Exam 21: Forms of Business Organization

Which of the following is the term for the activity of completing unfinished partnership business, collecting and paying debts, collecting partnership assets, and taking inventory?

When is the dissolution state of a partnership considered complete?

Reference - Grooming Losses. Wally, Beverly, and Matthew formed a partnership to groom dogs. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. The articles of partnership did not allocate profits or losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to a review and listing of all partnership assets and profit. Beverly and Matthew denied that Wally was entitled to a review of the books and stored them in a safe deposit to which only Beverly had a key. They claimed complete innocence of any wrongdoing. Which of the following is correct regarding Matthew's claim to additional compensation based upon the amount of work he was doing?

Only officers in a limited liability company have a say in the management of the company.

When the articles of partnership are silent, which of the following property rights do partners have?

Under which of the following circumstances may a partnership be dissolved by an act of court?

Which of the following occurs during a provisional dissolution of a partnership in Spain?

A general partner has unlimited personal liability for the debts of the limited partnership.

Joint and several liability means that partners must be sued jointly.

Reference - New Associate. Rick was a newly hired associate in a small law firm in his town which was operated as a partnership. The partners were Paula, Sam, Susie, and Jason. Bob, who ran an exotic pet store, had a complex legal problem involving the importation of venomous snakes from South America and came to the office to see Paula. Rick was walking by Paula's office at the time and was pleased and excited when Paula introduced him to Bob as her newest partner. Based on Paula's advice that it was perfectly legal for him to import the snakes and that he had no legal liability for snake bites, Bob imported some particularly dangerous snakes. One bit a customer resulting in a significant judgment against Bob in favor of the customer. Bob also had significant problems with the federal government for illegal importation activity. On the basis that Paula had told him that he had no legal liability for snake bites and that importing the snakes was perfectly legal, Bob sued the law firm partnership along with Paula, Sam, Jason, and Rick. Paula admits that she gave poor advice but says that she had no prior experience with venomous snakes. Rick tells you that he was a lowly associate, had never done work for Bob, and only met him briefly. Which of the following is true if the partnership pays a judgment obtained by Bob against it?

Under the Uniform Partnership Act, in regard to an agreement with a third party, which of the following is true under the regarding personal liability of partners for obligations of the partnership?

How is a limited partnership created, and what is the consequence if proper procedures are not followed?

Unless otherwise agreed in the articles of partnership, which of the following are rights partners have in regard to their interactions with other partners?

Ellie is a partner in a law firm. She does not have authority to make purchases for the firm. She, however, goes to ABC Office Supply and purchases a computer on the firm account. She later quits the law firm and takes the computer with her. Assuming that ABC Office Supply knew she was a partner but did not know that she lacked authority to make purchases, what remedies are available to ABC and why?

Describe the liability, if any, of incoming partners.

Which of the following may cause the dissolution of a partnership?

A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs based upon that failure.

Reference - Fish Fiasco. Matt agreed to be a limited partner in Susie and Bill's business of importing tropical fish. Matt contributed $10,000 to the partnership as his capital contribution. The partnership made a profit of $30,000 the first year. Matt was paid nothing. When he inquired, Susie told him that a limited partner was only entitled to a share of profits as approved by the general partners and that perhaps things would be better the next year. The next year, however, importation was banned because of a fish disease, and the partnership lost money and owed debts of $60,000. At the end of the year, Susie and Bill asked Matt to contribute $20,000 to cover the debts. When Matt complained about the amount, Bill told him that he and Susie were being overly reasonable and that he was legally liable for an even larger percentage. In an attempt to keep the business afloat, Matt told Susie and Bill that they should consider suing a customer who had not paid a large account. Susie and Bill replied, however, that they were morally opposed to lawsuits and that they had the final say on litigation. Assume that legally Matt has the rights and liabilities of a limited partner. Which of the following is true regarding Matt's entitlement to share in profits?

Reference - Big Spender. Wally was a partner in XYZ law firm. He decided to withdraw from the partnership because he wanted to retire early somewhere in the Caribbean. The partnership agreement of XYZ law firm did not specify the objective or duration of the partnership. Although Wally gave proper notice prior to his withdrawal and the dissolution of the partnership, the other partners claimed that he acted illegally. Wally was angry and decided to get even. He went to the office supply store at which he typically purchased supplies on account for the firm. He purchased several cameras, a computer, and other items which he placed on the firm account. Wally just smiled when Sam, the manager at the store, told Wally that he really appreciated the law firm's business. The next day Wally headed for the Caribbean and cannot be located. Sam later requests that XYZ firm pay the bill for Wally's purchases. The law firm, whose members had decided to continue the partnership after the dissolution resulting from Wally's resignation, refused on the basis that Wally was not a partner when the purchases were made. Sam says that he thought Wally was a partner and that he expects to be paid immediately. What type of partnership was XYZ law firm?

In a dissolution of a partnership, if a noncontinuing partner holds 20% of the partnership in which assets after the payment of debt are valued at $10,000, how much will the partner receive?