Question 1

The death of a partner automatically dissolves the partnership unless the partnership agreement provides otherwise.

Accepted Answer

Upon the death of a partner, a partnership is automatically dissolved unless there is a provision in the partnership agreement that allows the partnership to continue with the remaining partners or outlines a process for succession.

Question 2

Notice of dissolution of a partnership is not necessary to third persons who have done business with the firm.

Accepted Answer

Notice of dissolution is necessary to protect the departing partner from liability for the actions of the firm or the other partners after the date of dissolution, especially for third persons who have done business with the firm and might otherwise assume the partnership still exists.

Question 3

What can happen if one partner develops an incapacity that makes it impossible for that partner to perform the services contemplated by the partnership agreement?

Accepted Answer

A court must judge whether the partnership should be dissolved because the incapacity may be temporary and the partnership may be able to continue without the incapacitated partner.

Question 4

When one partner dies, the other partners must:

Accepted Answer

When one partner dies, the partnership is legally dissolved unless there is a specific clause in the partnership agreement that allows it to continue or outlines procedures for such an event. This is because a partnership is based on the mutual agreement and relationship between specific individuals.

Question 5

Which of the following best describes the dissolution of a partnership?

Accepted Answer

Dissolution of a partnership refers to the ending of the current legal entity and the change in the relation of the partners, which may lead to the winding up of the partnership's business or the continuation of the business under a new agreement.

Question 6

Bankruptcy of a partnership does not terminate it.

Accepted Answer

The bankruptcy of a partnership typically leads to its termination, as the partnership's assets are used to pay off debts, and the partnership is dissolved.

Question 7

When a partnership is dissolved, its assets are first paid to:

Accepted Answer

Creditors are prioritized in the payment hierarchy during the dissolution of a partnership to ensure that the partnership's debts are settled before any distributions are made to the partners.

Question 8

A withdrawing partner is entitled to:

Accepted Answer

A withdrawing partner is entitled to receive their share of any undistributed profits that have been earned by the partnership up until the time of their withdrawal. They are not automatically exempt from liability for company losses, personal taxes, or outstanding debts of the partnership.

Question 9

A partner may obtain a decree of dissolution when a court declares another partner insane or of unsound mind.

Accepted Answer

Courts can grant a decree of dissolution of partnership if a partner is found to be of unsound mind or becomes permanently incapable of performing their part of the partnership contract, as this significantly affects the operation and management of the partnership.

Question 10

Dissolution of a partnership relieves the partners of their duties to each other.

Accepted Answer

Dissolution of a partnership does not automatically relieve the partners of their duties to each other; they still have obligations during the winding-up process to manage and settle the partnership's affairs.

Question 11

A court will not dissolve a partnership for misconduct if one partner:

Accepted Answer

Filing a petition for personal bankruptcy by one partner is not considered misconduct that would lead to the dissolution of a partnership by a court. The other options (B, C, D) involve actions that could be seen as misconduct potentially justifying dissolution.

Question 12

One partner can compel the other members to assume continued losses after the success of the business becomes highly improbable.

Accepted Answer

In a partnership, no partner can be forced to continue in the partnership or absorb losses indefinitely if they choose to dissolve the partnership or leave, especially when the success of the business is highly improbable.

Question 13

Brothers Inc., a partnership, consisted of three partners Jessie, Mark, and Jake. However, Jessie was declared bankrupt at a time the company suffered considerable losses. Which of the following is likely to be true?

Accepted Answer

The answer of Brothers Inc., a partnership, consisted of three...

Question 14

Under the Revised Uniform Partnership Act, a court may issue a decree of dissolution when a partner's conduct makes it impractical to carry on business in conformity with the partnership agreement.

Accepted Answer

The Revised Uniform Partnership Act allows for a court to issue a decree of dissolution if it finds that a partner's behavior is making it not reasonably practicable to carry on the business in conformity with the partnership agreement.

Question 15

Explain the dissolution of a partnership on the basis of futility. ​

Accepted Answer

The answer of Explain the dissolution of a partnership on...

Question 16

Which of the following is true regarding notice of a partnership's dissolution?

Accepted Answer

Notice of dissolution is not necessary for dormant or secret partners because they are not known to the public or third parties, so their retirement does not affect the partnership's external relations.

Question 17

A partner may be expelled who has engaged in conduct against the principles of good faith and loyalty.

Accepted Answer

Partnership agreements often include provisions that allow for the expulsion of a partner who has engaged in conduct that violates the principles of good faith and loyalty, as such behavior can undermine the partnership's operations and trust among partners.

Question 18

When a date for dissolution is set in the partnership agreement, the partnership cannot be dissolved before that date. ​

Accepted Answer

A partnership can be dissolved before the set date if all partners agree to dissolve it earlier or if certain conditions that allow for early dissolution, as outlined in the partnership agreement or by law, are met.

Question 19

A withdrawing partner has liability for any loss sustained by the other partners because of the withdrawal.

Accepted Answer

A withdrawing partner can be held liable for any losses sustained by the partnership or the remaining partners due to their withdrawal, depending on the terms of the partnership agreement and applicable laws.

Question 20

After dissolution, a third person making a contract with the partnership stands in a similar position as a person dealing with an agent whose authority has been revoked.

Accepted Answer

After dissolution, a third person making a contract with the partnership is indeed in a similar position as a person dealing with an agent whose authority has been revoked, because the partners no longer have the authority to bind the partnership in new business dealings, similar to how a revoked agent cannot bind the principal.

Quiz 31: Dissolution of a Partnership