Deck 25: The Business Entity: an Introduction

Question 1

Under the RUPA,a dissociation takes place whenever a partner is no longer associated with the running of the firm.

Answer 1

True

Question 2

Jean and Bert enter into a written agreement to establish their partnership.Under RUPA,the written agreement has to specify that their partnership has a continuity of existence.

Answer 2

False

Question 3

In a case involving the issue of whether a partnership actually existed,equal management is prima facie evidence.

Answer 3

False

Question 4

Under the RUPA,partnerships at will are automatically dissolved when a partner dies or enters bankruptcy.

Question 5

Under RUPA,certain types of profit sharing,such as the repayment of a debt,not rise to the level needed to create a partnership.

Question 6

A limited liability is the easiest business organization to form.

Question 7

Under the UPA aggregate theory,a partnership exists as a unique individual person that is separate from the identities of the partners.

Question 8

Under RUPA,an association of two or more persons means that the partners have to be 'flesh and blood' individuals.

Question 9

John,Sam,and Mark decided to form a limited partnership (LP)with John being the general partner,and Sam and Mark as limited partners.The LP is sued and the court awards $100,000 against the LP.All three partners are jointly and severally liable.

Question 10

In the Classic Case,The Liability Blues,PNC Bank v.Michael Farinacci,the main issue was whether the defendants be held jointly liable under the old law (UPA)or jointly and severally liable under the new law (RUPA).

Question 11

Attorneys Joseph,Sam,Nayeli,and Juanita agree to form a limited liability partnership (LLP),JUSTICE LAWYERS,LLP and each contribute $10,000 to the startup of this firm.In this LLP,each partner is personally liable because of the capital contribution,and may be sued in a separate action or in a joint action.

Question 12

Under the Uniform Partnership Act,when a partner is deceased,her interest in real property became a tenancy in partnership held by the partnership and passed to the surviving partners.

Question 13

Mia works as an assistant in a pharmacy.Her receipt of monthly wages,by itself,makes her a partner in the pharmacy.

Question 14

The capital contributions of all partners are considered to be the property of the partnership.

Question 15

Tom,Lori,Joseph,and Carol agree to do business together,but haven't agreed on anything about profits.The group appoints Tom as 'leader.' A court would consider Tom's appointment by itself as clear evidence of a partnership.

Question 16

Under the UPA,partners are jointly and severally liable for damages resulting from breach of contract actions.

Question 17

A term partnership is one that any partner may leave without liability.

Question 18

One of the main disadvantages of the sole proprietorship is that the owner has unlimited liability.

Question 19

Under the RUPA,a term partnership dissociation occurs when a partner files bankruptcy.

Question 20

RUPA requires that a partnership agreement be in writing to be enforceable and binding on the partners.

Question 21

Arian is a sole proprietor and owes a number of business creditors.The business creditors may sue to:

A)only take Arian's business assets.
B)only take Arian's personal assets.
C)take both Arian's business and personal assets.
D)not take any assets,but only the profits of the business.

Question 22

In a limited partnership,general partners:

A)take an active part in management,but have unlimited liability for the firm's debts.
B)take an active part in management,but have no liability for the firm's debts.
C)take an active part in management,but are nonparticipating investors.
D)take no part in management,but contribute cash or property.

Question 23

Under the UPA,a partner in a tenancy in partnership has all the following rights except:

A)an equal right to possess and use specific partnership property for partnership purposes,but not for that partner's personal use.
B)rights in partnership property that are not subject to attachment for personal debts.
C)in the case of a partner's death,the right to have the deceased partner's interest in real property held by the partnership pass to the surviving partners.
D)the right to be a co-owner of partnership property with no interest in partnership property which can be transferred,either voluntarily or involuntarily.

Question 24

A partner's ________ is her share of the ________ plus any ________,which is any remaining funds after dissolution.

A)vested property right;profits;surplus
B)economic interest;profits and losses;surplus
C)property;surplus;losses
D)economic interest;surplus;vested property rights

Question 25

When forming a limited partnership,it is critical to know that:

A)general partners have limited liability for the firm's debts.
B)a certificate of limited partnership must be filed with the Secretary of State's office.
C)limited partners are participating investors.
D)general partners can only take a limited part in the management of the firm.

Question 26

The RUPA has eliminated:

A)all management rights enjoyed by partners.
B)the concept of tenancy in partnership.
C)partnership entity status.
D)each partner's interest in the firm.

Question 27

Susan and Stanley are in a partnership called Easy Partnership.Susan purchases a truck with her personal funds with title to the truck naming Easy Partnership.Who owns the truck?

A)Susan
B)Susan and Stanley
C)Easy Partnership only
D)Both Susan and Easy Partnership

Question 28

Thomas invests $10,000 in the Thomas and Trudy partnership named Tremendous Enterprise.Thomas needs $2,000 for medical expenses and insists that he is entitled to withdraw that amount immediately from what he has invested.Trudy asserts that the $10,000 investment is partnership property.Under the RUPA,who owns the $10,000?

A)Tremendous Enterprise
B)Thomas only
C)Thomas individually and Trudy individually
D)The $10,000 is owned by no one,but is merely a future interest of Thomas.

Question 29

Charlotte is declared mentally incompetent by a court and is unable to participate as a partner in AMLAP Enterprises.Charlotte wants to leave the AMLAP partnership,but is contractually obligated for three more years.Can Charlotte leave the AMLAP partnership?

A)Yes,she can do so without any liability to the partnership.
B)No,there is no right to leave.
C)Yes,she has a right to leave,but is liable for breach of contract.
D)No,there is no right to leave unless all the partners agree.

Question 30

Jack has an auto accident while on business for Small Enterprises,an RLLP consisting of Jack and Alex.Who is liable for damages resulting from the auto accident?

A)Small Enterprises only
B)Jack only
C)Jack and Alex only
D)Small,Jack,and Alex

Question 31

Jackie is interested in the property of the Big Partnership,in which Jackie is a full partner.She wants to mortgage the property in order to collateralize loans for the organization.However,not all the partners agree with Jackie.What is Jackie's legal position with regard to the mortgage under UPA?

A)Her partners' non-agreement is legally irrelevant.
B)Jackie's interest in the partnership property cannot be assigned.
C)Jackie can mortgage her share of the organization's property.
D)UPA does not address this issue,and a court will decide on a case by case basis.

Question 32

Alan and Baker are disappointed in the profitability of their A and B Partnership.They want to join their partnership with the X and Y Partnership.Is it possible for a partnership to be a partner?

A)Yes
B)No
C)Yes,if the partners agree to personally guarantee the debts of the new partnership
D)No,because a partner must be an entity

Question 33

Under RUPA,a ________ takes place whenever a partner is no longer associated with the running of the firm.

A)dissolution
B)dissociation
C)rescission
D)devolution

Question 34

Under the RUPA,a partnership:

A)has continuity of existence.
B)is considered an entity in all situations.
C)is no longer viewed as an aggregate in relation to liability.
D)has no liability for the obligations made by its partners.

Question 35

Tina is a limited partner in Aon Enterprises,a limited partnership,while Mark is a general partner.Tina assumes management duties for three weeks,while Mark is recovering from heart surgery.Most likely,who or what has liability for partnership actions during this period?

A)Aon Enterprises only
B)Mark only
C)Tina only
D)Mark and Tina

Question 36

In a general partnership,which of the following is true of limited partners?

A)Limited partners take an active part in the management of the firm.
B)A limited partner's nonpartnership property can be used to satisfy any debts owed by the firm.
C)Limited partners are nonparticipating investors.
D)Limited partners have unlimited liability for the firm's debts.

Question 37

John knows that The Franklin Enterprises Partnership,in which John is a partner,is interested in purchasing a particular tract of land for a business location.Can John lawfully have his aunt buy the land,so that she may resell the land to Franklin Partnership?

A)No,it violates John's duty of care.
B)Yes,assuming the price to Franklin was a fair market price.
C)No,it violates John's duty of loyalty.
D)Yes,the aunt is not a Franklin partner and has no loyalty to it.

Question 38

The Titanic Partnership's loan from Big Bank is structured so that payments on the loan are made out of profits and the amounts of the payments vary according to profitability.Which of these best describes this arrangement?

A)This is evidence of a partnership between Titanic and Big Bank;additional evidence may overcome this assumption.
B)This is conclusive evidence of a partnership between Titanic and Big Bank.
C)This may be evidence of a partnership between Titanic and Big Bank.
D)This is not evidence of a partnership between Titanic and Big Bank.

Question 39

Alan and Delen enter into a partnership agreement with a $10,000 capital contribution.Six months later,Delen loans Alan $1,000.The loan is a:

A)partnership capital contribution.
B)loan to the partnership,rather than to Alan.
C)loan to both the partnership and to Alan.
D)personal loan to Alan only.

Question 40

Which of the following is an advantage of a sole proprietorship?

A)The owner of a sole proprietorship has no liability.
B)The owner of a sole proprietorship has complete control over the business.
C)The sole proprietorship's existence does not depend entirely upon the sole proprietor.
D)Owners of sole proprietorships can raise a lot of cash quickly for expansion purposes.

Question 41

Striuli asks Sarducci to become a limited partner in Avionics Ltd. ,a limited partnership that will sell computer software.Both Striuli and Sarducci delay filing the certificate of limited partnership.If the limited partnership is sued before the certificate is filed,will Sarducci be named as a defendant? Explain.

Question 42

Anita wants to go into business for herself,but does not know how to start.Discuss the best way for Anita to begin.

Question 43

Wellington and Haggerty were partners in a souvenir shop.It is a traditional general partnership.While on a regular delivery trip,Wellington caused an accident when he ran a red light.Haggerty claimed that only Wellington was liable for the injuries sustained by the other driver.Was Haggerty correct? Explain.

Question 44

Jackson,Thomas,and Susan are partners in an investment firm.There is a vote taken to sell government bonds owned by the partnership,with Thomas and Susan opposed and Jackson in favor.Jackson decides to sell the government bonds and the partnership loses $50,000.Discuss Jackson's liability to the partnership.

Question 45

Due to a typing mistake,Delta,a limited partner in Derby Limited Partnership,is identified in the certificate of limited partnership as a general partner.Discuss how this error should be corrected.

Question 46

Brylea is paid 10% of the net profits by Delta Partnership as compensation for her work for Delta.Delta ceases business,owing many creditors who attempt to collect from Brylea,asserting that Brylea is a partner.Discuss Brylea's partnership status and liability.

Question 47

Todd and Walker form a venture to operate snow cone stands in Smallville.The stands are only open for five warm weather months.The remainder of the year,Todd and Walker do no business together.Discuss the legal status of their business.

Question 48

Morgan,Slater,and Jergenston were partners in a legal consulting partnership.Jergenston pocketed $500,000 he had solicited in bank loans for expanding the partnership.When Morgan and Slater discovered Jergenston's impropriety,Jergenston told them,"Tough luck,but as partners,we are jointly liable on this debt and must pay off the $500,000 plus interest together." Was Jergenston correct? Explain.

Question 49

Tangent Enterprises is a partnership consisting of Delen,Javid,and Kaya.Kaya leaves the partnership to do volunteer work in Africa.Discuss the legal status of Tangent Enterprises.

Question 50

A large machine is purchased by Vida and is sometimes used for her personal work and sometimes used for work by the partnership of which she is a member.Discuss what factors a court will consider in deciding if the machine is partnership property.