Question 1

Refer to Fact Pattern 14-1.Desi and Gwen are

Accepted Answer

Desi and Gwen are not partners because Gwen does not have an ownership interest or management rights in eSites. She is simply an employee who receives hourly wages and a commission based on profits. The fact that her commission is tied to profits does not automatically make her a partner.

Question 2

Hud and Iggy form Jerry-Bilt Construction to enter into a contract to build one bridge.Under their partnership agreement,Jerry-Bilt is to dissolve when the bridge is built.Iggy signs a contract for the firm to build a second bridge.Jerry-Bilt

Accepted Answer

According to the partnership agreement, Jerry-Bilt is to dissolve when the first bridge is built. Therefore, the signing of a second contract does not change the dissolution requirement.

Question 3

Noah and Orin do business as Pest Control Partners.In most states,for the purposes of suing and being sued,Pest Control Partners would be treated as

Accepted Answer

Pest Control Partners would be treated as an entity, separate from the individual partners. This means that they could be sued as a single entity, and their assets and liabilities would be separate from those of the individual partners.

Question 4

Megan and Nicole do business as One World Realty.In acting on the firm's behalf in a deal with Property Acquisition Company,Megan fails to account for the profit.To her firm,Megan is

Accepted Answer

Megan's failure to account for the profit violates her duty of loyalty to the firm. As a partner, she owes a fiduciary duty of utmost good faith and loyalty to her firm. This duty requires her to act solely in the interest of her firm and not engage in acts of self-dealing or other actions that may result in harm to the firm. By failing to account for the profit, Megan has breached this duty of loyalty.

Question 5

Corbin,a partner in Doctors Medical Clinic,applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners.Evermore knows that Corbin is not authorized to take out the loan.Corbin defaults on the loan.Liability for its unpaid amount is imposed on

Accepted Answer

Since Corbin acted without authorization from the other partners, he cannot bind the partnership to the loan agreement. Therefore, liability for the unpaid amount falls solely on Corbin. Evermore Bank knew that Corbin was not authorized and therefore cannot hold Doctors Medical Clinic liable for the loan.

Question 6

B2B,LLC,is a limited liability company.Among its members,a dispute arises that the operating agreement does not cover.The dispute is governed by

Accepted Answer

As B2B, LLC is a limited liability company, any dispute among its members that is not covered by the operating agreement will be governed by the applicable state LLC statute. Each state has its own LLC statute that provides default rules and procedures to govern the operation of LLCs, which would apply in the absence of an explicit provision in the operating agreement. The federal Uniform LLC Law is not uniformly adopted by all states, and the principles of partnership law would not apply to an LLC, which is a distinct legal entity. The state corporation statute also would not be applicable since B2B, LLC is not a corporation.

Question 7

Coco is considering forms of business organization for her concessions business-Coco's Cupcakes.Most states require that a limited liability company have

Accepted Answer

Most states require at least one member to form a limited liability company, making it the best choice for Coco's Cupcakes. Option A is incorrect because some states may have a minimum requirement for members. Option C is incorrect because while some states allow for multiple members in an LLC, it is not a requirement. Option D is incorrect because it only applies to limited partnerships, not limited liability companies.

Question 8

Refer to Fact Pattern 14-2.Mace dissociates from Networx.Luann signs a contract with Physik Drives,a wholesale component supplier,apparently on Networx's behalf.Physik does not know of Mace's dissociation.The contract is binding on

Accepted Answer

The answer of Refer to Fact Pattern 14-2.Mace dissociates from...

Question 9

Guy and Hanna do business as G-H Associates.If G-H is a partnership,it is governed by the Uniform Partnership Act

Accepted Answer

The Uniform Partnership Act governs partnerships in the absence of an express agreement. If the partners have not created their own partnership agreement, the default rules provided by the Uniform Partnership Act will apply.

Question 10

Esteban and Florian want to form a limited liability company (LLC)to manage their business,Gordian Nuts.LLC statutes have been adopted in

Accepted Answer

LLC statutes have been adopted in every state, making it possible to form an LLC in any state in the US.

Question 11

Greta is a member of Hovercraft LLC.As a member,Greta is

Accepted Answer

As a member of Hovercraft LLC, Greta is an owner.

Question 12

Jay is a member of Kitchen Cookouts,LLC,a limited liability company.Jay is liable for Kappa's debts

Accepted Answer

As a member of a limited liability company (LLC), Jay's liability is limited to the extent of his investment in the firm. This means that Jay's personal assets are not at risk beyond the amount of money or property he has invested into the company. The other options (A, C, D) imply that Jay is personally liable beyond his investment which is not the case in an LLC.

Question 13

Kelly,Lars,and Mona agree to be partners in Neighborhood Delivery Service (NDS),splitting the profits equally.Kelly contributes 67 percent of the capital.When NDS is dissolved,its liabilities are greater than its assets.The losses are paid by

Accepted Answer

The answer of Kelly,Lars,and Mona agree to be partners in...

Question 14

Rona and Savannah do business as Treasure Island Traders.Acting in good faith on the firm's behalf in a deal with Unlimited Potential,Inc.,Rona makes an honest error in overestimating the profit.To her firm,Rona is

Accepted Answer

Rona made an honest error in overestimating the profit while acting in good faith on behalf of the firm. As such, she is not liable for any breach of duty.

Question 15

Location! Realty LLC is a limited liability company (LLC).Like other LLCs,for federal jurisdictional purposes,Location! Realty is most likely a citizen of

Accepted Answer

The answer of Location! Realty LLC is a limited liability...

Question 16

Sable and Rex agree while talking on the phone to form a partnership to deal in transfers of real property,which fall under the Statute of Frauds.Their partnership agreement is legally binding

Accepted Answer

Under the Statute of Frauds, agreements dealing with transfers of real property must be in writing to be enforceable. Therefore, the partnership agreement between Sable and Rex must be reduced to writing to be legally binding. Filing a copy of the agreement or submitting an information return to the IRS is not necessary for the agreement to be enforceable.

Question 17

Refer to Fact Pattern 14-2.Luann signs a contract with Oleo Chips,a retail component supplier,apparently on Networx's behalf.The contract is binding on

Accepted Answer

The answer of Refer to Fact Pattern 14-2.Luann signs a...

Question 18

Refer to Fact Pattern 14-1.Desi and Fred are

Accepted Answer

Desi and Fred are not partners because Fred does not have an ownership interest or management rights in eSites. The lease agreement only requires Desi to pay a portion of profits as rent, and does not establish a partnership relationship between the parties.

Question 19

Sustainable Café LLC is a limited liability company.Like any other LLC,unless Sustainable Café chooses otherwise,the firm will be taxed as

Accepted Answer

The answer of Sustainable Café LLC is a limited liability...

Question 20

Clu,Dolf,and Elton do business as Fertile Valley Farm.Clu's relationship to the firm ends,but it continues to do business.This is

Accepted Answer

Clu has dissociated from the firm, meaning they are no longer a partner or have any ownership stake. However, the firm continues to operate without them. This is different than dissolution, which would involve the complete termination of the business entity. Winding up refers to the process of settling the affairs of a dissolved partnership. Wrongful does not apply here as there is no indication of any illegal or unethical behavior.

Quiz 14: Small Business Organizations