Deck 37: Partnerships and Limited Liability Partnerships

Question 1

A partner who pursues his or her own interests automatically violates the partner's fiduciary duties to the partnership.

Answer 1

False

Question 2

Any event that makes its unlawful for a partnership to continue its business will result in dissolution.

Answer 2

True

Question 3

Federal law permits a partnership to be treated as an entity in suits in federal courts.

Answer 3

True

Question 4

A limited liability partnership allows its partners to avoid personal liability for the malpractice of other partners.

Question 5

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

Question 6

An assignment of the interest of a limited partner dissolves a limited partnership.

Question 7

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

Question 8

Withdrawal from a partnership for a term prematurely does not constitute a breach of the partnership agreement.

Question 9

A partner owes to the partnership and the other partners a duty of loyalty.

Question 10

In a general partnership,the partners are personally liable for the debts of the partnership.

Question 11

In a limited liability limited partnership,the liability of a general partner is limited to the amount of capital he or she has invested in the partnership.

Question 12

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

Question 13

A sharing of profits from the ownership of property creates a presumption that a partnership exists.

Question 14

Under no circumstances can a non-partner be regarded as an agent whose acts are binding on the partnership.

Question 15

On a partner's dissociation,his or her duty of loyalty to the partnership ends.

Question 16

An association cannot be a partnership without an express agreement.

Question 17

The Uniform Partnership Act governs the operation of partnerships.

Question 18

In a general partnership,all partners have equal rights in managing the partnership.

Question 19

A partner always has the power and the right to dissociate from the partnership.

Question 20

In a limited partnership,a limited partner has full responsibility for the partnership and for all its debts.

Question 21

Energy Unlimited,LP,is a limited partnership to which its partners,in?cluding Fink,have contributed capital.Energy's creditors include Graves Engineering,Inc.On Energy's dissolution,its assets will be distributed to pay

A)Fink and Graves proportionately.
B)Fink first.
C)Graves first.
D)neither Fink nor Graves.

Question 22

Jack and Kyra are partners in Law Firm,LLP,a limited liability partnership.Jack supervises Kyra,who negligently fails to appear in court on behalf of Milo,a client.Liability to Milo rests with

A)Jack and Kyra.
B)Jack only.
C)Kyra only.
D)neither Jack nor Kyra.

Question 23

Fact Pattern 37-1A (Questions A3-A4 apply)
Desi starts up eSites,an Internet service,and leases office space in a building owned by Fred.The lease requires Desi to pay Fred a base rental of $1,250,plus 10 percent of eSites' profits,each month.The term is two years.Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50,plus a commis?sion of 10 percent of the prof?its.The term is also two years.
Refer to Fact Pattern 37-1A.Desi and Fred are

A)not partners,because Fred does not have an ownership interest or manage?ment rights in eSites.
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 24

Vasili is considering forms of business organization for Vasili's Designs,an ar?chitectural firm.An advantage of a limited liability partnership is that partners may be able to avoid personal liability for

A)any partnership obligation.
B)only other partners' wrongdoing.
C)only partnership obligations that exceed capital contributions.
D)only partnership obligations that fall within capital contributions.

Question 25

Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite.In most states,a limited partnership will be created when

A)a certificate of limited partnership is filed.
B)a partnership agreement is executed.
C)the business for which the firm is formed actually opens its doors.
D)the partners make their capital contributions.

Question 26

Rona and Savannah do business as Treasure Island Traders.In acting on the firm's behalf in a deal with Unlimited Potential,Inc.,Rona makes an honest error in overestimating the profit.To her firm,Rona is

A)liable for breach of the duty of care.
B)liable for breach of the duty of economic sense.
C)liable for breach of the duty of loyalty.
D)not liable.

Question 27

Noah and Orin do business as Pest Control Partners.In most states,for the purposes of suing and being sued,Pest Control Partners would be treated as

A)an aggregate of the individual partners.
B)a natural person.
C)an entity.
D)a non-existent party.

Question 28

Megan and Nicole do business as One World Realty.In acting on the firm's behalf in a deal with Property Acquisition Company,Megan fails to account for the profit.To her firm,Megan is

A)liable for breach of the duty of care.
B)liable for breach of the duty of economic sense.
C)liable for breach of the duty of loyalty.
D)not liable.

Question 29

Guy and Hanna do business as G-H Associates.If G-H is a partnership,it 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 in the presence of an express agreement.
D)under all circumstances.

Question 30

Fay is admitted to Global Associates,an existing partnership.A partnership debt incurred before the date of her admission comes due.Fay is

A)not liable for the debt.
B)only liable for the debt up to the amount of her capital contribution.
C)personally liable only to the extent the other partners do not pay.
D)personally liable to the full extent of the debt.

Question 31

Corbin,a partner in Doctors Medical Clinic,applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners.Evermore knows that Corbin is not authorized to take out the loan.Corbin defaults on the loan.Liability for its unpaid amount is imposed on

A)Corbin and Doctors,jointly.
B)Corbin only.
C)Doctors only.
D)Evermore only.

Question 32

Fact Pattern 37-1A (Questions A3-A4 apply)
Desi starts up eSites,an Internet service,and leases office space in a building owned by Fred.The lease requires Desi to pay Fred a base rental of $1,250,plus 10 percent of eSites' profits,each month.The term is two years.Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50,plus a commis?sion of 10 percent of the prof?its.The term is also two years.
Refer to Fact Pattern 37-1A.Desi and Gwen are

A)not partners,because Gwen does not have an ownership interest or manage?ment rights in eSites.
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 for two years.

Question 33

Fact Pattern 37-2A (Questions A9-A10 apply)
Luann and Mace are partners in Networx,a computer peripherals firm.
Refer to Fact Pattern 37-2A.Mace dissociates from Networx.Luann signs a con?tract with Physik Drives,a wholesale component supplier,apparently on Networx's behalf.Physik does not know of Mace's dissociation.The contract is binding on

A)Luann,Mace,and Networx.
B)Luann only.
C)Networx only.
D)Physik only.

Question 34

Venture Capital,LP,is a limited partnership.Its limited partners include more than 150 sophisticated investors and investment professionals.A Venture limited partner loses his or her limited liability if he or she

A)acts as the firm's manager.
B)does not participate in the firm's management.
C)invests in Unified Fund,one of Venture's competitors.
D)votes on the firm's sale or dissolution.

Question 35

Sable and Rex agree while talking on the phone to form a partner?ship to deal in transfers of 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 reduced to writing.
C)only if the parties exchange valid consideration.
D)without more.

Question 36

Kelly,Lars,and Mona agree to be partners in Neighborhood Delivery Service (NDS),splitting the profits equally.Kelly contributes 67 percent of the capital.When NDS 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)Kelly because she contributed most of the capital.
D)Lars and Mona because they contributed the least of the capital.

Question 37

Hud and Iggy form Jerry-Bilt Construction to enter into a contract to build one bridge.Under their partnership agreement,Jerry-Bilt is to dissolve when the bridge is built.Iggy signs a contract for the firm to build a second bridge.Jerry-Bilt

A)dissolves as soon as the first bridge is built.
B)dissolves as soon as the second bridge is built.
C)dissolves immediately on Iggy's signing of the second contract.
D)does not dissolve.

Question 38

Lucy is a limited partner in Metro Contractors,a limited partnership,which cannot pay its debts.Lucy is personally 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.
D)to the full extent.

Question 39

Fact Pattern 37-2A (Questions A9-A10 apply)
Luann and Mace are partners in Networx,a computer peripherals firm.
Refer to Fact Pattern 37-2A.Luann signs a contract with Oleo Chips,a retail component supplier,apparently on Networx's behalf.The contract is binding on

A)Luann,Mace,and Networx.
B)Luann only.
C)Networx only.
D)Oleo only.

Question 40

Clu,Dolf,and Elton do business as Fertile Valley Farm.Clu's relationship to the firm ends,but it continues to do business.This is

A)dissociation.
B)dissolution.
C)winding up.
D)wrongful.

Question 41

International Exports,L.P.,is a limited partnership,with $100,000 in de?clared but unpaid profits.International's creditors include Friendly Credit Corporation for $5,000 and Gwen,one of International's limited partners,also for $5,000.When Harry,one of International's general partners,de?cides to retire,the other general partners vote to liquidate and dissolve the firm.The limited partners,who are not asked their opinions,want Interna?tional to continue in business and file a suit against the general partners to compel this result.Can the court order International to continue? If not,what is the priority of the distribution of International's assets on its dissolution?

Question 42

Sally and Tom decide to go into business,selling discounted merchandise through their Web site "e-Buy." They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm.The agreement also states that only Sally will have the authority to bind the partnership in deals with third parties,but the agreement says nothing about the management of the firm or a division of profits.Without Sally's knowledge,Tom tells United Computer Products,Inc.,that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy.In the first year,e-Buy makes a profit of $50,000.What are the partners' rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year's profits? If so,how much is each entitled to?