Question 1

It is impossible to form a business in a manner that allows for single taxation and limited liability.

Accepted Answer

It is possible to form a business in a manner that allows for single taxation and limited liability through the use of a pass-through entity such as a limited liability company (LLC) or S-corporation.

Question 2

Limited partners may contribute cash or property as their capital contributions.

Accepted Answer

Limited partners are able to contribute cash or property as their capital contributions to the partnership.

Question 3

While most states have adopted limited liability company statutes,few states have created statutes allowing the formation of limited liability partnerships.

Accepted Answer

Most states in the United States have statutes that allow for the formation of both limited liability companies (LLCs) and limited liability partnerships (LLPs), making LLPs a common business structure option alongside LLCs.

Question 4

A general partner within a limited partnership may be a corporation.

Accepted Answer

A corporation can serve as a general partner in a limited partnership. This allows the corporation to participate in the profits and losses of the partnership, while also providing limited liability protection.

Question 5

Both general partnerships and limited partnerships are created only through the process of executing a certificate.

Accepted Answer

General partnerships can be formed through an oral agreement or simply by the actions of the partners without the need for a formal certificate. Limited partnerships typically require filing a certificate with the appropriate state authority.

Question 6

A limited partner can never lose money.

Accepted Answer

A limited partner can still lose money, but only up to the amount of their investment. They are not personally responsible for the partnership's debts beyond their invested capital.

Question 7

Even limited partners are completely liable for debts of the business.

Accepted Answer

Limited partners are only liable for the debts of the business up to the amount of their investment. They are not completely liable for the debts of the business.

Question 8

A limited liability company pays federal income tax.

Accepted Answer

A limited liability company (LLC) is a type of business structure that is not required to pay federal income tax. Instead, the profits and losses of the LLC are passed through to the individual owners, who report this information on their personal tax returns. However, certain LLCs can opt to be taxed as a corporation, in which case they would be responsible for paying federal income tax.

Question 9

The limited liability company combines the tax advantage of the partnership with the limited liability feature of the corporate form of business organization.

Accepted Answer

This statement is true. The limited liability company (LLC) is a type of business organization that combines the pass-through taxation of a partnership with the limited liability for its owners, similar to a corporation.

Question 10

A limited partner may receive a share of the profits.

Accepted Answer

A limited partner may receive a share of the profits, but their liability is limited to the amount of their investment in the partnership.

Question 11

It is possible for a limited partner to be subject to the debts of the firm if the limited partner participates in the control of the business.

Accepted Answer

Limited partners are typically not personally liable for the debts of the partnership, as they are not involved in the management of the business. However, if a limited partner participates in the control of the business (for example, by making day-to-day management decisions), they may be considered a general partner and can be subject to personal liability for the debts of the firm.

Question 12

In a limited partnership,general partners are not responsible for the debts of the firm.

Accepted Answer

In a limited partnership, general partners are still responsible for the debts of the firm in addition to having unlimited liability. It is only the limited partners who have limited liability and are not responsible for the firm's debts beyond their investment in the partnership.

Question 13

A limited partner may never sue the business.

Accepted Answer

A limited partner may sue the business under certain circumstances, such as if the general partner has breached their fiduciary duties or committed fraud. However, the limited partner's liability is limited to the amount of their investment in the partnership.

Question 14

Under the Revised Uniform Limited Partnership Act,limited partners may engage in certain "safe harbor" activities without losing their protection from liability.These activities include being a contractor for,or an agent or employee of,the limited partnership or of a general partner.

Accepted Answer

Limited partners can engage in certain activities such as being a contractor, agent, or employee of the limited partnership or general partner without losing their liability protection under the Revised Uniform Limited Partnership Act.

Question 15

Every limited partnership must have at least one general partner.

Accepted Answer

This is true, as every limited partnership must have at least one general partner who has unlimited liability and is responsible for the management of the partnership. Limited partners, on the other hand, have limited liability and do not participate in the management of the partnership.

Question 16

Courts tend to resolve ambiguities in limited partnership agreements against the general partners.

Accepted Answer

This is known as the rule of contra proferentem, which means that any ambiguity in a legal document will be interpreted against the party who drafted the document. In the case of limited partnership agreements, the general partner(s) typically drafts the agreement, so any ambiguity will be interpreted against them.

Question 17

If a limited partnership certificate is never filed,all partners are treated as limited partners.

Accepted Answer

If a limited partnership certificate is never filed, the partnership will be considered a general partnership and all partners will be treated as general partners.

Question 18

The dissolution of a limited partnership is governed by unique rules quite different from those applicable to the dissolution of a general partnership.

Accepted Answer

The answer of The dissolution of a limited partnership is...

Question 19

Limited liability is not a feature of general partnership law.

Accepted Answer

In a general partnership, each partner is personally liable for the debts and obligations of the business, unlike in structures with limited liability where personal assets are typically protected.

Question 20

The names of limited partners and investors must be included on the certificate of limited partnership.

Accepted Answer

The certificate of limited partnership is a document filed with the state to establish the existence of a limited partnership. It typically includes the name and address of the partnership, the names and addresses of the general and limited partners, and the nature of the partnership's business. However, the names of the limited partners and investors are not typically required to be included on the certificate. Instead, such information is generally provided in the partnership agreement or in other private documents.

Quiz 43: LPs, LLCs, and LLPs