Question 1

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 should not be included in the partnership agreement. The tax liability is determined by the tax laws and regulations in the jurisdiction where the partnership operates. However, the partnership agreement should include the division of profits and losses, the duties of the partners, and the capital contribution of the partners.

Question 2

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 unless a contrary intention appears, property acquired with partnership funds is partnership property. A is incorrect because partnership property is not necessarily a fixed amount like partnership capital. C is incorrect because the RUPA actually sets forth one irrebuttable presumption and one rebuttable presumption when the partners did not express their intent. D is incorrect because if there is no express agreement, the default rule is that property owned by a partner before formation of the partnership and used in the partnership business remains the partner's separate property, even if taxes, liens, and expenses are paid by the partnership.

Question 3

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 possess the property for partnership purposes, but does not have a direct ownership interest in the property that can be transferred independently of the partnership.

Question 4

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

In a partnership, each partner has unlimited liability, meaning they are personally responsible for the debts and obligations of the partnership. This is a disadvantage, not an advantage, of a partnership in comparison to other business structures like a limited liability company (LLC) or corporation where owners have limited liability.

Question 5

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

Arthur, Betty, and Clara each have an undivided one-third interest in the apartment complex, which means they are co-owners. By deciding to continue to operate it together, they are forming a partnership. A corporation would require more formalities like incorporation, shareholders, and a board of directors, which is not mentioned in the scenario. They are not creditors of the apartment complex since they own a share in it, rather than owing it money.

Question 6

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 usually leads to a joint venture. A partnership is a more long-term and ongoing arrangement between partners who contribute capital, labor, and skill to carry on a business. A corporation is a separate legal entity from its owners, and R&D partnerships are focused on research and development rather than a specific business transaction or series of transactions.

Question 7

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) None of these.

Accepted Answer

To be partnership property, title to real estate purchased with partnership assets and used by the partnership can be put in the name of the partnership or one or more partners in their capacity as partners in the partnership if the name of the partnership is indicated in the document transferring title. Putting the property in the name of any individual partner or only in the name of the partnership would not make it partnership property.

Question 8

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

Marilyn, George, and Christine are associating to carry on a for-profit business, which they co-own. Therefore, they are partners. Joint venturers are also in a similar situation but with a temporary or specific goal rather than a continuous business operation. Option B is incorrect because the fact that they each control the use of the land is irrelevant to determining whether they are partners or not. Option C is also incorrect because sharing a loss in the value of the land does not necessarily mean that they are partners.

Question 9

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 there is 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 criterion.

Question 10

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 determining 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 party who questions the ownership of the property by the partnership must prove their claim, rather than the partnership having to prove ownership. None of the other choices are supported by the court decision in this case.

Question 11

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

Both A and C can actually become partners under certain circumstances, but an adjudicated incompetent lacks the legal capacity to enter into a partnership.

Question 12

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 the intent of the parties to form a partnership will be ascertained objectively from all the evidence and circumstances. This means that the court will look at all the relevant facts and circumstances surrounding the agreement between the parties to determine whether a partnership was formed or not. It is not necessary that the parties have a specific agreement, and the intent necessary to form an association (which refers to a partnership) is not limited to the intent to form a partnership per se.

Question 13

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 only for the purpose of suing or being sued. This means that a partnership can be named as a defendant or plaintiff in a lawsuit, rather than each individual partner being named separately. However, a partnership is not treated as a legal entity for all purposes, such as taxation.

Question 14

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

A limited partnership is a type of unincorporated business association consisting of at least one general partner who has unlimited liability for the partnership's obligations and at least one limited partner who has limited liability for the partnership's obligations. The limited partners' liability is limited to the extent of their investment in the partnership.

Question 15

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 who carry on a business for profit as co-owners.

Question 16

Andre invested $100,000 in a partnership with Erik and Louis. Andre'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 $100,000 he invested. Andre is:
A) a subpartner.
B) a dormant partner.
C) a limited partner.
D) an aggregate partner.

Accepted Answer

Andre is a limited partner. As per the terms of the partnership agreement, he has limited liability and is only responsible for the debts of the partnership to the extent of his investment. This is characteristic of a limited partner, who is not involved in the day-to-day management of the business and is only liable for the partnership's debts to the extent of their investment.

Question 17

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 judicial lien that allows a creditor to receive payments that would otherwise go to the debtor partner. The creditor cannot force the sale of the transferable interest, and the other partners are not affected by the lien. Foreclosure and redemption refer to the sale or repayment of property, and are not relevant to a partner's transferable interest.

Question 18

Which of the following would be the most convincing evidence of a partnership?
A) An agreement to share in the management of a business.
B) Agreements to share gross returns.
C) An agreement to share profits and losses.
D) An agreement to pay a firm manager a percentage of the profits for his salary.

Accepted Answer

An agreement to share profits and losses is the most convincing evidence of a partnership, as it indicates a joint venture where all partners are invested in the success or failure of the business. Agreements to share in the management of a business (option A) or to pay a manager a percentage of profits (option D) do not necessarily mean that there is a partnership, as a manager could be an employee rather than an owner. Agreements to share only in gross returns (option B) do not indicate the sharing of costs and expenses, which is a crucial aspect of a partnership.

Question 19

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 20

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 required elements for the formation of a partnership.

Quiz 30: Formation and Internal Relations of General Partnerships

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

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

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

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

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?

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

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?

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

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

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

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

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

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

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

Andre invested $100,000 in a partnership with Erik and Louis. Andre'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 $100,000 he invested. Andre is:

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 would be the most convincing evidence of a partnership?

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?

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