Question 1

Fact Pattern 37-1B (Questions B10-B13 apply)
Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that 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.
-Refer to Fact Pattern 37-1B. The partners decide to dissolve Equity Lending. Duke collects and distributes the firm's assets. This results in

Accepted Answer

When partners decide to dissolve a partnership, it results in the termination of the firm's legal existence. This means that the partnership will no longer exist after the distribution of assets and liabilities among the partners.

Question 2

Fact Pattern 37-1B (Questions B10-B13 apply)
Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that 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.
-Refer to Fact Pattern 37-1B. Cornell's assignment of his interest in Equity Lending to Financial Consultants Corporation results in

Accepted Answer

Cornell's assignment of his interest without consent is a breach of the partnership agreement. This results in wrongful dissociation and Cornell is liable for any damages caused. The partnership still exists with Bryn and Duke as partners.

Question 3

Commercial Credit & Finance is a lim?ited partner?ship. Derry, Eleni, and Frey are the general partners. Derry dies. The partnership can

Accepted Answer

In a limited partnership, the general partners have control over the management of the partnership and the limited partners do not. In this scenario, Derry's death will not result in the automatic dissolution of the partnership, but Eleni and Frey will need to consent to continuing the partnership without Derry. Therefore, the partnership can continue only if Eleni and Frey consent.

Question 4

Nazih and Ovidia are limited partners in Physicians Medical Center, a limited partner?ship. In terms of the firm's books and information regarding partnership business, Nazih and Ovidia are entitled to

Accepted Answer

The answer of Nazih and Ovidia are limited partners in...

Question 5

Quisa and Reilly are partners in Sport Bikes, which rents and sells bikes, bike accessories, and related gear. Quisa manages the business. Unless the partnership agreement states otherwise, Quisa is

Accepted Answer

In a partnership, unless the partnership agreement specifies otherwise, partners are not entitled to compensation for participating in the management of the business. They share in the profits and losses according to their partnership agreement.

Question 6

Buckley is a general partner in Cut-Rate Shipping, LLLP, a limited liability lim?ited partnership, which cannot pay its debts. Buckley is personally li?able for the debts

Accepted Answer

The answer of Buckley is a general partner in Cut-Rate...

Question 7

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 at any time, though it may not be without consequences.

Question 8

Nikki and Orlando are limited partners in Port City Exports, a lim?ited part?ner?ship. To avoid personal liability for partnership obligations, they must not

Accepted Answer

Limited partners are only responsible for contributing funds or property to the partnership and are not allowed to participate in the management of the firm. If they do participate in management, they may be held personally liable for the partnership's obligations. Choices A and B are incorrect because acquiring an interest in the partnership and contributing property are allowed and expected actions for partners. Choice C is partially correct because limited partners should not engage in activities that go beyond the scope of the partnership's business, but it is not the best choice as it is not the primary factor that determines personal liability.

Question 9

Corbin, a partner in Dentists & Orthodontists Clinic, applies for a loan with Evermore Bank allegedly on the firm's behalf but without the authorization of the other partners. Evermore knows that Corbin is not authorized to take out the loan. If Corbin defaults on the loan, liability for its unpaid amount will be imposed on

Accepted Answer

Since Corbin applied for the loan without authorization, he acted outside of his authority as a partner. Therefore, he is solely responsible for the loan and any liability that arises from defaulting on it. The other partners (Doctors) did not give their consent or authorize the loan, so they are not liable for its repayment. Evermore Bank also knew that Corbin did not have authority to take out the loan, thus they cannot hold Doctors liable.

Question 10

Bayside Marina Company and Canoes & Kayaks Inc., share officers, directors, employees, property, and equipment. In reliance on Bayside Marina's reputation, Delivery Transport Inc. contracts to perform services for Canoes & Kayaks, but the firm does not pay. In terms of liability to Delivery Transport, a court is most likely to treat Bayside Marina and Canoes & Kayaks as

Accepted Answer

Bayside Marina and Canoes & Kayaks share officers, directors, employees, property, and equipment, which can lead others to believe they are a partnership. Since Delivery Transport Inc. relied on the reputation of Bayside Marina, the court may treat Bayside Marina and Canoes & Kayaks as a partnership by estoppel, holding them liable for the debts of Canoes & Kayaks.

Question 11

Hillside Vineyards is a family limited liability partnership. All of the partners must be

Accepted Answer

According to the definition of a limited liability partnership, partners can be both natural persons and persons acting as fiduciaries (such as trustees) for natural persons. Therefore, option A and C are incorrect. There is no requirement for partners to be related, so option D is also incorrect. Option B includes both natural persons and fiduciaries, making it the best choice.

Question 12

Oliana is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Oliana does not participate in, know about, or ratify, Oliana would be liable for

Accepted Answer

In a general partnership, partners have joint and several liability for all partnership obligations, regardless of whether they participated in, knew about, or ratified the obligation. This means that any partner can be held personally responsible for the entire amount of a partnership debt or obligation. Therefore, Oliana would be liable for all partnership obligations, jointly and severally, even if she did not participate in or know about them.

Question 13

Fact Pattern 37-1B (Questions B10-B13 apply)
Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that 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.
-Refer to Fact Pattern 37-1B. Bryn's dissociation from the firm results in

Accepted Answer

When a partner dissociates from a partnership, the partnership can either dissolve or continue to exist with the remaining partners. In this case, Bryn's dissociation from the firm does not automatically terminate the firm's legal existence. The partnership agreement requires the consent of the other partners for an assignment of interest to a creditor, so Bryn cannot transfer her interest to a creditor without their approval. Rather, the partnership may choose to buy out Bryn's interest in the firm, as provided for in the partnership agreement.

Question 14

Round-Up Ranch and Smith & Jones, Accountants, are limited liability partnerships (LLPs). The major features of an LLP are that it limits the personal liability of the partners and

Accepted Answer

The passage states that one of the major features of an LLP is that it limits the personal liability of the partners, and it also mentions that LLPs can continue as pass-through tax entities. This suggests that choice A is the correct answer, as it directly relates to one of the key features of an LLP. Choices B, C, and D are all incorrect because the passage does not support any of these statements.

Question 15

Noah and Orin do business as Personnel Providers, an employment agency. In most states, for purposes of suing and being sued, Personnel Providers, which is a partnership, would be treated as

Accepted Answer

The partnership is considered an entity separate from the individual partners for the purposes of suing and being sued. This means that Personnel Providers can enter into contracts, be held liable for debts, and be sued in its own name, rather than as an aggregate of the individual partners.

Question 16

Fact Pattern 37-1B (Questions B10-B13 apply)
Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that 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.
-Refer to Fact Pattern 37-1B. Bryn, Cornell, and Duke decide to admit Giselle as a new partner in Equity Lending. Giselle's liability for partnership debts incurred before her admission is

Accepted Answer

Giselle's liability for partnership debts incurred before her admission is limited to her capital contribution to the firm, as she is not liable for any debts incurred before her admission as a partner.

Question 17

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

Accepted Answer

While goodwill is typically considered an important element of a partnership, it is not an essential element. The essential elements of a partnership include a sharing of profits and losses, joint ownership of the business, and an equal right to management in the business.

Question 18

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, management decisions are typically made by a majority vote of the partners. Therefore, in this case, a majority of the partners (which would be 6 out of 10) must agree to the decision. It is not necessary for both Jill and Amy to agree, nor is it sufficient for only one of them to agree.

Question 19

Pualani and Quentin do business as partners in Rio Vista Builders, a residential construction firm. For federal income tax purposes, Rio Vista would be treated as

Accepted Answer

Rio Vista Builders is a partnership, which is classified as a pass-through entity for federal income tax purposes. This means that the partnership itself does not pay income taxes, but instead, the profits and losses of the partnership flow through to the individual partners' tax returns, and they are responsible for paying taxes on their share of the partnership income.

Question 20

Sable and Rex agree while talking on the phone to form a partner?ship-The Home Source-to deal in transfers of real property. To be enforceable, their agreement must

Accepted Answer

A verbal agreement to form a partnership dealing with real property transfers is not enforceable under the statute of frauds, which requires such agreements to be in writing to be enforceable. Therefore, the agreement must be in writing to be legally binding.

Quiz 37: Partnerships and Limited Liability Partnerships