Question 1

Fact Pattern 37-2A 
Luann and Mace are partners in Networx,a computer peripherals firm.
-Refer to Fact Pattern 37-2A.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 Fact Pattern 37-2A 
Luann and Mace are...

Question 2

Fact Pattern 37-1A 
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 37-1A.Desi and Gwen are

Accepted Answer

Gwen is an employee of eSites and not a partner, as she does not have any ownership interest or management rights in the company. The fact that her pay includes a commission on profits does not automatically make her a partner.

Question 3

Jack and Kyra are partners in Law Firm,LLP,a limited liability partnership.Jack supervises Kyra,who negligently fails to appear in court on behalf of Milo,a client.Liability to Milo rests with

Accepted Answer

The answer of Jack and Kyra are partners in Law...

Question 4

Sable and Rex agree while talking on the phone to form a partner?ship to deal in transfers of real property.Their partnership agreement is legally binding

Accepted Answer

In order for a partnership agreement to be legally binding, it must be reduced to writing. While filing a copy of the agreement in the appropriate state office is a requirement for certain types of businesses (such as corporations), it is not necessary for a partnership. Valid consideration is also required for a contract to be binding, but this does not necessarily need to be exchanged at the time of forming the partnership agreement. Therefore, the correct answer is B.

Question 5

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 is a breach of the duty of loyalty, which requires that a partner act in good faith and in the best interest of the partnership. By not accounting for the profit, Megan has put her own interests above those of the partnership, thus breaching her duty of loyalty to One World Realty.

Question 6

Energy Unlimited,LP,is a limited partnership to which its partners,in?cluding Fink,have contributed capital.Energy's creditors include Graves Engineering,Inc.On Energy's dissolution,its assets will be distributed to pay

Accepted Answer

When a partnership is dissolved, the partnership's creditors must be paid before any distribution of assets to the partners can occur. Therefore, Graves Engineering, Inc. will be paid first before any distribution is made to the partners.

Question 7

Venture Capital,LP,is a limited partnership.Its limited partners include more than 150 sophisticated investors and investment professionals.A Venture limited partner loses his or her limited liability if he or she

Accepted Answer

A Venture limited partner loses his or her limited liability if he or she acts as the firm's manager. This is because being an active manager goes beyond the role of a passive investor and exposes the partner to more liability.

Question 8

Fact Pattern 37-2A 
Luann and Mace are partners in Networx,a computer peripherals firm.
-Refer to Fact Pattern 37-2A.Mace dissociates from Networx.Luann signs a con?tract 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 Fact Pattern 37-2A 
Luann and Mace are...

Question 9

Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite.In most states,a limited partnership will be created when

Accepted Answer

A limited partnership is created when a certificate of limited partnership is filed with the state. This certificate typically includes information about the partnership's structure, including the names and roles of the general and limited partners, as well as the amount of capital contributed by each partner.

Question 10

Lucy is a limited partner in Metro Contractors,a limited partnership,which cannot pay its debts.Lucy is personally liable for the debts

Accepted Answer

As a limited partner, Lucy's liability is limited to the amount of her capital contribution. Therefore, she is only liable to the extent of her investment in the partnership and no more.

Question 11

Fact Pattern 37-1A 
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 37-1A.Desi and Fred are

Accepted Answer

Desi and Fred are not partners because there is no indication in the fact pattern that Fred has an ownership interest or management rights in eSites. The lease agreement and profit-sharing arrangement do not create a partnership by themselves.

Question 12

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 bridge is built. As soon as the first bridge is built, the partnership will be dissolved and there will be no further contracts that Jerry-Bilt can enter into.

Question 13

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 is most likely treated as an entity for the purposes of suing and being sued, meaning it has its own separate legal status and liabilities independent of its individual partners.

Question 14

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 15

Rona and Savannah do business as Treasure Island Traders.In acting 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, thus she did not intend to harm her firm or violate any duty. Therefore, she is not liable.

Question 16

Fay is admitted to Global Associates,an existing partnership.A partnership debt incurred before the date of her admission comes due.Fay is

Accepted Answer

The answer of Fay is admitted to Global Associates,an existing...

Question 17

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 (UPA) is the default law that applies to partnerships if there is no express agreement between the partners. Therefore, if G-H Associates is a partnership and there is no express agreement, it would be governed by the UPA.

Question 18

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's dissociation means that he is no longer a part of the firm, but the firm itself can still continue to do business. Dissolution refers to the complete end of the firm's existence, while winding up refers to the process of settling the firm's affairs after dissolution. Wrongful implies wrongdoing or illegality, which is not suggested in the given scenario.

Question 19

Vasili is considering forms of business organization for Vasili's Designs,an ar?chitectural firm.An advantage of a limited liability partnership is that partners may be able to avoid personal liability for

Accepted Answer

Limited liability partnership allows partners to avoid personal liability for any partnership obligation. This means that the personal assets of each partner are protected, and they are not personally responsible for any debts or legal issues that the business may face.

Question 20

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 Doctors cannot be held liable for the unpaid amount. Evermore Bank is also not responsible, as they knew that Corbin was not authorized to take out the loan. Therefore, Corbin is solely responsible for the loan default and the unpaid amount.

Quiz 37: B: Partnerships and Limited Liability Partnerships

Fact Pattern 37-2A Luann and Mace are partners in Networx,a computer peripherals firm. -Refer to Fact Pattern 37-2A.Luann signs a contract with Oleo Chips,a retail component supplier,apparently on Networx's behalf.The contract is binding on