Question 1

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

Accepted Answer

This is known as the concept of "holding out" or "ostensible partnership". If someone represents themselves as a partner or allows others to believe they are a partner, they can be held liable as though they were actually a partner, even if they are not legally considered a partner.

Question 2

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

Accepted Answer

A partner is not considered an employee of the partnership; instead, they are an owner who contributes to the business's capital and shares in its profits and losses. Their work in the partnership is part of their role as an owner, not as an employee.

Question 3

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

Accepted Answer

False

Question 4

A partnership is organized for the profit of its members.

Accepted Answer

A partnership is a business entity formed by two or more individuals who agree to share the profits and losses of the business. The main objective of a partnership is to make a profit for its partners.

Question 5

A partnership must have a name.

Accepted Answer

The answer of A partnership must have a name....

Question 6

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

Accepted Answer

The answer of The sharing of profits and losses is...

Question 7

The fact that parties share profits and losses is strong evidence of the existence of a partnership.

Accepted Answer

Sharing of profits and losses is a common characteristic of partnerships. It is one of the factors used to determine if a partnership exists. Therefore, the statement is true.

Question 8

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.

Accepted Answer

Swartz did not agree to be a partner, therefore he cannot have partner's liability. Cruise's reliance on the registration certificate does not make Swartz a partner.

Question 9

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

Accepted Answer

A partnership can be formed based on the actions and behavior of the parties involved, irrespective of whether they explicitly called themselves partners or not. The law recognizes such partnerships as "Partnership by Estoppel" or "Partnership by Holding Out."

Question 10

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

Accepted Answer

The burden of proving the existence of a partnership will not always fall on one of the partners. In some cases, it may be required for both partners to provide evidence of the partnership, or it may be up to a third party (such as a court) to determine the existence of a partnership based on various factors and evidence presented.

Question 11

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

Accepted Answer

The Uniform Partnership Act has been adopted by all states except Louisiana, which has its own unique partnership laws.

Question 12

A partnership may be formed for any legal purpose.

Accepted Answer

This statement is true. Partnerships can be formed for any legal purpose, as long as they meet the legal requirements for partnership formation in the applicable jurisdiction.

Question 13

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.

Accepted Answer

A fixed payment not dependent on profit or losses indicates an employee-employer relationship, rather than a partnership.

Question 14

The rights of partners are determined by the partnership agreement.

Accepted Answer

The partnership agreement outlines the rights and responsibilities of each partner, so the answer is true.

Question 15

All partners must contribute money to be treated as partners.

Accepted Answer

Partners can contribute in various ways, including money, property, skills, or labor. While contributions of money are common, they are not the only way partners can contribute and be treated as partners.

Question 16

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

Accepted Answer

A partnership is a business structure in which two or more individuals own and operate the business. Partners may contribute capital, such as cash or property, and also contribute services, skills, or expertise to the business. The specific contributions and responsibilities of each partner are outlined in a partnership agreement.

Question 17

As in the case of agency, the burden of proving the existence of a partnership is on the person who claims that one exists.

Accepted Answer

This statement is true. The burden of proof lies with the person who alleges the existence of a partnership, just as in the case of agency.

Question 18

Partnership property is only that property contributed by the partners.

Accepted Answer

Partnership property includes all property (money, assets, etc.) brought into the partnership by any of the partners, as well as any property acquired by the partnership itself during the course of the partnership.

Question 19

Each partner is an agent of the partnership.

Accepted Answer

Each partner has the authority to act on behalf of the partnership, making them an agent of the partnership.

Question 20

The mere fact that an enterprise is described as a partnership is not controlling or binding regarding its true business form.

Accepted Answer

Just because an enterprise is called a partnership does not necessarily mean that it is legally structured as a partnership. The true business form is determined by the legal documents and agreements governing the enterprise.

Quiz 42: Partnerships