Question 1

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

On dissolution, creditors like Graves Engineering, Inc. have priority in receiving payment from the partnership's assets before any distribution is made to partners like Fink. Therefore, Graves would be paid first, and Fink would receive any remaining portion of the assets.

Question 2

Jack and Kyra are partners in Law Firm,LLP,a limited liability partnership.Jack supervises Kyra,who negligently fails to appear in court on behalf of Milo,a client.Liability to Milo rests with

Accepted Answer

In a limited liability partnership, partners are generally not liable for the negligence of other partners. However, if a partner supervises another and fails to prevent negligence, both the supervising partner and the negligent partner can be held liable.

Question 3

Fact Pattern 37-1A (Questions A3-A4 apply)
Desi starts up eSites,an Internet service,and leases office space in a building owned by Fred.The lease requires Desi to pay Fred a base rental of $1,250,plus 10 percent of eSites' profits,each month.The term is two years.Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50,plus a commis?sion of 10 percent of the prof?its.The term is also two years.
-Refer to Fact Pattern 37-1A.Desi and Fred are

Accepted Answer

Fred does not have an ownership interest or management rights in eSites, which are essential elements for a partnership.

Question 4

Vasili is considering forms of business organization for Vasili's Designs,an ar?chitectural firm.An advantage of a limited liability partnership is that partners may be able to avoid personal liability for

Accepted Answer

A limited liability partnership allows partners to avoid personal liability for any partnership obligation. This means that each partner's personal assets are protected from any liabilities and debts incurred by the partnership. Therefore, if the firm faces financial difficulties or legal issues, the personal assets of each partner will not be at risk.

Question 5

Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite.In most states,a limited partnership will be created when

Accepted Answer

A limited partnership is created when a certificate of limited partnership is filed with the state. This certificate typically includes information about the partnership's structure, including the names and roles of the general and limited partners, as well as the amount of capital contributed by each partner.

Question 6

Rona and Savannah do business as Treasure Island Traders.In acting on the firm's behalf in a deal with Unlimited Potential,Inc.,Rona makes an honest error in overestimating the profit.To her firm,Rona is

Accepted Answer

Rona made an honest error while acting on behalf of the firm. Therefore, she is not liable for any breach of duty in this scenario.

Question 7

Noah and Orin do business as Pest Control Partners.In most states,for the purposes of suing and being sued,Pest Control Partners would be treated as

Accepted Answer

Pest Control Partners is likely to be treated as an entity for the purpose of suing and being sued. This means that it can enter into contracts, sue and be sued, and own assets and liabilities, separate from its individual partners.

Question 8

Megan and Nicole do business as One World Realty.In acting on the firm's behalf in a deal with Property Acquisition Company,Megan fails to account for the profit.To her firm,Megan is

Accepted Answer

Megan has breached her duty of loyalty by failing to account for the profit earned in the deal with Property Acquisition Company. As a partner in One World Realty, it was her duty to act in the best interest of the firm and not hold onto profits for personal gain. This breach of loyalty makes her liable to the firm.

Question 9

Guy and Hanna do business as G-H Associates.If G-H is a partnership,it is governed by the Uniform Partnership Act

Accepted Answer

The Uniform Partnership Act (UPA) governs partnerships in the absence of an express agreement. If there is an express agreement, the terms of the agreement will govern the partnership instead of the UPA.

Question 10

Fay is admitted to Global Associates,an existing partnership.A partnership debt incurred before the date of her admission comes due.Fay is

Accepted Answer

The answer of Fay is admitted to Global Associates,an existing...

Question 11

Corbin,a partner in Doctors Medical Clinic,applies for a loan with Evermore Bank allegedly on Doctors' behalf but without the authorization of the other partners.Evermore knows that Corbin is not authorized to take out the loan.Corbin defaults on the loan.Liability for its unpaid amount is imposed on

Accepted Answer

Corbin acted without authorization and Evermore knew this, so they cannot hold Doctors liable for the unpaid loan amount. Corbin alone is responsible for the default.

Question 12

Fact Pattern 37-1A (Questions A3-A4 apply)
Desi starts up eSites,an Internet service,and leases office space in a building owned by Fred.The lease requires Desi to pay Fred a base rental of $1,250,plus 10 percent of eSites' profits,each month.The term is two years.Desi hires Gwen to work at eSites' tech support desk at an hourly wage of $12.50,plus a commis?sion of 10 percent of the prof?its.The term is also two years.
-Refer to Fact Pattern 37-1A.Desi and Gwen are

Accepted Answer

Gwen does not have an ownership interest or management rights in eSites, which are important factors in determining whether a partnership exists. The fact that she receives a commission based on profits does not automatically make her a partner.

Question 13

Fact Pattern 37-2A (Questions A9-A10 apply)
Luann and Mace are partners in Networx,a computer peripherals firm.
-Refer to Fact Pattern 37-2A.Mace dissociates from Networx.Luann signs a con?tract with Physik Drives,a wholesale component supplier,apparently on Networx's behalf.Physik does not know of Mace's dissociation.The contract is binding on

Accepted Answer

The contract is binding on Luann, Mace, and Networx because Physik Drives was not aware of Mace's dissociation, and thus, Mace is still considered a partner with apparent authority to bind the partnership.

Question 14

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 loses limited liability protection if he or she participates in the management of the business. Therefore, if a Venture limited partner acts as the firm's manager, they would lose their limited liability. The other options listed do not result in a loss of limited liability.

Question 15

Sable and Rex agree while talking on the phone to form a partner?ship to deal in transfers of real property.Their partnership agreement is legally binding

Accepted Answer

In order for a partnership agreement to be legally binding, it must be reduced to writing. While filing a copy of the agreement in the appropriate state office is a requirement for certain types of businesses (such as corporations), it is not necessary for a partnership. Valid consideration is also required for a contract to be binding, but this does not necessarily need to be exchanged at the time of forming the partnership agreement. Therefore, the correct answer is B.

Question 16

Kelly,Lars,and Mona agree to be partners in Neighborhood Delivery Service (NDS),splitting the profits equally.Kelly contributes 67 percent of the capital.When NDS is dissolved,its liabilities are greater than its assets.The losses are paid by

Accepted Answer

In a partnership, unless otherwise agreed, losses are shared in the same proportion as profits. Since Kelly, Lars, and Mona agreed to split profits equally, they will also share losses equally.

Question 17

Hud and Iggy form Jerry-Bilt Construction to enter into a contract to build one bridge.Under their partnership agreement,Jerry-Bilt is to dissolve when the bridge is built.Iggy signs a contract for the firm to build a second bridge.Jerry-Bilt

Accepted Answer

The partnership agreement stated that Jerry-Bilt would dissolve when the bridge is built. As soon as the first bridge is built, the partnership will be dissolved, and any contracts entered into after that point will not be valid for the partnership. Therefore, the second contract signed by Iggy will not be a valid agreement for Jerry-Bilt Construction.

Question 18

Lucy is a limited partner in Metro Contractors,a limited partnership,which cannot pay its debts.Lucy is personally liable for the debts

Accepted Answer

As a limited partner, Lucy is only personally liable for the debts to the extent of her capital contribution. This means that she is only liable for the amount of money she originally invested in the partnership and not for any additional debts or liabilities incurred by the partnership.

Question 19

Fact Pattern 37-2A (Questions A9-A10 apply)
Luann and Mace are partners in Networx,a computer peripherals firm.
-Refer to Fact Pattern 37-2A.Luann signs a contract with Oleo Chips,a retail component supplier,apparently on Networx's behalf.The contract is binding on

Accepted Answer

As a partner, Luann has the authority to bind the partnership (Networx) in contracts with third parties like Oleo Chips, making the contract binding on both partners, Luann and Mace, as well as the partnership itself.

Question 20

Clu,Dolf,and Elton do business as Fertile Valley Farm.Clu's relationship to the firm ends,but it continues to do business.This is

Accepted Answer

This is dissociation, as it refers to the withdrawal of one partner from a partnership while the business continues to operate under the same name and with the remaining partners.

Quiz 37: Partnerships and Limited Liability Partnerships