Deck 32: Limited Partnerships and Limited Liability Companies

Question 1

A limited partner who participates in the control of the business has broad liability to third persons regardless of whether they have transacted business with the partnership believing the limited partner is a general partner.

Answer 1

False

Question 2

A limited partner has a right to bring an action on the behalf of a limited partnership to recover a judgment in its favor if the general partners having authority to do so have refused to bring the action.

Answer 2

True

Question 3

Foreign limited partnerships do not have to operate in another country to be identified as "foreign."

Answer 3

True

Question 4

A for-profit company with a socially beneficial purpose as its primary objective is called a  low-profit limited liability company (L3C).

Question 5

All of the states have enacted statutes enabling the formation of limited liability partnerships (LLPs).

Question 6

The certificate of a limited partnership must be amended if a new general partner is admitted.

Question 7

The RULPA requires that the limited partnership certificate list the capital contribution of each general and limited partner.

Question 8

In a limited partnership, the contribution of a partner may be cash, property, services, a promissory note, or an obligation to contribute cash, property, or to perform services.

Question 9

If a limited partner votes on an amendment to the partnership agreement allowing a new business venture, he will not lose his limited status.

Question 10

Joe Stewart is a limited partner in a limited partnership. Joe does not have the right to dissolve the partnership except by decree of a court.

Question 11

Some statutes permit the operating agreement of a limited liability company to deny members the right to withdraw from the company.

Question 12

In Alzado v. Blinder, Robinson & Company, Inc. , Blinder, Robinson & Co. was found liable to partnership creditors as a general partner because it assumed control of the business and thus lost its limited partnership status.

Question 13

A general partner may also be a limited partner and thereby also share in profits and distributions as a limited partner.

Question 14

Legislation authorizing the formation of  low-profit limited liability companies  (L3Cs) has been enacted in only four states, as of 2017.

Question 15

A limited partnership agreement may not provide that limited partners have the right to vote on matters as a class separate from the general partners.

Question 16

If the written partnership agreement makes no provision for sharing profits and losses in a limited partnership, they are shared equally.

Question 17

A limited partnership must continuously maintain an office at which basic organizational and financial records are kept.

Question 18

The majority of states have adopted the 2001 revision of the Revised Uniform Limited Partnership Act (ReRULPA), which reflects that LLPs and LLCs can meet many of the needs formerly met by limited partnerships.

Question 19

Ordinarily, members of manager-managed LLCs have duties to the LLC and its members by reason of being members.

Question 20

Most LLC statutes expressly provide for mergers, which would allow Northern LLC and Southern LLC to combine all of their assets into Northern LLC, with Northern being the surviving LLC and Southern being the merged LLC.

Question 21

Members of an LLC share profits and losses equally.

Question 22

A limited liability company is a relatively new form of unincorporated business association that blends the advantages of both general and limited partnerships, because all its members may have limited liability and all may participate in management and control without loss of limited liability.

Question 23

General partners and limited partners rank equally unless the partnership agreement provides otherwise.

Question 24

The laws of the state in which a foreign limited partnership is organized govern its organization, its internal affairs, and the liability of its limited partners.

Question 25

The general partners of a limited partnership have almost exclusive control and management of the limited partnership.

Question 26

An operating agreement is adopted by members of a limited liability company.

Question 27

The causes of dissolution and the priorities in the distribution of assets for a limited partnership are the same as those of a general partnership.

Question 28

A creditor of a limited partner may obtain a charging order against a partner's interest in the partnership, thereby obtaining the rights of an assignee of the partnership interest.

Question 29

One of the most appealing features of a limited partnership is the limited personal liability it offers to all of the partners.

Question 30

RULPA does not distinguish between the duty of care owed by a general partner to a general partnership and that owed by a general partner to a limited partnership.

Question 31

A limited partner owes a duty of care to the partnership similar to that of a general partner.

Question 32

False statements in a limited partnership's certificate or amendment that cause loss to third parties who rely on the statement may result in liability for the general partners.

Question 33

Under the RULPA, a limited partnership may not use a name that is deceptively similar to that of any corporation or other limited partnership.

Question 34

A person for purposes of membership in a partnership includes a natural person, a partnership, a limited partnership, a trust, an estate, an association, or a corporation.

Question 35

Written consent of all partners is required for the addition of a general partner if the partnership agreement so provides or if the partnership agreement fails to deal with this issue.

Question 36

Unanimous written consent of all partners is required to add new limited partners to a limited partnership, unless the partnership agreement provides otherwise.

Question 37

The 1976 RULPA and the 1985 RULPA are supplemented by the Uniform Partnership Act, which applies to limited partnerships in any case for which the Limited Partnership Act does not provide.

Question 38

Limited partners have limited liability for partnership obligations.

Question 39

The death or bankruptcy of a limited partner will dissolve the partnership.

Question 40

Most statutes and the amended ULLCA make an LLC member's dissociation a mandatory cause of dissolution.

Question 41

A __________ is a partnership in which the liability of the general partners has been limited to the same extent as in a limited liability partnership.

A) limited partnership
B) limited liability company
C) limited liability limited partnership
D) None of these are correct.

Question 42

Typically, members of a limited liability company have the right to vote on proposals to:

A) adopt or amend the operating agreement.
B) admit any person as a member.
C) sell all or substantially all of the limited liability company's assets prior to dissolution.
D) All of these.

Question 43

Daniel is a general partner in a real estate investment firm. Hank and Barry are limited partners. Daniel, without the consent or ratification of Hank and Barry, can:

A) admit another limited partner.
B) act as an agent of the partnership.
C) rename the partnership using Hank's last name.
D) not have almost exclusive managerial control of the business.

Question 44

Only the general partners have access to the books and records of the partnership.

Question 45

With regard to a limited partner's capital contribution to the limited partnership:

A) the limited partner can only contribute cash.
B) an oral promise by a limited partner to contribute to the limited partnership is enforceable if the partnership has given consideration to induce the promise.
C) a limited partner is liable to the partnership for the difference between the contribution actually made and that which is stated in a signed writing promising a certain contribution.
D) a limited partner may contribute no more than 49% of the partnership's capitalization.

Question 46

It remains unclear under the law whether a limited partner has a fiduciary duty to his general partners or to the limited partnership.

Question 47

Which of the following is true with respect to the distribution of assets following dissolution of a limited partnership?

A) Partners are paid before ex-partners for unpaid distributions.
B) Limited partners who are creditors are paid at the same priority as third-party creditors of the partnership.
C) The amount limited partners are paid for their partnership interests has no relation to the proportion in which they share in distributions.
D) Capital contributions are paid before unpaid distributions.

Question 48

Members of member-managed LLCs and manager-managed LLCs are the same in which of the following aspects?

A) Control.
B) Fiduciary duty.
C) Liability.
D) Whether the member is an agent of the LLC.

Question 49

Which of the following is correct regarding the fiduciary duties in a limited partnership?

A) The general partner has a fiduciary relationship to the limited partners, but not to any other general partners.
B) Judicial authority seems to suggest that the limited partner has no fiduciary duty to the partnership.
C) The fiduciary duty of the general partner has little effect upon the interests of the limited partners, because they have no ability to manage or control the partnership.
D) All of these are correct.

Question 50

Extinguishing a limited partnership involves:

A) dissolution.
B) winding up or liquidation.
C) termination.
D) All of these.

Question 51

Unless otherwise agreed, under RULPA, a limited partner is entitled to repayment of his capital contribution under which of the following conditions?

A) Before general partners are repaid their capital contribution.
B) The partnership's postdistribution assets would be sufficient to pay all of its liabilities to nonpartners.
C) Only after general partners have been repaid their capital contribution.
D) None of these.

Question 52

Which of the following is untrue of a limited partnership?

A) Limited partnerships must be formed under a state statute.
B) Limited partners' surnames ordinarily cannot be used in the partnership business name.
C) Partners in limited partnerships must contribute services to the partnership.
D) Limited partners in a limited partnership are generally not responsible for the debts of the partnership beyond their investment.

Question 53

A limited partner's financial obligation to the partnership may be increased if:

A) the limited partner acts as agent for a competing partnership.
B) the limited partner takes active part in the management of the partnership.
C) the certificate of limited partnership is incorrect or incomplete.
D) The limited partner takes active part in the management of the partnership or  the certificate of limited partnership is incorrect or incomplete.

Question 54

Which of the following need NOT be included in the certificate filed by a limited partnership?

A) The name of the limited partnership.
B) The name and address of the agent for service of process.
C) The names and addresses of each of the limited partners.
D) The name and business address of each general partner.

Question 55

All statutes require LLPs:

A) to designate themselves as LLPs.
B) to register or obtain a certificate of authenticity if they are foreign LLPs.
C) to make a new filing with the secretary of state after any change in membership.
D) to follow the laws of the jurisdiction under which they are registered regarding internal affairs and organization.

Question 56

A partner may not receive a distribution from a limited partnership unless the partnership's assets after the distribution would be sufficient to pay all of the partnership's liabilities, including those to other partners on account of their partnership interests.

Question 57

The RULPA specifies the events that will trigger a dissolution, after which the partnership affairs must be liquidated. These events include which of the following?

A) The expiration of the time period specified in the certificate.
B) The unanimous written consent of all the partners.
C) A limited partner's withdrawal from the partnership.
D) The expiration of the time period specified in the certificate  and t he unanimous written consent of all the partners.

Question 58

A general partnership that, by making the statutorily required filing, limits the liability of its partners for some or all of the partnership's obligations is known as a:

A) limited liability partnership.
B) limited liability company.
C) limited liability limited partnership.
D) limited partnership.

Question 59

Lonny is a partner in the Harris Limited Partnership. Unless the partnership agreement provides otherwise, Lonny may:

A) assign his partnership interest and, if he does, he ceases to be a partner.
B) assign his partnership interest, but if he does, the assignment dissolves the partnership.
C) assign his partnership interest and, if he does, the assignee may exercise the rights of a partner.
D) not assign his partnership interest.

Question 60

Which of the following is correct regarding a limited partnership?

A) The general partner must make a cash or property contribution.
B) It can be created in such a way that the general partner has limited liability.
C) It can only be created pursuant to statutory provisions.
D) Limited partners are unable to vote on the incurrence of debt other than in the ordinary course of business under the safe harbor provisions of the RULPA.

Question 61

If Jack contributed $1000 as a limited partner, signed a certificate, but the certificate was filed in the wrong office, Jack:

A) will not be liable as a general partner if he quickly withdraws from the business and renounces future profits.
B) is not a partner at all and may withdraw his contribution.
C) cannot avoid liability as a general partner under any circumstances.
D) may become a limited partner by giving constructive notice of the defective filing to all potential business contacts by an advertisement in a publication of general circulation.

Question 62

Describe an LLC and the rights of its members.

Question 63

The definition of a limited liability company includes that:

A) it is a noncorporate business.
B) it limits liability for all its owners.
C) all members may participate in management of the business.
D) All of these.

Question 64

The Elm Street Partnership is a limited partnership in which Arlo is the sole general partner and Barbara and Charles are the limited partners. Now the partnership is being dissolved, and Barbara wants her money. The partnership creditors include Charles, for a $1,000 loan, in addition to his capital contribution. In what order should the partnership assets be distributed?

Question 65

LLC statutes all require the articles of organization:

A) to include whether the LLC will be managed by managers who may, but need not be, members.
B) to be in writing and filed with the state.
C) to include in the name of the business the designation "limited liability company" or "LLC."
D) to include the name of the firm and the address of the principal place of business or registered office.

Question 66

Which of the following is NOT true about a limited liability company?

A) It is a noncorporate business organization.
B) In most states, an LLC must have at least two members.
C) It may elect not to be a separate taxable entity.
D) An ownership interest may be considered a security.

Question 67

Discuss the duties of general partners to limited partners.

Question 68

What are the liabilities of a limited partner in a limited partnership?

Question 69

What is the effect on liability of a limited partner who participates in the management of the partnership? What activities may a limited partner perform without affecting liability?

Question 70

Which of the following is NOT correct regarding a limited liability partnership?

A) All of the states authorize them.
B) It is the same as a limited partnership.
C) A registered limited liability partnership is a general partnership that makes a statutorily required filing.
D) Its name must indicate it is a limited liability partnership.