Deck 14: Small Business, General Partnerships, and Limited Partnerships

Question 1

Jonathan Lopez wants to be his own boss and ventures into retailing fruit in the neighborhood. Jonathon files the paperwork necessary to obtain a license to carry out business in his city, but files no other paperwork with any other government entity. Under which of the following major forms of business does Jonathan's store appear to be?

A) a corporation
B) a sole proprietorship
C) a limited partnership
D) a limited liability corporation

Answer 1

a sole proprietorship

Question 2

Orlando opened a hot dog stand in Brooklyn, doing business as Orlando's Red Hots. Unfortunately, the venture has not generated a profit. Orlando borrowed $5,000 from the bank to open his business, and the short-term loan is now due. Orlando's friend Bob has suggested partnering with him at the beginning of next year. From which of the following sources can the bank currently recover its $5,000?

A) Orlando's secondary lender
B) Orlando's savings account
C) Orlando's family
D) Bob, Orlando's prospective business partner

Answer 2

Orlando's savings account

Question 3

The designation for a business that is operating under a trade name is ________.

A) also known as (a.k.a.)
B) business operations legally occurring (b.o.l.o.)
C) designated operating business (d.o.b.)
D) doing business as (d.b.a.)

Answer 3

doing business as (d.b.a.)

Question 4

Which of these is true with regards to operating a business as a sole proprietorship?

A) Forming a sole proprietorship is complicated.
B) Forming a sole proprietorship is expensive.
C) The owner is restricted in making management decisions, especially those involving hiring and firing employees.
D) The owner has the right to receive all of the business's profits.

Question 5

An ordinary partnership is also known as a ________.

A) private partnership
B) normal partnership
C) major partnership
D) general partnership

Question 6

A ________ is a partnership created for a fixed duration.

A) temporal partnership
B) partnership for a term
C) nominal partnership
D) partnership at will

Question 7

A ________ is a partnership created with no fixed duration.

A) plenary partnership
B) partnership for a term
C) nominal partnership
D) partnership at will

Question 8

The Uniform Partnership Act and the Revised Uniform Partnership Act were each promulgated by ________.

A) the United States Congress
B) the National Alliance of Partners and Partnerships
C) the National Conference of Commissioners on Uniform State Laws
D) the Chancery Court of the State of Delaware

Question 9

It is estimated that the number of partnerships in the United States is ________.

A) less than 500,000
B) between 500,000 and 1 million
C) between 1 million and 2 million
D) more than 2 million

Question 10

Erin, Jayne, and Kathryn form a general partnership. Kathryn, while on partnership business, accidentally caused a fire that burned down Bill's house. Bill successfully sued the partnership and each of the partners and received a judgment for $500,000. Bill decided seek payment on the judgment just from Erin and Jayne, since they were known to be independently wealthy. Erin and Jayne ________.

A) must divide the payment 50-50
B) can seek an injunction to prevent collection of the judgment since they were not involved in the tortious act
C) may seek indemnification from the Kathryn, the partner who committed the tortious act.
D) can avoid paying by dissolving the partnership immediately

Question 11

Describe the liability situation of a newly admitted partner to a general partnership.

Question 12

Justin and Michael form a limited partnership and start a car dealership. Justin is the general partner and Michael is the limited partner. Seven months after the commencement of the business, Pedro makes an investment and wishes to become a general partner. A week later, Michael's mother wishes to join the partnership as a limited partner. Which of the following is true in this scenario?

A) Pedro cannot be admitted as a general partner to the partnership after the business has commenced.
B) Pedro cannot be admitted as a general partner to the partnership as a limited partnership can only have one general partner.
C) Michael's mother cannot be admitted as a limited partner to the partnership as a limited partnership can only have one limited partner.
D) Both Pedro and Michael's mother can choose to be admitted as either general or limited partners to the partnership.

Question 13

Laura is an investor and a limited partner in a limited partnership. Two years after she becomes a limited partner, Laura believes that the general partners are not doing a very good job of managing the affairs of the limited partnership, and she accordingly participates in its management. While she was managing the business, a bank loans $1 million to the limited partnership, believing that Laura is a general partner. If the limited partnership defaults on the $1 million loan, which of the following will be true?

A) Laura will not be held personally liable, as she is technically a limited partner.
B) Laura will be treated as a general partner and will be held personally liable for the loan.
C) Laura will be held liable for her proportionate share of the $1 million, depending on the total number of general and limited partners in the limited partnership.
D) Laura's liability will be restricted to the value of her capital investment in the limited partnership.

Question 14

Promulgated in 1976 and revised in 1985, the ________ Act is a uniform act that regulates the formation, operation, and termination of limited partnerships.

A) Reformed Uniform Limited Partnership
B) Uniform Limited Partnership
C) Revised Uniform Limited Partnership
D) Model Limited Partnership

Question 15

Limited partnerships are also known as ________.

A) LLP's
B) LtdP's
C) LP's
D) ULP's

Question 16

With regards to the management of a limited partnership, if there are more than one general partner, ________.

A) each general partner gets a weighted vote, proportional in size to his or her capital contribution
B) each general partner gets a weighted vote, proportional in size to his or her share in the partnership's profits
C) each general partner gets one vote
D) each general partner and each limited partner get a weighted vote proportional in size to his or her capital contribution

Question 17

How does defective formation of a limited partnership occur? How can a limited partner in a defectively formed limited partnership escape general partner liability?

Question 18

A limited partnership is liable ________.

A) for a general partner's tortious conduct, but not for contracts entered into by a general partner on behalf of the partnership
B) for contracts entered into by a general partner on behalf of the partnership, but not for a general partner's tortious conduct
C) for a general partner's tortious conduct and for contracts entered into by a general partner on behalf of the partnership
D) for neither a general partner's tortious conduct, nor for contracts entered into by a general partner on behalf of the partnership

Question 19

With regards to the obligations of a limited partnership, whether arising in contract, tort, or otherwise, if the limited partnership has more than one general partner, the general partners can be personally liable ________.

A) only for those obligations for which they were personally involved
B) only for obligations arising in contract, but not those arising in tort or otherwise
C) only to the extent of their capital contribution
D) jointly and severally, for all obligations of the limited partnership whether arising in contract, tort, or otherwise

Question 20

Which of the following is an accurate statement regarding dissolution of a partnership?

A) A general partnership may be dissolved, while a limited partnership may not.
B) Just like a general partnership, a limited partnership may be dissolved, and its affairs wound up.
C) Dissolution of a general partnership is governed by federal law, while dissolution of a limited partnership is governed by state law.
D) Dissolution of a limited partnership is governed by federal law, while dissolution of a general partnership is governed by state law.

Question 21

A(n) ________ is a document that is filed with the secretary of state when a dissolved limited partnership has completed winding up.

A) certificate of completion
B) articles of cancellation
C) statement of termination
D) certificate of non-existence

Question 22

What is an FLP?

A) a Fiscal Leasing Partnership
B) a Financial Liability Partnership
C) a Formal Legal Partnership
D) a Family Limited Partnership

Question 23

Explain the three ways for the dissolution of a limited partnership to occur under the ULPA (2001).

Question 24

In a limited liability limited partnership, which of the partners are personally liable for the debts and obligations of the limited partnership?

A) the general partners
B) the limited partners
C) the general and the limited partners, jointly and severally
D) none of the partners

Question 25

To become an LLLP, a limited partnership must file a certificate of limited liability limited partnership with the ________ stating that it is an LLLP.

A) Internal Revenue Service
B) secretary of state
C) county clerk
D) U.S. Department of Commerce

Question 26

Limited liability limited partnerships (LLLPs) are ________.

A) taxed at the individual partners' level only
B) taxed at the partnership level only
C) double taxed, i.e., at both the partnership level and at the individual partners' level
D) tax exempt

Question 27

A limited partnership (LLLP) is subject to double taxation.

Question 28

What is a limited liability limited partnership? What distinguishes it from a limited partnership?