Question 1

Luke and Maya form Northwest Air Express,a general partnership.The essential elements of this partnership do not include

Accepted Answer

While goodwill can be a valuable asset to a partnership, it is not an essential element of a partnership. The essential elements are A) sharing of profits and losses, B) joint ownership of the business, and C) equal right to management in the business.

Question 2

Sable and Rex agree while talking on the phone to form a partnership-The Home Source-to deal in transfers of real property.To be enforceable,their agreement must

Accepted Answer

In order for an agreement to transfer real property to be enforceable, it must be in writing. Additionally, the statute of frauds requires certain contracts related to real property to be in writing in order to be enforceable. Therefore, choice B is the correct answer as it meets these requirements. Filing in the appropriate state office or involving valid consideration may also be necessary for the transfer of real property, but they are not the primary requirements for enforceability, making choices A and C incorrect. Choice D is not relevant, as it is not clear what third party would be involved in this situation.

Question 3

Fact Pattern 30-1B (Questions B10-B13 apply)
Bryn,Cornell,and Duke are general partners in Equity Lending,a consumer credit,mortgage,and investment firm.Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
-Refer to Fact Pattern 30-1B.Bryn's dissociation from the firm results in

Accepted Answer

Bryn's dissociation from the firm does not automatically terminate the partnership's legal existence, nor does it result in the immediate maturity of all partnership debts. The partnership agreement likely provides a procedure for the buyout of a dissociating partner's interest, which would require the remaining partners to purchase Bryn's interest in the firm. This would likely be done either through negotiation or through a court-ordered valuation process. The partnership agreement's prohibition on the assignment of a partner's interest to a creditor without the consent of the other partners would also likely prevent Bryn from purchasing her interest in the partnership from the firm.

Question 4

Hillside Vineyards is a family limited liability partnership.All of the partners must be

Accepted Answer

In a family limited liability partnership, partners can be natural persons or persons acting as fiduciaries for natural persons, allowing for flexibility in estate planning and management.

Question 5

Quisa and Reilly are partners in Sport Bikes,which rents and sells bikes,bike accessories,and related gear.Quisa manages the business.Unless the partnership agreement states otherwise,Quisa is

Accepted Answer

In a partnership, unless the partnership agreement specifies otherwise, partners are not entitled to compensation for participating in the management of the business. They share in the profits and losses according to their partnership agreement.

Question 6

Nikki and Orlando are limited partners in Port City Exports,a limited partnership.To avoid personal liability for partnership obligations,they must not

Accepted Answer

Limited partners, like Nikki and Orlando, must not participate in the firm's management in order to avoid personal liability for partnership obligations. This is because participating in management can be viewed as taking on the responsibility of the partnership and can, therefore, expose the limited partner to personal liability. Choices A, B, and C are not accurate as acquiring an interest, contributing property, or engaging in activities independent of the firm's business are not necessarily prohibited actions for limited partners.

Question 7

Bayside Marina Company and Canoes & Kayaks Inc.,share officers,directors,employees,property,and equipment.In reliance on Bayside Marina's reputation,Delivery Transport,Inc.,contracts to perform services for Canoes & Kayaks,but the firm does not pay.In terms of liability to Delivery Transport,a court is most likely to treat Bayside Marina and Canoes & Kayaks as

Accepted Answer

By sharing officers, directors, employees, property, and equipment, Bayside Marina and Canoes & Kayaks can be seen as holding themselves out as partners to the public. Given that Delivery Transport, Inc. contracted with Canoes & Kayaks in reliance on Bayside Marina's reputation, a court could find Bayside Marina and Canoes & Kayaks liable as partners by estoppel. This means that they are not technically a formal partnership but will be held liable as if they were due to their actions and representations to the public.

Question 8

Sweet Selections is a general partnership that sells candy,cards,and flowers.Sweet Selections has ten partners.Jill and Amy each have a 25 percent interest in the partnership.All the other members have a 10 percent interest.To pass a management decision

Accepted Answer

In a general partnership, decisions are made by a majority of the partners. In this case, since there are 10 partners, at least 6 of them must agree to the decision. Therefore, option A is the correct choice. B and C are incorrect because the agreement of only 2 partners, even if they have the highest percentage, is not enough to pass a decision. Option D is incorrect because it does not take into account the percentage of ownership of each partner, which is a key factor in making decisions in a general partnership.

Question 9

Fact Pattern 30-1B (Questions B10-B13 apply)
Bryn,Cornell,and Duke are general partners in Equity Lending,a consumer credit,mortgage,and investment firm.Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
-Refer to Fact Pattern 30-1B.Cornell's assignment of his interest in Equity Lending to Financial Consultants Corporation results in

Accepted Answer

Cornell's assignment of his interest without the consent of the other partners constitutes wrongful dissociation, and he is liable for any damages resulting from his conduct. The partnership continues to exist, and Cornell remains liable for any debts or obligations incurred before his dissociation. Financial Consultants Corporation does not become a partner in Equity Lending.

Question 10

Edgar,Jon,and Phoebe do business as partners in Reliable Movers.Phoebe develops a debilitating illness and can no longer work.Phoebe

Accepted Answer

Phoebe may dissociate from the partnership due to her inability to work, as partners generally have the right to dissociate from a partnership voluntarily.

Question 11

Oliana is a partner in Pacific Traders.In the majority of states,with respect to any partnership obligations that Oliana does not participate in,know about,or ratify,Oliana would be liable for

Accepted Answer

In a general partnership, partners are jointly and severally liable for all partnership obligations, regardless of their individual participation, knowledge, or ratification of those obligations. This means that if the partnership is unable to satisfy a debt or obligation, any or all partners may be held responsible for paying the full amount. Therefore, Oliana would be liable for all partnership obligations, jointly and severally, even if she did not participate in, know about, or ratify them.

Question 12

Commercial Credit & Finance is a limited partnership.Derry,Eleni,and Frey are the general partners.Derry dies.The partnership can

Accepted Answer

The partnership can continue only if the remaining general partners, Eleni and Frey, consent to continue the business. As a limited partnership, the partnership agreement would outline the rights and responsibilities of the partners in the event of death or withdrawal. If the agreement allows for the continuation of the partnership with the remaining partners, then it can continue. If not, then the partnership would need to be dissolved, and its assets distributed.

Question 13

Round-Up Ranch and Smith & Jones,Accountants,are limited liability partnerships (LLPs).The major features of an LLP are that it limits the personal liability of the partners and

Accepted Answer

LLPs allow the partnership to continue as a pass-through tax entity, which means that the partnership itself does not pay taxes on its income, but instead, the income is passed through to the individual partners and reported on their personal tax returns. This is a major advantage of LLPs over other business structures. LLP statutes vary from state to state, so choice B is incorrect. Choice C is also incorrect as LLPs can do business in multiple states. Lastly, many states have enacted LLP statutes, so choice D is also incorrect.

Question 14

Pualani and Quentin do business as partners in Rio Vista Builders,a residential construction firm.For federal income tax purposes,Rio Vista would be treated as

Accepted Answer

Rio Vista Builders would be treated as a pass-through entity for federal income tax purposes because it is a partnership, and partnerships are not subject to income tax at the entity level. Instead, the partnership's income, deductions, and credits pass through to the individual partners who report them on their individual tax returns.

Question 15

Corbin,a partner in Dentists & Orthodontists Clinic,applies for a loan with Evermore Bank allegedly on the firm's behalf but without the authorization of the other partners.Evermore knows that Corbin is not authorized to take out the loan.If Corbin defaults on the loan,liability for its unpaid amount will be imposed on

Accepted Answer

Since Corbin applied for the loan without the authorization of the other partners, the liability for the unpaid amount will be imposed on him alone. Evermore Bank already knew that Corbin was not authorized to take out the loan, so they cannot be held responsible for any default on the loan. The other partners of Dentists & Orthodontists Clinic (Doctors) are also not liable since they did not authorize the loan. Therefore, Corbin will be solely responsible for repaying the loan if he defaults.

Question 16

Fact Pattern 30-1B (Questions B10-B13 apply)
Bryn,Cornell,and Duke are general partners in Equity Lending,a consumer credit,mortgage,and investment firm.Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
-Refer to Fact Pattern 30-1B.Bryn,Cornell,and Duke decide to admit Giselle as a new partner in Equity Lending.Giselle's liability for partnership debts incurred before her admission is

Accepted Answer

Giselle's liability for partnership debts incurred before her admission is limited to her capital contribution to the firm, as she will not be personally liable for any debts incurred before she became a partner.

Question 17

Fact Pattern 30-1B (Questions B10-B13 apply)
Bryn,Cornell,and Duke are general partners in Equity Lending,a consumer credit,mortgage,and investment firm.Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
-Refer to Fact Pattern 30-1B.The partners decide to dissolve Equity Lending.Duke collects and distributes the firm's assets.This results in

Accepted Answer

When the partners decide to dissolve Equity Lending and Duke distributes the firm's assets, this results in the termination of the firm's legal existence. Once the assets are distributed, the firm no longer exists as a legal entity.

Question 18

Nazih and Ovidia are limited partners in Physicians Medical Center,a limited partnership.In terms of the firm's books and information regarding partnership business,Nazih and Ovidia are entitled to

Accepted Answer

Limited partners are entitled to complete access to the partnership's books and information regarding the partnership business, as they have a right to be informed about the financial status and operations of the partnership.

Question 19

Buckley is a general partner in Cut-Rate Shipping,LLLP,a limited liability limited partnership,which cannot pay its debts.Buckley is personally liable for the debts

Accepted Answer

The answer of Buckley is a general partner in Cut-Rate...

Question 20

Noah and Orin do business as partners in Personnel Providers,an employment agency.In most states,for purposes of suing and being sued,Personnel Providers would be treated as

Accepted Answer

Personnel Providers is a business entity and is treated as such for purposes of suing and being sued. It is not an aggregate of the individual partners, a natural person, or a non-existent party.

Quiz 30: Partnerships and Limited Liability Partnerships