Question 1

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 owes a duty of loyalty to the firm, which includes accounting for all profits earned in the firm's interest. By failing to account for the profit in the deal with Property Acquisition Company, Megan breaches her duty of loyalty to the firm.

Question 2

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

The Statute of Frauds requires contracts related to transfers of real property to be in writing to be legally binding. Therefore, the partnership agreement between Sable and Rex must be reduced to writing to be enforceable. Filing a copy of the agreement with a state office or filing an information return with the IRS is not required for the partnership agreement to be binding.

Question 3

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

Dissociation occurs when a partner leaves a partnership but the partnership continues to do business. This is different from dissolution, which is the complete end of the partnership. Winding up is the process of settling the partnership's affairs after dissolution, and wrongful refers to actions taken by a partner that harm the partnership. Since Clu has left the partnership but Fertile Valley Farm continues to do business, this is a case of dissociation.

Question 4

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

Corbin acted without authorization from the other partners, therefore, he is personally liable for the loan. The other partners are not liable as they did not authorize or benefit from the loan. Evermore Bank also cannot be held liable as they knew that Corbin was not authorized to take out the loan.

Question 5

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 acted in good faith on behalf of the firm and made an honest error. Therefore, she is not liable for breach of duty.

Question 6

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

Accepted Answer

Most states require that a limited liability company (LLC) have at least one member. Therefore, an LLC could be a suitable choice for Coco's Cupcakes, as it offers limited liability protection, flexibility in management structure, and pass-through taxation.

Question 7

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 all 50 states of the United States, making it a popular form of business organization for small and medium-sized companies.

Question 8

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

Accepted Answer

As a member of Hovercraft LLC, Greta is an owner. LLC stands for Limited Liability Company, which means that members have ownership in the company.

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 made a different arrangement, the UPA will provide default rules for areas such as profit sharing, management, and liability.

Question 10

Fact Pattern 23-1
Desi starts up eSites, an Internet service, and leases office space in a building owned by Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of eSites’ profits, each month. The term is two years. Desi hires Gwen to work at eSites’ tech support desk at an hourly wage of $12.50, plus a commis¬sion of 10 percent of the prof¬its. The term is also two years.
-Refer to Fact Pattern 23-1.Desi and Gwen are

Accepted Answer

Gwen does not have an ownership interest or management rights in eSites, which are essential elements for a partnership.

Question 11

Denise and Elke do business as Final Curtain Decorators.In most states,for purposes of holding title to property,this partnership would be treated as

Accepted Answer

Partnerships are generally treated as entities for purposes of holding title to property, which means they have a separate legal existence from their individual partners.

Question 12

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 its individual partners. As a separate legal entity, it can enter into contracts, sue and be sued, and own assets and liabilities in its own name.

Question 13

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 14

Ben,who runs a livestock breeding business,owes the Circle C Ranch $40,000.Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid.Because of this agreement,the Circle C is

Accepted Answer

The answer of Ben,who runs a livestock breeding business,owes the...

Question 15

Dani is considering forms of business organization for her financial advisory firm.Like most states,Dani's state requires that to form a limited liability company,she must file with a central state agency

Accepted Answer

To form a limited liability company, Dani would need to file articles of organization with the state agency. This document outlines the basic information about the company, such as its name, address, and the names and addresses of its members. It also defines the rights and responsibilities of the members and specifies the management structure of the company. The other options (articles of certification or formation) are not typically used for LLC formation.

Question 16

Fact Pattern 23-1
Desi starts up eSites, an Internet service, and leases office space in a building owned by Fred. The lease requires Desi to pay Fred a base rental of $1,250, plus 10 percent of eSites’ profits, each month. The term is two years. Desi hires Gwen to work at eSites’ tech support desk at an hourly wage of $12.50, plus a commis¬sion of 10 percent of the prof¬its. The term is also two years.
-Refer to Fact Pattern 23-1.Desi and Fred are

Accepted Answer

Fred does not have an ownership interest or management rights in eSites, which are essential elements for a partnership. The arrangement is a lease agreement, not a partnership.

Question 17

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

Under the partnership agreement, Jerry-Bilt is to dissolve when the bridge is built. Since they only formed the partnership to build one bridge, upon completion of the first bridge, the partnership agreement will be fulfilled and Jerry-Bilt will dissolve. The signing of a second contract is not relevant to the dissolution of the partnership.

Question 18

Fact Pattern 23-2 
Luann and Mace are partners in Networx, a computer peripherals firm.
-Refer to Fact Pattern 23-2.Luann signs a contract with Oleo Chips,a retail component supplier,apparently on Networx's behalf.The contract is binding on

Accepted Answer

As a partner in Networx, Luann has the authority to bind the partnership and its partners, including Mace, to contracts made in the ordinary course of business.

Question 19

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 20

Fact Pattern 23-2 
Luann and Mace are partners in Networx, a computer peripherals firm.
-Refer to Fact Pattern 23-2.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

Since Physik Drives does not know of Mace's dissociation, the contract is binding on Luann, Mace, and Networx. Under partnership law, a partner's dissociation does not immediately affect the authority of the remaining partners to bind the partnership unless the third party is aware of the dissociation.

Quiz 23: Sole Proprietorships, partnerships, Limited Liability Co