Question 1

Arthur, Betty, and Clara each inherit an undivided one-third interest in an apartment complex.Instead of selling it, they decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can earn some extra money.What are they?

Accepted Answer

Since Arthur, Betty, and Clara each own an undivided one-third interest in the apartment complex and have decided to operate it together for a profit, they are considered to be a partnership. They are not a corporation as they have not incorporated and are not creditors as they are not owed money by the apartment complex. While they are co-owners, they have gone beyond just jointly owning the property by actively working together to generate income from it, which makes them a partnership.

Question 2

Which of the following is correct with regard to partnership property?

Accepted Answer

Partnership property refers to property acquired with partnership funds or property that is used for partnership business. Unless the articles of partnership explicitly state otherwise, any property bought with partnership funds is considered partnership property.

Question 3

Marilyn, George, and Christine pool their money to buy land to operate a vegetable farm from which they plan to sell the produce and share the profits or losses.Are they partners?

Accepted Answer

Marilyn, George, and Christine are pooling their money to buy land for the purpose of operating a vegetable farm and sharing the resulting profits or losses. This shows they are associating to carry on a for-profit business which they co-own, making them partners.

Question 4

Which of the following would lack the capacity to become a partner?

Accepted Answer

A trust and a corporation can both become partners in a partnership, but an adjudicated incompetent lacks the legal capacity to enter into contracts, including partnership agreements. Therefore, option B, an adjudicated incompetent, would lack the capacity to become a partner.

Question 5

Which of the following is the correct definition for a partnership?

Accepted Answer

A partnership is defined as an association of two or more persons to carry on as co-owners a business for profit. This means that partners share ownership of the business and work together to generate profits. Option A also defines a partnership, but it includes the distinction between general and limited partners, which is not necessary for a basic definition. Option B refers to a corporation, not a partnership. Option C is close, but it does not include the for-profit aspect of a partnership.

Question 6

To be partnership property, title to real estate bought with partnership assets and used by the partnership may be put in the name of:

Accepted Answer

The partnership property can be put in the name of the partnership, or one or more partners as long as the partnership's name is indicated in the transfer of title instrument. This is because the real estate was purchased with partnership assets and is used by the partnership, making it partnership property. Option A is incorrect because it does not recognize the partnership interest in the property. Option B is incorrect because it does not allow for individual partners to have legal ownership in the property. Option D is incorrect because one of the options presented in the question must be correct.

Question 7

A __________ is an unincorporated business association consisting of at least one general partner and at least one limited partner.

Accepted Answer

A limited partnership is an unincorporated business association consisting of at least one general partner, who manages the business and is personally liable for its debts, and at least one limited partner, who is only liable for the amount of their investment. This structure allows for flexibility in management and ownership, while also providing some protection from personal liability for the limited partners.

Question 8

Which of the following forms of business association may elect that only the partners/members are taxed?

Accepted Answer

All of the listed forms of business associations can elect to be treated as pass-through entities for tax purposes, meaning only the partners or members are taxed on the income, not the entity itself.

Question 9

Andre invested $100,000 in a partnership with Erik and Louis.Andre's contract with the partnership states he will receive a portion of partnership profits, but he will be liable for partnership's debts only to the extent of the $100,000 he invested.Andre is:

Accepted Answer

Andre is a limited partner. As per the terms of the partnership agreement, he has limited liability and is only responsible for the debts of the partnership to the extent of his investment. This is characteristic of a limited partner, who is not involved in the day-to-day management of the business and is only liable for the partnership's debts to the extent of their investment.

Question 10

Which of the following would be the most convincing evidence of a partnership?

Accepted Answer

An agreement to share profits and losses is the most convincing evidence of a partnership because it shows the parties are not just sharing in the financial benefits but also in the risks and responsibilities of the business. The other options (A, B, and D) could potentially indicate a partnership, but they could also be present in other types of business arrangements such as employment agreements or joint venture agreements.

Question 11

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a:

Accepted Answer

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions typically results in a joint venture. A partnership involves co-ownership of an ongoing business enterprise, while a corporation involves ownership through shares of stock. An R&D partnership specifically deals with research and development projects.

Question 12

Which of the following is NOT an advantage of a partnership?

Accepted Answer

Unlike a corporation, each partner in a partnership has unlimited liability, meaning they can be held personally responsible for the partnership's debts and obligations. This is a disadvantage rather than an advantage. Therefore, option B is the correct answer.

Question 13

A partnership agreement should include all but which one of the following?

Accepted Answer

A partnership agreement should include the duties of the partners, the capital contribution of the partners, and the division of profits and losses. However, the agreement for dividing tax liability of the partnership is not necessary as it can be determined by the tax laws and regulations.

Question 14

A partner's interest is subject to the claims of that partner's creditors who may obtain a judicial lien known as a(n) __________ against the partner's transferable interest.

Accepted Answer

A charging order is a judicial lien that allows a creditor to obtain payments from a debtor's transferable interest in a partnership without gaining any control or decision-making authority in the partnership. The debtor's partner is still entitled to their share of the profits and losses of the partnership, but the creditor can intercept those payments. This protects the interests of the partnership and other partners from being affected by the creditor's claims.

Question 15

The law establishes a test for determining whether a partnership has been formed.The test includes which of the following?

Accepted Answer

A partnership is generally defined as an association of two or more persons who carry on as co-owners of a business for profit. The other options are not required elements for the formation of a partnership.

Question 16

Which of the following is the most convincing evidence of a partnership arrangement?

Accepted Answer

The most convincing evidence of a partnership arrangement is when two or more persons carry on a business for profit, even if there is no formal agreement. This aligns with the definition of a partnership in many legal jurisdictions, where the intent to make a profit together is a key criterion.

Question 17

In the case of Thomas v.Lloyd, the court held:

Accepted Answer

The court held that whether real estate titled in the names of individual partners is partnership property is a question of fact, and the burden of proof is on the one alleging that the actual ownership does not match the names on the legal title. This means that the burden of proof is on the party trying to prove that the property is not owned by the partnership, rather than on the party trying to prove that it is owned by the partnership. None of the other choices are mentioned in the case.

Question 18

The RUPA treats a partnership as a legal entity in which one of the following respects?

Accepted Answer

The RUPA treats a partnership as a legal entity for the purpose of suing or being sued. This means that the partnership can be named as a party in a lawsuit, rather than each individual partner having to be named separately. However, the partnership is not treated as a separate legal entity for all purposes, such as taxation. Additionally, the RUPA still allows for individual partners to be held liable for partnership obligations. The assignment of a partner's interest is also addressed in the RUPA, but it does not treat the partnership as a separate legal entity in this respect.

Question 19

Sue, Barb, and Carlotta agree to put in $1,000 each to set up a shelter for lost animals.They each work two days a week.Donations fund the day-to-day operations.Do they have a partnership?

Accepted Answer

The key factor that determines a partnership in this context is the intention to form a business for profit. Since the shelter is funded by donations and operates as a service for lost animals rather than a profit-making business, it does not constitute a partnership in the traditional business sense.

Question 20

Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a:

Accepted Answer

Under the Uniform Partnership Act (UPA), a partner's ownership interest in partnership property is considered a "tenant in partnership." This means that each partner has an equal right to possess the property for partnership purposes, but does not have a direct ownership interest in the property that can be transferred independently of the partnership.

Quiz 31: Formation and Internal Relations of General Partnerships