Question 1

Mead,Nero,and Olen do business as Pipe & Plumbing Services.After Mead's relationship to the firm ends,Nero and Olen agree to discontinue the business.This is

Accepted Answer

When Nero and Olen agree to discontinue the business, it is known as dissolution, which is the formal closure of a business entity. Dissociation refers to the withdrawal of a partner from a partnership. Gross negligence and simple misconduct are unrelated to the scenario given.

Question 2

Sweet Selections is a general partnership that sells candy,cards and flowers.Sweet Selections has ten partners.Jill and Amy each have a 25 percent interest in the partnership.All the other members have a 10 percent interest.To pass a management decision

Accepted Answer

In a general partnership, decisions are typically made based on a majority vote of the partners. Therefore, for a management decision to pass in Sweet Selections, a majority of the partners (i.e. 6 out of 10) must agree to the decision.

Question 3

Coco is considering forms of business organization for her concessions business-Coco's Cupcakes.Most states require that a limited liability company have at least

Accepted Answer

Most states require a limited liability company (LLC) to have at least one member. This means that Coco can form an LLC with herself as the sole member, which can provide personal liability protection and potential tax advantages for her business. Option A is incorrect because there still needs to be at least one member. Option C is incorrect because not all states require at least two members for an LLC. Option D is incorrect because this is not a requirement for forming an LLC.

Question 4

Tom and Bill are partners in Tough Trucks Towing.James is not a partner.In dealing with Fred,James holds himself out to be a partner in Tough Trucks Towing and Fred contracts to have Tough Trucks Towing tow some vehicles for him.If Tough Trucks fails to tow the vehicles,a court may conclude that

Accepted Answer

James has held himself out to be a partner in Tough Trucks Towing, which creates a partnership by estoppel. This means that James will be liable to Fred for the failure to tow the vehicles, even though he is not actually a partner. Tom and Bill may also be liable to Fred, but the fact that James held himself out as a partner makes him personally liable as well.

Question 5

Greta is a member of Hovercraft LLC.As a member,Greta is

Accepted Answer

As a member of an LLC, Greta is an owner of the company. The other options either exclude ownership or are too specific to fit the general definition of a member.

Question 6

Hollister and Gladys do business as partners in Frothy Confections.For federal income tax purposes,Frothy Confections would be treated as

Accepted Answer

Partnerships are generally considered pass-through entities for federal income tax purposes, meaning that the partnership itself does not pay taxes on its income. Instead, the profits and losses of the partnership are passed through to the individual partners, who report their share of the partnership's income on their personal tax returns. So, Frothy Confections would be treated as a pass-through entity for federal income tax purposes.

Question 7

Parker and Oscar sign a partnership agreement to do business as "Parker's Plumbing" without specifying a duration.This partnership is terminable

Accepted Answer

Since the partnership agreement does not specify a duration, it is considered a partnership at will. This means that either partner may terminate the partnership at any time, without needing to provide a reason or wait for a reasonable term to expire.

Question 8

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 limited partner in a limited partnership is only liable up to the amount of their investment as long as they do not participate in the management of the firm. If they choose to act as the firm's manager, they will lose their limited liability status and become fully liable for any debts or legal issues.

Question 9

Bo and Clancy decide to do business as Marketing & Promotion Services.To be a partnership,this association can result from an agreement that is

Accepted Answer

Partnerships can be formed through an oral agreement, a written agreement, or through conduct that implies a partnership. Therefore, option C is correct as it allows for all three forms of agreement to result in a partnership. Options A and D are incorrect as they limit the ways in which a partnership can be formed. Option B is incorrect as it suggests that an implied agreement cannot result in a partnership, which is not true.

Question 10

Fay is a member of Garden Groves LLC.Like other members of limited liability companies,Fay's liability for Garden Groves's obligations resembles the liability of

Accepted Answer

A member of a limited liability company has limited liability, similar to a shareholder of a corporation. This means that their personal assets are not at risk in the event that the company incurs debts or legal obligations. This distinguishes them from partners in a partnership or owners of a sole proprietorship, who have unlimited liability and are personally liable for any debts or legal issues the business may face.

Question 11

Will and Jay form Northwest Air Express,a general partnership.The essential elements of this partnership do not include

Accepted Answer

Goodwill is not an essential element of a partnership. While it is a desirable aspect of any business, it is not necessary for a partnership to exist. The essential elements of a partnership include the sharing of profits and losses, joint ownership of the business, and equal right to management in the business.

Question 12

Doral,Esteban,and Fiona are general partners in Centreville Dentistry,a dental clinic.Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.Doral's assignment of his interest in the clinic to Hometown Lenders results in

Accepted Answer

Doral's assignment of his interest to Hometown Lenders without the consent of the other partners constitutes wrongful dissociation. As per their agreement, this is considered a breach of the partnership agreement. Doral can be held liable for any damages caused by his dissociation, which may include compensating the remaining partners for their losses. This action does not automatically terminate the legal existence of the clinic, and Doral's liability for the clinic's debts will depend on the terms of their agreement and the laws governing partnerships.

Question 13

Cody is a partner in Delta Accounting Service.Cody can inspect

Accepted Answer

The answer of Cody is a partner in Delta Accounting...

Question 14

Edgar,Jon and Phoebe do business as Reliable Movers.Phoebe develops a debilitating illness and can no longer work.Phoebe

Accepted Answer

Phoebe may dissociate from the partnership due to her debilitating illness, as partners have the right to dissociate from a partnership under certain circumstances, such as incapacity.

Question 15

Location! Realty LLC is a limited liability company.Like other LLCs,for federal jurisdictional purposes,Location! Realty is most likely a citizen of

Accepted Answer

The answer of Location! Realty LLC is a limited liability...

Question 16

Ryder and Sergei are partners in Timberline Gear,which sells mountain- and rock-climbing equipment.Ryder manages the business.Unless the partnership agreement states otherwise,Ryder is

Accepted Answer

The answer of Ryder and Sergei are partners in Timberline...

Question 17

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

In the event of a partnership dissolution, creditors are given priority over the partners in the distribution of assets. Therefore, Graves Engineering, Inc. as a creditor will be paid before any funds are distributed to the partners, including Fink.

Question 18

Connie,Drew,and Ellen are the general partners of Foreign Auto Repair,a lim-ited partner-ship.Connie dies.The partnership can

Accepted Answer

The answer of Connie,Drew,and Ellen are the general partners of...

Question 19

Dani is considering forms of business organization for her financial advisory firm.Like most states,Dani's state requires that to form a limited liabil-ity company,she must file with a central state agency

Accepted Answer

To form a limited liability company, Dani's state requires her to file articles of organization with a central state agency.

Question 20

Newt is considering forms of business organization for Newton Design,an ar-chitectural firm.An advantage of a limited liability partnership is that partners can avoid personal liability for

Accepted Answer

In a limited liability partnership (LLP), partners are protected from personal liability for the malpractice of other partners, but not for their own wrongful acts or negligence.

Quiz 23: Sole Proprietorships, partnerships, and Limited Liability Companies