Deck 42: Partnerships

Question 1

A partner has the authority to do those acts that are customary for a member of a partnership conducting the particular business of that partnership.

Answer 1

True

Question 2

The rights of partners are determined by the partnership agreement.

Answer 2

True

Question 3

When a person who performs continuing services for another receives a fixed payment that does not depend on the existence of profit and is not affected by losses,that person is a partner.

Answer 3

False

Question 4

Sharing of gross returns,as compared to the sharing of profits,is strong evidence of a partnership.

Question 5

The assignee of a partner's interest in the partnership becomes a partner only with the consent of the other partners.

Question 6

All partners must contribute money to be treated as partners.

Question 7

In order to satisfy the statute of frauds,all partnership agreements must be in writing.

Question 8

The Uniform Partnership Act,a codification of partnership law,has been adopted by 49 states.

Question 9

A registration certificate for a partnership's fictitious name contained the names of Barry,Boyd,and Swartz.Cruise extended credit to the firm in reliance in part on the certificate that named Swartz as a partner.Swartz,in fact,had no knowledge of the certificate and never had agreed to be a partner.Because of Cruise's reliance on the certificate and the statement that Swartz was a partner,Swartz has a partner's liability insofar as Cruise is concerned.

Question 10

A partnership involves partners' contributions of capital,services,or a combination of these.

Question 11

A combination of two or more persons for a common nonprofit purpose is commonly an unincorporated association.

Question 12

Each partner is an agent of the partnership.

Question 13

A partnership may occur even though the parties did not label their relationship a partnership.

Question 14

Partnership property is only that property contributed by the partners.

Question 15

The burden of proving the existence of a partnership will always fall on one of the partners.

Question 16

A partner is considered an employee of the partnership when doing work that would ordinarily be done by an employee.

Question 17

The sharing of profits and losses is conclusive evidence of partnership.

Question 18

Persons who are not partners under appropriate circumstances may be held liable to third persons as though they were partners.

Question 19

A majority action of partners is not binding if it contravenes the partnership agreement.

Question 20

A creditor of an individual partner cannot proceed against any specific items of partnership property,but can obtain a charging order against that partner's interest in the partnership.

Question 21

The habitual drunkenness of a partner is a sufficient cause for judicial dissolution of a partnership.

Question 22

In determining the rights of partner Dewey in the firm of Dewey,Cheatham and Howe,the most important reference point is:

A) the Uniform Partnership Act.
B) the partnership agreement.
C) the sworn testimony of Cheatham and Howe.
D) the customs and traditions of similar partnerships.

Question 23

When the dissolution of a partnership has been caused by operation of law,notice of such dissolution must be given to third persons.

Question 24

Persons who are in a partnership are called __________ partners.

A) general
B) silent
C) secret
D) nominal

Question 25

Creditors of a firm have first claim on the assets of the partnership.

Question 26

After the dissolution of a partnership,partners retain the authority to perform any acts necessary to wind up the business.

Question 27

Partners hold title to firm property by:

A) tenancy in partnership.
B) tenancy in common.
C) joint tenancy.
D) none of the above.

Question 28

A partner admitted as a partner into an existing partnership has unlimited liability for all obligations of the partnership arising before such admission.

Question 29

The vested rights of partners are not extinguished by dissolving the firm,and the existing liabilities remain.

Question 30

Regarding partnership property:

A) only a managing partner has the right to use firm property for firm business.
B) where a three-person partnership owns three autos,each partner owns one of the autos individually.
C) on the death of a partner,that partner's share of partnership property vests in his or her next of kin.
D) a creditor of a partner cannot proceed against any specific items of partnership property.

Question 31

Partnership property may consist of:

A) real property only.
B) personal property only.
C) any and all property acquired by the partnership.
D) all property contributed by the partners or acquired for the firm or with its funds.

Question 32

When a partner executes an agreement outside the limitations of that partner's agreed scope of power,the other partners are always able to set aside the contract.

Question 33

Partners have the implied authority to bind the partnership by contracts of surety for any and all purposes.

Question 34

Bankruptcy of only one of the partners does not cause dissolution of the firm.

Question 35

An assignee of a partner's interest does not become a partner without the consent of the other partners and is only entitled to:

A) participate in the management of the partnership.
B) receive the assignor's share of the profits during the term of the partnership and the assignor's share of capital on dissolution.
C) inspect the books of the partnership.
D) vote on matters concerning the business of the partnership.

Question 36

In determining whether a partnership exists,which of the following factors is not evidence of a partnership?

A) Shared profits and losses
B) Co-ownership of property
C) Equal control of the business
D) All of these are evidence of partnership.

Question 37

A third person should recognize that a partner has limited or no authority if:

A) the partner seeks to act for the partnership concerning a matter not within the usual business of the firm.
B) the third person knows that the partnership has been terminated.
C) the partner seeks to pay a personal obligation by issuing a promissory note in the name of the firm.
D) all of the above.

Question 38

Prohibited transactions by a partner without the consent of other partners include:

A) a contract that makes it impossible for the firm to conduct its usual business.
B) submitting controversies of the firm to arbitration.
C) making a general assignment of firm property for the benefit of creditors
D) all of the above.

Question 39

A partner cannot make a general assignment of firm property for the benefit of creditors unless authorized by the other partners or unless they have abandoned the business.

Question 40

In a partnership of four physicians,a decision to buy an office copier for the partnership must be approved by:

A) all of the partners.
B) at least three of the partners.
C) at least two of the partners.
D) one partner.

Question 41

When a partnership is dissolved by a partner's bankruptcy,notice:

A) is not required.
B) must be given to the other partners only.
C) must be given to third persons only.
D) must be given to both other partners and third persons.

Question 42

Robertson and Enrickson prepared an agreement to enter into a partnership.Both of the partners realized that outside capital was needed for the firm to begin operations;however,they also realized that their individual and combined credit ratings would not attract sufficient funds.In order to improve the new partnership's ability to attract investment capital,and with the approval of Enrickson,Robertson added his friend Thompson's name to the partnership agreement.Thompson,a well-known personality from a family of means,was not asked to be a partner and knew nothing of Robertson's and Enrickson's actions.Upon seeing Thompson's name on the partnership agreement,a local bank readily agreed to advance Robertson and Enrickson the total sum required to begin operations.The partnership has now failed,and the bank would like to hold Thompson,Robertson and Enrickson liable for the amount of the loan.Will the bank recover from Thompson,Robertson and Enrickson?

Question 43

Dissolution of a partnership:

A) always means that the business has ended.
B) increases the authority of the partners.
C) both a.and b.
D) neither a.nor b.

Question 44

Theo,a member of TGI partnership,withdrew from the partnership and duly notified the other members.The firm was an at-will partnership and the parties parted amicably,posting a notice in the local newspaper of the dissolution of their firm.Cosmo,a customer who had conducted business with Theo several times,did not see the newspaper notice and was not informed of the dissolution.Later,Theo approached Cosmo concerning a transaction similar to those Cosmo had engaged in before with Theo acting on behalf of TGI.Cosmo placed an order,gave a substantial down payment to Theo,and received a receipt on TGI stationery from him.Theo thereafter absconded with the down payment,and TGI failed to honor the contract.Cosmo sued the other members of TGI partnership.Discuss their potential liability.

Question 45

A partner may withdraw from the partnership without liability:

A) unless the withdrawal violates the partnership agreement.
B) when the partnership is not for a definite purpose.
C) when the partnership is not for a definite time.
D) all of the above.

Question 46

A partner's authority to act for the partnership is similar to the authority of a(n):

A) agent to act for a principal.
B) independent contractor to act for an employer.
C) shareholder to act for a corporation.
D) employee to act for another employee.

Question 47

Which of the following will not result in dissolution of the partnership by court decree?

A) A partner becomes incapable of performing the terms of the partnership agreement
B) A partner persistently or willfully acts in such a way that it is not reasonably practicable to carry on the partnership business
C) The withdrawal of a partner.
D) All of the above.

Question 48

When a partnership is dissolved by the act of a partner,notice:

A) is not required.
B) must be given to the other partners only.
C) must be given to third persons only.
D) must be given to both other partners and third persons.

Question 49

Which of the following does not result in dissolution of the partnership by operation of law?

A) The expulsion of a partner.
B) Bankruptcy of the partnership or of one of the partners.
C) The death of a partner.
D) All of these will result in dissolution of the partnership by operation of law.

Question 50

Each partner has to a right to:

A) take an equal part in transacting the business of the firm.
B) receive compensation for any work done for the partnership.
C) both a.and b.
D) neither a.nor b.

Question 51

Partners are:

A) jointly liable on all firm contracts and for all torts committed by one of the partners in the scope of partnership business.
B) jointly and severally liable on all firm contracts and for all torts committed by one of the partners in the scope of partnership business.
C) jointly and severally liable on all firm contracts and jointly liable for all torts committed by one of the partners in the scope of partnership business.
D) jointly liable on all firm contracts and jointly and severally liable for all torts committed by one of the partners in the scope of partnership business.

Question 52

When a partner disassociates with a partnership:

A) the partnership is no longer bound by acts of that partner,whether or not a notice is filed.
B) the disassociated partner is prohibited from competing with the partnership for a period of one year.
C) the disassociated partner may be liable for damages for breach of contract.
D) none of the above.

Question 53

Rundles,Kreiger,and Larson formed a partnership to breed and show horses.Rundles and Kreiger each contributed $25,000 to the partnership.Larson contributed four (4)horses valued at $25,000.The partnership agreement provided that the partners would share profits equally.When the horses failed to perform as expected,Rundles and Kreiger decided to reduce Larson's share of the profits.Larson claims that this decision must be unanimous to be binding.How will the case be decided?