Question 1

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

Accepted Answer

A limited liability partnership provides liability protection to its partners, meaning that they are not personally responsible for the malpractice of other partners.

Question 2

During the winding up stage of dissolution, no party can make a claim on the partnership assets.

Accepted Answer

During the winding up stage of dissolution, creditors and partners can make claims on partnership assets.

Question 3

Dissociation occurs when a partner ceases to be associated in the carrying on of the partnership business.

Accepted Answer

Dissociation refers to the ceasing of a partner's association in a partnership business. It can occur due to various reasons such as retirement, death or voluntary withdrawal of a partner.

Question 4

A partner can be held liable for a partnership obligation only if he or she participated in, or knew about, whatever it was that gave rise to the obligation.

Accepted Answer

In a partnership, each partner can be held liable for the obligations of the partnership, regardless of whether they participated in or knew about the activities that gave rise to the obligation. This is due to the legal principle of joint and several liability in partnerships.

Question 5

The essential elements of a partnership do not include
A) a sharing of profits and losses.
B) a joint ownership of the business.
C) an equal right in the management of the business.
D) good faith.

Accepted Answer

Good faith is an important aspect of any business relationship, but it is not considered an essential element of a partnership. The essential elements of a partnership include a sharing of profits and losses, joint ownership of the business, and an equal right in the management of the business.

Question 6

Bhat and Cho do business as Data Security, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as
A) a combination of individuals.
B) a proprietorship.
C) an independent entity.
D) an aggregate.

Accepted Answer

A partnership is considered an independent entity separate from the individual partners for most legal and accounting purposes. This means that the partnership can enter into contracts, own property, and sue or be sued in its own name.

Question 7

A court can order the dissolution of a partnership if the business can only be operated at a loss.

Accepted Answer

If a partnership is unable to generate profits and can only sustain losses, a court has the authority to order its dissolution. This can occur if the partnership is no longer able to carry on its business or if its operations have become illegal.

Question 8

Dissociation terminates some of the rights of the dissociated partner, requires the firm to buy his or her interest, and alters the parties' liability to third parties.

Accepted Answer

Dissociation typically results in the termination of some of the dissociated partner's rights, the requirement for the firm to buy out their interest, and may affect the liability of the remaining partners to third parties.

Question 9

In a limited partnership, every partner has full responsibility for the management of the partnership and its obligations.

Accepted Answer

In a limited partnership, there are general partners who have full responsibility for management and obligations, while limited partners have limited responsibility and are mainly investors.

Question 10

Regardless of the partners' consent or agreement, the voluntary dissociation of a partner begins the dissolution of the partnership.

Accepted Answer

Voluntary dissociation of a partner does not automatically begin the dissolution of the partnership; the partnership can continue its business with the remaining partners, depending on the terms of the partnership agreement and applicable laws.

Question 11

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

Accepted Answer

The answer of A partner always has the right to...

Question 12

When a partnership that was supposed to dissolve after one partner's death continues to operate, a court is estopped from ordering its dissolution.

Accepted Answer

Courts can order the dissolution of a partnership that continues to operate after a partner's death if the partnership agreement or state law allows for dissolution under such circumstances. The continuation of the business does not automatically estop a court from ordering its dissolution.

Question 13

Amber owns and operates Bistro Café in space leased in a building owned by Cindy. The lease requires a base rent of $1,500, plus 10 percent of Bistro's profits, each month. The term is two years. Amber and Cindy are
A) not partners, because Cindy does not have an ownership interest or management rights in Bistro.
B) not partners, because the lease includes "base rent."
C) not partners, because the rent includes only 10 percent of the profits.
D) partners in a partnership for two years.

Accepted Answer

The fact that Cindy owns the building and Amber pays rent does not make them partners. The lease agreement only entitles Cindy to a portion of Bistro's profits, not an ownership or management interest in the business.

Question 14

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.

Accepted Answer

The Uniform Partnership Act applies to partnerships in the absence of an express agreement, meaning that it is the default governing law for partnerships unless the partners have chosen to adopt a different set of rules through an express agreement.

Question 15

Olav starts Power Cells to make and sell batteries. Later, Olav contracts with Quinn to invest additional capital in the firm in exchange for 25 percent of the profits. Olav and Quinn agree that Olav will continue to control the business. Olav and Quinn are not partners in Power Cells because
A) they do not share the profits equally.
B) their agreement does not provide for the sharing of losses.
C) Olav started the firm before Quinn agreed to invest additional capital.
D) they do not have joint control over the business.

Accepted Answer

Olav and Quinn are not partners in Power Cells because they do not have joint control over the business. While Quinn has invested capital and has a share in the profits, the agreement states that Olav will continue to control the business. Therefore, Quinn is considered an investor rather than a partner in the company.

Question 16

In some states, limited partners cannot withdraw from a limited partnership.

Accepted Answer

Limited partners generally cannot withdraw from a limited partnership without causing the partnership to dissolve or triggering other consequences, such as loss of limited liability protection. However, there may be certain limited circumstances under which a limited partner can withdraw.

Question 17

A limited partner can force the dissolution of a limited partnership even if the other partners want to continue the business.

Accepted Answer

A limited partner does not have the authority to force the dissolution of a limited partnership. This decision must be made by the general partners, who have the authority and responsibility to manage the affairs of the partnership.

Question 18

To eliminate costly negotiations or litigation, partners may agree on how the firm's assets will be valued or divided if the partnership dissolves.

Accepted Answer

This statement is true. By agreeing to a predetermined plan for valuing and dividing the firm's assets in the event of dissolution, partners can avoid disputes and unnecessary costs associated with negotiations or litigation.

Question 19

In a limited partnership, a general partner assumes no liability for partnership debts beyond the amount of capital contributed.

Accepted Answer

In a limited partnership, the general partner assumes unlimited liability for partnership debts. It is the limited partner who assumes no liability beyond their capital contribution.

Question 20

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

Accepted Answer

All partners in a partnership have the legal right to dissociate from the partnership at any time, as long as it is done in accordance with the terms set forth in the partnership agreement or applicable state law.

Quiz 31: All Forms of Partnership