Question 1

Jana and Kwan are partners in Lawyers LLP, a limited liability partnership. Jana supervises the firm's associate Milo, who negligently fails to appear in court on behalf of Norm, a client. Liability to Norm rests only with
A)Jana and Milo.
B)Jana.
C)Milo.
D)Jana and Kwan.

Accepted Answer

In a limited liability partnership (LLP), partners are not personally liable for the negligent acts of other partners or employees not under their direct supervision. However, a partner who directly supervises an employee who commits a negligent act can be held personally liable alongside the employee. Therefore, Jana (who supervised Milo) and Milo (who committed the negligent act) can be held liable for the failure to appear in court on behalf of Norm.

Question 2

Otto is a limited partner in Port Exports, a limited partnership. By participating in the firm's management, Otto 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.

Accepted Answer

A limited partner who participates in the management of the partnership can lose their limited liability status and become liable for the partnership's obligations to the full extent, similar to a general partner.

Question 3

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.

Accepted Answer

In a limited liability partnership (LLP), partners can avoid personal liability for any partnership obligations, meaning they are not personally liable for the debts or obligations of the partnership itself, beyond their investment in the LLP. However, they remain liable for their own wrongful acts.

Question 4

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

Accepted Answer

In most states, a limited partnership is officially created when the partners file a certificate of limited partnership with the appropriate state authority. This is a legal requirement for establishing the partnership's existence and distinguishing it from other types of partnerships, such as general partnerships.

Question 5

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.

Accepted Answer

An LLP (Limited Liability Partnership) limits the personal liability of the partners and allows the partnership to continue as a pass-through tax entity, meaning the partnership itself is not taxed on its income. Instead, the income is passed through to the partners who report it on their personal tax returns. This is a key feature of LLPs. The other options are incorrect because LLP statutes do vary from state to state, LLPs can do business in multiple states, and many states have enacted LLP statutes.

Question 6

Cal, Dex, and Erin agree to be partners in Fajitas, a food cart outfit, splitting the profits equally. Cal contributes 65 percent of the capital. When Fajitas 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)Cal because he contributed most of the capital.
D)Dex and Erin because they contributed the least of the capital.

Accepted Answer

In a partnership, losses are typically shared in the same manner as profits, unless otherwise agreed upon. Since Cal, Dex, and Erin agreed to split profits equally, they would also share any losses equally, regardless of their individual capital contributions.

Question 7

Dain is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Dain 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 his capital contribution to the firm.
D)to the full extent.

Accepted Answer

Limited partners, such as Dain, are liable for the debts of the partnership only to the extent of their capital contribution. This means Dain's financial responsibility for the debts of Eco Baits is limited to the amount of money or property he has invested in the firm.

Question 8

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char 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.

Accepted Answer

Limited partners are entitled to complete access to the firm's books and information regarding partnership business, regardless of their level of participation in management. This ensures transparency and allows them to monitor their investment.

Question 9

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, including Ethan. Ethan loses his limited liability if he
A)participates in the firm's management.
B)does not participate in the firm's management.
C)invests in a project that the firm has declined.
D)votes to sell or dissolve the firm.

Accepted Answer

Limited partners, like Ethan, maintain their limited liability status as long as they do not participate in the management of the partnership. Engaging in management activities can result in losing their limited liability protection.

Question 10

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L
A)can continue its business for one twelve-month period.
B)can continue its business indefinitely.
C)dissolves immediately unless the partners change its business.
D)is immediately subject to criminal prosecution and penalties.

Accepted Answer

When Congress declares that the equipment K&L Sales exports can no longer be exported, the business cannot continue as is. The partnership would need to change its business focus or dissolve, as continuing to export the now-prohibited equipment would be illegal.

Question 11

Shih was the manager of Thai Bistro, a restaurant specializing in Southeast Asian foods. Shih 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." Shih 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?

Accepted Answer

The answer of Shih was the manager of Thai Bistro,...

Question 12

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?

Accepted Answer

The answer of Fresco and Garcia form a partnership-HVAC Pros....

Quiz 35: All Forms of Partnerships

Jana and Kwan are partners in Lawyers LLP, a limited liability partnership. Jana supervises the firm's associate Milo, who negligently fails to appear in court on behalf of Norm, a client. Liability to Norm rests only with

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

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

Del 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 Del and Efron

The major features of an LLP are that it limits the personal liability of the partners and

Cal, Dex, and Erin agree to be partners in Fajitas, a food cart outfit, splitting the profits equally. Cal contributes 65 percent of the capital. When Fajitas is dissolved, its liabilities are greater than its assets. The losses are paid by

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

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char are entitled to

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, including Ethan. Ethan loses his limited liability if he

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L