Question 1

Which of the following would lack the capacity to become a partner?
A) A trust.
B) An adjudicated incompetent.
C) A corporation.
D) All of these.

Accepted Answer

An adjudicated incompetent lacks the legal capacity to enter into contracts, including partnership agreements.

Question 2

A partner has all but which of the following duties?
A) A duty of faithful service to the best of his ability.
B) A duty to act in accordance with the partnership agreement.
C) A duty not to engage in any other business while a partner.
D) A duty not to acquire for himself a partnership opportunity without the consent of all the partners.

Accepted Answer

A partner has a duty to act in good faith and with loyalty to the partnership, which includes not taking actions that could interfere with the partnership's success or taking opportunities that belong to the partnership. However, a partner is not necessarily prohibited from engaging in other business activities outside of the partnership.

Question 3

In the case of Thomas v.Lloyd , the court held:
A) the use of land by a partnership is determinative of the fact that the land is owned by the partnership.
B) whether real estate titled in the names of individual partners is partnership property is a question of fact, and the burden of proof is on the one alleging that the actual ownership does not match the names on the legal title.
C) payment of real estate taxes out of partnership funds is determinative of the fact that the land is a partnership asset.
D) payment of promissory note payments for the real estate out of partnership funds is determinative of the fact that the realty is a partnership asset.

Accepted Answer

The court held that whether real estate titled in the names of individual partners is partnership property is a question of fact, and the burden of proof is on the one alleging that the actual ownership does not match the names on the legal title. This means that the burden of proof is on the party claiming that the property is not owned by the partnership, rather than the party claiming that it is. Therefore, option B is the correct choice.

Question 4

In the case of In Re KeyTronics , the court held that:
A) the intent of the parties to form a partnership is controlling as to partnership formation under the RUPA.
B) there is a requirement that the parties have a specific agreement in order to form a partnership.
C) the intent of the parties to form a partnership will be ascertained objectively from all the evidence and circumstances.
D) under Section 202(a) of the RUPA, the intent necessary to form an association refers to the intent to form a partnership per se.

Accepted Answer

The court held that under the RUPA, the intent of the parties to form a partnership will be ascertained objectively from all the evidence and circumstances, meaning that there is no requirement for a specific agreement and the intention can be inferred from the behavior and actions of the parties.

Question 5

A partnership agreement should include all but which one of the following?
A) The duties of the partners.
B) The capital contribution of the partners.
C) The agreement for dividing tax liability of the partnership.
D) The division of profits and losses.

Accepted Answer

The agreement for dividing tax liability of the partnership is not necessary to include in a partnership agreement. However, it is important to specify the duties of the partners, their capital contributions, and the division of profits and losses.

Question 6

Sue, Barb, and Carlotta agree to put in $1,000 each to set up a shelter for lost animals.They each work two days a week.Donations fund the day-to-day operations.Do they have a partnership?
A) Yes, since each has control of the operation.
B) Yes, because they are all co-equals in ownership of the shelter.
C) No, because they have made no formal agreement.
D) No, because there is no business for profit.

Accepted Answer

The key factor that determines a partnership in this context is the intention to form a business for profit. Since the shelter is funded by donations and operates as a service for lost animals rather than a profit-making business, it does not constitute a partnership in the traditional business sense.

Question 7

A __________ is an unincorporated business association consisting of at least one general partner and at least one limited partner.
A) joint venture
B) limited liability company
C) limited liability partnership
D) limited partnership

Accepted Answer

The description fits that of a limited partnership, which has at least one general partner who has full liability for the debts and obligations of the partnership, and at least one limited partner whose liability is limited to their investment in the partnership. A joint venture is similar but not necessarily structured as a partnership, while a limited liability company and limited liability partnership both have limited liability for all partners/members.

Question 8

Arthur, Betty, and Clara each inherit an undivided one-third interest in an apartment complex.Instead of selling it, they decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can earn some extra money.What are they?
A) A partnership.
B) Co-owners only.
C) A corporation.
D) Creditors of the apartment complex.

Accepted Answer

Since Arthur, Betty, and Clara are jointly operating the apartment complex and sharing profits and losses, they form a partnership. As co-owners, they can operate the complex as a sideline but would still be considered a partnership. Option B is true, but only partially describes their relationship as co-owners. Option C is incorrect because they have not formed a corporation, and option D is incorrect because they are not creditors of the apartment complex.

Question 9

A partner's transferable interest is subject to the claims of that partner's creditors who may obtain a judicial lien known as a(n) __________ against the partner's transferable interest.
A) foreclosure
B) redemption
C) charging order
D) None of these.

Accepted Answer

A charging order is a remedy that allows a creditor to attach a partner's transferable interest in a partnership to satisfy the partner's debt, without disrupting the operations of the partnership.

Question 10

Which of the following is the correct definition for a partnership?
A) An association of two or more persons with one or more general partners and one or more limited partners.
B) A legal entity ordinarily consisting of an association of numerous individuals.
C) An association of two or more persons to carry on as co-tenants in business.
D) An association of two or more persons to carry on as co-owners a business for profit.

Accepted Answer

A partnership is an association of two or more persons to carry on as co-owners a business for profit. This definition distinguishes partnerships from corporations and other legal entities that can consist of numerous individuals and have different structures. Option A refers to a limited partnership specifically, and option B is vague and not specific to partnerships. Option C is close, but it excludes the element of profit, which is a key component of partnerships.

Question 11

Ruben invested $40,000 in a partnership with Clark and Louis.Ruben's contract with the partnership states he will receive a portion of partnership profits, but he will be liable for partnership's debts only to the extent of the $40,000 he invested.Ruben is:
A) a general partner.
B) a dormant partner.
C) a limited partner.
D) an aggregate partner.

Accepted Answer

Ruben's contract with the partnership states that he will be liable for partnership's debts only to the extent of the $40,000 he invested. This means that he is a limited partner. Limited partners are only responsible for the debts and obligations of the partnership up to the amount of their investment. This is different from general partners who have unlimited liability and can be held personally responsible for the debts of the partnership. A dormant partner is one who is not involved in the day-to-day operations of the partnership, and an aggregate partner is not a recognized type of partnership.

Question 12

Which of the following is correct with regard to partnership property?
A) Like partnership capital, it is a fixed amount set forth in the articles of partnership.
B) Under the RUPA, there is a rebuttable presumption that unless a contrary intention appears, property acquired with partnership funds is partnership property.
C) The RUPA sets forth two irrebuttable presumptions that apply when the partners did not express their intent, one of which is that property acquired in the name of one of the partners without an indication of her capacity as a partner and without use of partnership funds is presumed to be that partner's separate property.
D) If there is no express agreement whether property owned by a partner before formation of the partnership and used in the partnership business is an asset of the partnership, the fact that taxes, liens, and expenses have been paid by the partnership is irrelevant.

Accepted Answer

Under the RUPA, there is a rebuttable presumption that property acquired with partnership funds is partnership property. Option A is incorrect, as partnership property is not a fixed amount set forth in the articles of partnership. Option C is incorrect, as the RUPA does not set forth any irrebuttable presumptions related to partnership property. Option D is incorrect, as the fact that taxes, liens, and expenses have been paid by the partnership may be relevant in determining whether property owned by a partner before formation of the partnership and used in the partnership business is an asset of the partnership.

Question 13

Which of the following is the most convincing evidence of a partnership arrangement?
A) Two or more persons are co-owners of property used in a business.
B) Two or more persons have a written agreement regarding a fundraiser for charity.
C) Two or more persons carry on a business for profit, but they have no formal agreement.
D) Two person share a joint savings account in which they deposit money and share the interest.

Accepted Answer

The most convincing evidence of a partnership arrangement is when two or more persons carry on a business for profit, even if they have no formal agreement. This aligns with the definition of a partnership in many legal jurisdictions, where the intent to make a profit together is a key component.

Question 14

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a:
A) partnership.
B) joint venture.
C) corporation.
D) R & D partnership.

Accepted Answer

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a joint venture. A joint venture is a temporary association between two or more individuals or businesses that come together to accomplish a single project or a limited number of projects. The co-owners share the profits and losses of the venture and have joint control over the operation of the business.

Question 15

The RUPA treats a partnership as a legal entity in which one of the following respects?
A) Liability of partners for partnership obligations.
B) For the purpose of suing or being sued.
C) For all purposes.
D) Assignment of a partner's interest.

Accepted Answer

The RUPA treats a partnership as a legal entity for the purpose of suing or being sued. This means that the partnership can be named as a defendant in a lawsuit and can also bring a lawsuit against others. However, the partnership is not treated as a separate legal entity for all purposes, such as taxation or ownership of property.

Question 16

To be partnership property, title to real estate bought with partnership assets and used by the partnership may be put in the name of:
A) any partner in that individual's name.
B) the partnership only.
C) the partnership in its name, or one or more partners in their capacity as partners in the partnership if the name of the partnership is indicated in the instrument transferring title.
D) the agent who represented the partnership in the transaction.

Accepted Answer

Title to real estate bought with partnership assets and used by the partnership may be put in the name of the partnership in its name, or one or more partners in their capacity as partners in the partnership if the name of the partnership is indicated in the instrument transferring title. This ensures that the property is recognized as a partnership asset and is subject to the partnership's control and management. It also helps to prevent individual partners from claiming the property as their own personal asset.

Question 17

Marilyn, George, and Christine pool their money to buy land to operate a vegetable farm from which they plan to sell the produce and share the profits or losses.Are they partners?
A) Yes, since they are associating to carry on a for-profit business which they co-own.
B) No, because they each control the use of the land.
C) Yes, because if there is a loss in the land's value, they will all share that loss.
D) No, they are merely joint venturers.

Accepted Answer

A partnership is formed when two or more persons engage in a business for profit. Since Marilyn, George, and Christine are pooling their resources to buy land and operate a vegetable farm with the intention of sharing profits or losses, they meet the criteria for a partnership.

Question 18

The law establishes a test for determining whether a partnership has been formed.The test includes which of the following?
A) An association of two or more persons.
B) Conducting a business not necessarily for profit.
C) That the partnership agreement is filed with the Secretary of State.
D) The sharing of gross returns.

Accepted Answer

A partnership is generally defined as an association of two or more persons who carry on as co-owners of a business for profit. The other options are not universally required elements for establishing a partnership.

Question 19

Which of the following is NOT an advantage of a partnership?
A) Partners' income taxes may be less than the income taxes would be on a corporation.
B) Each partner has limited liability.
C) It is possible to bring together more managerial skills than in a sole proprietorship.
D) It is possible to bring together more capital than in a sole proprietorship.

Accepted Answer

Each partner in a partnership does not have limited liability, which means they are personally liable for the debts and obligations of the partnership. This is a disadvantage of a partnership compared to a corporation or limited liability partnership, where the owners have limited liability.

Question 20

Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a:
A) joint tenant.
B) tenant in common.
C) tenant in partnership.
D) tenant by the entireties.

Accepted Answer

Under the Uniform Partnership Act (UPA), a partner's ownership interest in partnership property is considered a "tenant in partnership." This means that each partner has an equal right to use the property for partnership purposes, but does not have rights to the property as an individual.

Quiz 30: Formation and Internal Relations of General Partnerships

Which of the following would lack the capacity to become a partner?

A partner has all but which of the following duties?

In the case of Thomas v.Lloyd , the court held:

In the case of In Re KeyTronics , the court held that:

A partnership agreement should include all but which one of the following?

Sue, Barb, and Carlotta agree to put in $1,000 each to set up a shelter for lost animals.They each work two days a week.Donations fund the day-to-day operations.Do they have a partnership?

A __________ is an unincorporated business association consisting of at least one general partner and at least one limited partner.

Arthur, Betty, and Clara each inherit an undivided one-third interest in an apartment complex.Instead of selling it, they decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can earn some extra money.What are they?

A partner's transferable interest is subject to the claims of that partner's creditors who may obtain a judicial lien known as a(n) __________ against the partner's transferable interest.

Which of the following is the correct definition for a partnership?

Ruben invested $40,000 in a partnership with Clark and Louis.Ruben's contract with the partnership states he will receive a portion of partnership profits, but he will be liable for partnership's debts only to the extent of the $40,000 he invested.Ruben is:

Which of the following is correct with regard to partnership property?

Which of the following is the most convincing evidence of a partnership arrangement?

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a:

The RUPA treats a partnership as a legal entity in which one of the following respects?

To be partnership property, title to real estate bought with partnership assets and used by the partnership may be put in the name of:

Marilyn, George, and Christine pool their money to buy land to operate a vegetable farm from which they plan to sell the produce and share the profits or losses.Are they partners?

The law establishes a test for determining whether a partnership has been formed.The test includes which of the following?

Which of the following is NOT an advantage of a partnership?

Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a: