a gift shop. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. With respect to management decisions

A) ​a majority of the partners must agree.
B) ​both Jill and Amy must agree.
C) ​the senior partner decides.
D) ​30 percent of the partners must agree.

Question 57

Brad and Carolyn are partners in Doctors for Children, a medical clinic. Brad's dissociation from the firm results in

A) ​the automatic termination of the firm's legal existence.
B) ​the partnership's buyout of Brad's interest in the firm.
C) ​the immediate maturity of all partnership debts.
D) ​the temporary suspension of the partnership's business.

Question 58

Jim and Kyle are partners in J&K Sales, which exports technical equipment under a three-year partnership agreement. One year into the term, Congress declares that the equipment can no longer be exported. J&K​

A) ​can continue its business until the end of the three-year term.
B) can continue its business indefinitely.
C) ​dissolves immediately unless the partners change its business.
D) ​is immediately subject to criminal prosecution and penalties.

Question 59

Fact Pattern 27-3
​Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 27-3. Bryn, Cornell, and Duke decide to admit Giselle as a new partner in Equity Lending. Giselle's liability for partnership debts incurred before her admission is​

A) ​limited to her capital contribution to the firm.
B) limited to her personal assets.
C) ​nothing.
D) ​unlimited.

Question 60

Sara and Tony agree while talking on the phone to form a partnership-United Caretakers-to enter into the business of real property management. To be enforceable under the Statute of Frauds, their agreement must​

A) ​be filed in the appropriate state office.
B) ​be in writing.
C) ​be signed by a notary public.
D) ​not involve a third party.

Question 61

Delany and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Delaney and Efron​

A) ​file a certificate of limited partnership.
B) ​execute a partnership agreement.
C) ​accept their first client.
D) ​make their capital contributions.

Question 62

Natural Gas, LP, is a limited partnership to which its partners have contributed capital. Natural Gas's creditors include Precision Piping, Inc. On Natural Gas's dissolution, its assets will be distributed to pay

A) ​the partners and Precision Piping proportionately.
B) ​the partners before Precision Piping.
C) ​Precision Piping before the partners.
D) ​none of the choices.

Question 63

Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for​

A) ​their own wrongful acts.
B) ​any partnership obligation.
C) ​their own and other partners' wrongful acts.
D) ​none of the choices.

Question 64

Sebastian was the manager of Thai Bistro, a restaurant specializing in Southeast Asian foods. Sebastian opened a bank account in Thai Bistro's name, signing the account signature card as "owner." Umeko, who was often at Thai Bistro and had free access to its office, told others that she was "an owner" and "a partner." She also opened a bank account in Thai Bistro's name, and signed the account signature card as "owner." Sebastian told Vijay, the owner of Wong Noodles, Inc., that Umeko was a member of a partnership that owned Thai Bistro. On this basis, Wong Noodles delivered its goods to Thai Bistro on credit. In fact, Thai Bistro was owned by a corporation. When the unpaid account totaled more than $10,000, Wong Noodles filed a suit against Umeko to collect. On what basis might Umeko be liable for the debt?

Question 65

Debra is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Debra is liable for the debts​

A) ​in proportion to the number of partners in the firm.
B) ​to no extent.
C) ​to the extent of her capital contribution to the firm.
D) ​to the full extent.

Question 66

Roma and Swain are partners in Roma & Swain Attorneys, LLP, a limited liability partnership. Roma supervises their firm's associate Taylor, who negligently fails to appear in court on behalf of Umberto, a client. Liability to Umberto rests only with​

A) ​Roma and Taylor.
B) ​Roma.
C) ​Taylor.
D) ​Roma and Swain.

Question 67

Fresco and Garcia form a partnership-HVAC Pros. Garcia's capital contribution is $10,000, and Fresco's is $15,000. The partnership agreement provides that profits are to be shared, with 40 percent for Garcia and 60 percent for Fresco. Later, Garcia makes a $10,000 loan to the partnership when it needs working capital. When the partnership is dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be distributed?​

Question 68

Colin, Demi, and Erin agree to be partners in Fajita Pizza, splitting the profits equally. Colin contributes 65 percent of the capital. When Fajita Pizza is dissolved, its liabilities are greater than its assets. The losses are paid by​

A) ​all of the partners in proportion to their capital contributions.
B) ​all of the partners in proportion to their shares of the profits.
C) ​Colin because he contributed most of the capital.
D) ​Demi and Erin because they contributed the least of the capital.

Question 69

Narib and Olivia are limited partners in Physicians Medical Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Narib and Olivia are entitled to​

A) ​access in proportion to their participation in management of the firm.
B) ​access to the parts that directly relate to their capital contributions.
C) ​no access.
D) ​complete access.

Question 70

Cherry Creek Development, LP, is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals. A Cherry Creek limited partner loses his or her limited liability if he or she​

A) ​participates in the firm's management.
B) ​does not participate in the firm's management.
C) ​invests in a project that Cherry Creek has declined.
D) ​votes to sell or dissolve the firm.

Question 71

Smith & Jones, Accountants, is a limited liability partnership (LLP). The major features of an LLP are that it limits the personal liability of the partners and​

A) ​it allows the partnership to continue as a pass-through tax entity.
B) ​LLP statutes do not vary from state to state.
C) ​it can only do business in the state in which it was formed.
D) ​only a few states have enacted LLP statutes.

Question 72

Orlando is a limited partner in Port of Call Exports, a limited partnership. By participating in the firm's management, Orlando is liable for its obligations​

A) ​in proportion to the number of partners in the firm.
B) ​to no extent.
C) ​to the extent of his capital contribution to the firm.
D) ​to the full extent.