Deck 35: Limited Partnerships and Limited Liability Limited Partnerships

Question 1

A limited partnership may have an unlimited number of partners.

Answer 1

True

Question 2

So long as there is at least one general and one limited partner,there are no restrictions on the number of each type of partner in a limited partnership.

Answer 2

True

Question 3

Limited partnerships properly registered in one state are generally free to operate in all states without further filing or registration requirements.

Answer 3

False

Question 4

A partner or creditor of the limited partnership may not bring a lawsuit to enforce a partner's promise to make a contribution.

Question 5

The creation of a limited partnership is informal and therefore no public disclosure is necessary.

Question 6

The limited partnership is formed when the certificate of limited partnership is filed.

Question 7

A trust may be a general partner in a limited partnership.

Question 8

It is all right to abbreviate the words limited partnership as long as all other formation requirements have been met.

Question 9

In a limited partnership,the partners can agree that all partners have limited liability.

Question 10

A person may be considered a limited partner and a general partner in the same partnership at the same time.

Question 11

Where a partner who erroneously believed she was a limited partner dealt with a third party who believed in good faith that she was a general partner,the partner will be treated as a general partner.

Question 12

A limited partnership must properly comply with all statutory requirements in order to be effectively formed.

Question 13

Limited partnerships have both general partners and limited partners.

Question 14

Under the Revised Uniform Limited Partnership Act,two or more persons must execute and sign a certificate of limited partnership.

Question 15

General and limited partners may be given unequal voting rights.

Question 16

The rights between partners in a limited partnership are unaffected by a failure to properly comply with filing requirements.

Question 17

Limited partners are liable for partnership debts.

Question 18

A master limited partnership is one that is traded on an organized securities exchange such as the New York Stock Exchange.

Question 19

A corporation may be a limited partner in a limited partnership.

Question 20

The firm name of a limited partnership may include the surname of a limited partner if the business was carried on under that name before the admission of the limited partner.

Question 21

Which of the following best describes the Revised Uniform Limited Partnership Act?

A) It is a federal statute governing all limited partnerships.
B) It is a standard law passed by most states that generally applies to limited partnerships except where the limited partnership agreement provides a different provision.
C) It is a standard law passed in every state that applies to limited partnerships and takes precedence over any contrary provisions in a limited partnership agreement.
D) It is a federal statute that states can choose to implement or not.

Question 22

Which of the following is true regarding the liability of the partners in a limited partnership?

A) Both the limited and general partners have unlimited liability for the partnership debts.
B) Neither the limited nor the general partners have unlimited liability for the partnership debts.
C) The limited partners have limited liability and the general partners have unlimited liability for the partnership debts.
D) The limited partners have unlimited liability and the general partners have limited liability for the partnership debts.
E) If a corporation is a partner,its shareholders have unlimited liability for the partnership debts.

Question 23

A limited partner may be an agent of the limited partnership.

Question 24

Which of the following is a consequence of defective formation of a limited partnership?

A) Contracts entered into by the partnership will be void.
B) Contracts entered into by the partnership will be voidable by the other party.
C) The rights as between the partners will be different based on the defective formation.
D) A partner who would have been a limited partner,might have unlimited liability to a third party who conducted business with a good faith belief that the partner was a general partner.
E) A partner who would have been a limited partner will have unlimited liability to all third parties who conduct business with the partnership during the period of defective formation of the limited partnership.

Question 25

A limited partner is liable for losses regardless of his or her contribution.

Question 26

Which of the following is true about articles of limited partnership?

A) The articles must be filed along with the certificate of limited partnership.
B) The articles of limited partnership apply to the general partners only.
C) Without articles of limited partnership,the partnership will be treated as a general partnership.
D) If there are no articles of limited partnership,the certificate of limited partnership will serve as the articles.

Question 27

The general partners of a limited partnership have unlimited liability for the debts and obligations of the limited partnerships.

Question 28

Which of the following best describes who may be a partner in a limited partnership?

A) an individual only
B) an individual and a corporation only
C) an individual,corporation,and a limited partnership only
D) an individual,corporation,limited partnership,and an estate
E) an individual,corporation,and an estate only

Question 29

The limited partnership can waive the right of partners to approve the admission of new general partners.

Question 30

Withdrawal of a limited partner causes dissolution of a limited partnership.

Question 31

A limited partnership is required to have at least:

A) two limited partners
B) one general partner and two limited partners
C) one general partner and one limited partner
D) two general partners
E) two partners who can be any mix of limited and general partners

Question 32

A limited partnership agreement can provide that withdrawal of a general partner does not cause dissolution.

Question 33

What is the effect of having a corporation as the general partner of a limited partnership?

A) The limited liability of the corporation will result in the limited partners having greater liability than they would otherwise.
B) Each shareholder of the corporation will be treated as a limited partner of the limited partnership.
C) Each shareholder of the corporation will be treated as a general partner of the limited partnership.
D) The liability of the corporate general partner will be limited to the amount of its assets.

Question 34

Which of the following are two names for the same item?

A) certificate of limited partnership and offering circular
B) certificate of limited partnership and limited partnership agreement
C) limited partnership agreement and articles of limited partnership
D) offering circular and articles of limited partnership
E) certificate of limited partnership and articles of limited partnership

Question 35

Which types of partners in a limited partnership should participate in management?

A) general partners only
B) limited partners only
C) both general and limited partners
D) general partners only,unless there are no general partners,and in that case,limited partners participate in management

Question 36

Which of the following is true about a corporation being a general partner in a limited partnership?

A) A corporation cannot be a general partner in a limited partnership.
B) A corporation can be a general partner in a limited partnership only if it is not the sole general partner in the limited partnership.
C) A corporation can be a general partner in a limited partnership only if there is at least one other general partner that is not a corporation.
D) A corporation can be a general partner in a limited partnership even if it is the only general partner.

Question 37

Which of the following is not required to be included in a certificate of limited partnership?

A) the general character of the business
B) the amount of capital contributed by each partner
C) the name and business of each limited and general partner
D) the portion of profits to be distributed to each limited and general partner
E) the latest date on which the limited partnership is to dissolve

Question 38

A limited partner may not act as a consultant or advisor to a general partner regarding the limited partnership,or he or she will lose his or her limited liability.

Question 39

The Revised Uniform Limited Partnership Act provides that,in distributing the assets of a dissolved partnership,the general partners have priority over limited partners.

Question 40

Each limited partner has the right to obtain from the general partners true and full information regarding the state of the business.

Question 41

Which partners have an unlimited right to obtain information about the partnership's business?

A) limited partners only
B) general partners only
C) both general and limited partners
D) neither general nor limited partners

Question 42

Where there is no agreement in a limited partnership regarding the allocation of profits,how are they allocated?

A) equally among all the partners
B) one-half equally among the general partners,one half equally among the limited partners
C) among all partners,in proportion to capital invested in the partnership
D) one-half among limited partners in proportion to capital invested,and one half among general partners in proportion to capital invested
E) in accordance with which partners generated the profits

Question 43

Can a limited partnership agreement provide for a different distribution priority than set out in the Revised Uniform Limited Partnership Act?

A) Yes; any differences are permitted so long as agreed to by all partners.
B) Yes; any differences are permitted so long as agreed to by the general partners.
C) Yes; so long as creditors retain their top priority.
D) No; differences are never permitted.
E) No; except for differences that benefit the limited partners.

Question 44

Which of the following must occur upon the conclusion of the winding-up process of a limited partnership?

A) The general partners must post a bond to cover potential claims against the partnership.
B) A certificate of cancellation must be filed with the secretary of state in the state of organization.
C) To protect their limited liability,the limited partners must give notice of the termination of the partnership to those parties with whom the partnership has dealt.
D) The limited partners must receive their capital investment before the general partners receive theirs.

Question 45

What is a master limited partnership?

A) It is a limited partnership whose partnership interests are traded on a stock exchange.
B) It is a limited partnership with at least 10 general and 10 limited partners.
C) It is a limited partnership that is taxed as a corporation.
D) It is a limited partnership that has been in existence for at least 20 years.
E) It is a limited partnership where all the partners have expressly agreed to not be bound by the provisions of the Revised Uniform Limited Partnership Act.

Question 46

Joel is a limited partner in the Snow Bird Limited Partnership.He invested $5,000 to buy his interest.Joel is one of 10 partners,two of whom are general partners.Snow Bird is now insolvent,with debts exceeding assets by $96,000.The partnership creditors sue all the partners for these debts.How much additional money must Joel contribute?

A) $0
B) $4,600
C) $5,000
D) $9,600
E) $96,000

Question 47

The Black Squirrel limited partnership has been in operation for many years,but has recently fallen on hard times.The partners have decided to dissolve,although there are few assets remaining in the partnership.Shortly after the partnership filed its certificate of limited partnership,the partners had the foresight to incorporate into their partnership agreement a provision that,in the event of dissolution,the assets would be distributed in payment of claims first to limited partners,then to general partners,then to creditors.Hilda is a limited partner and feels relieved that she will receive at least a portion of her capital.Henry,one of the general partners said that this provision is void and unenforceable.Which of the following best describes this situation?

A) The provision placing limited partners ahead of general partners in unenforceable,thus all partners would be on an equal footing and ahead of creditors.
B) The provision placing the partners ahead of creditors in not enforceable,but the priority of limited partners over general partners is enforceable.
C) The distribution of assets in the event of dissolution is one of the few provisions where the Revised Uniform Limited Partnership Act does not allow modification.
D) The distribution as called for in the agreement would be enforceable if it had been included in any filings related to the limited partnership.
E) The distribution as called for in the agreement is enforceable even though it was not included in any filing associated with the limited partnership.

Question 48

Which of the following is not one of the activities that is permissible under the Revised Uniform Partnership Act for a limited partner?

A) being an agent of the partnership
B) being an agent of a general partner
C) making the credit-granting decisions of the limited partnership
D) acting as a consultant to the limited partnership
E) acting as a surety for the limited partnership

Question 49

Amy is a limited partner in a limited partnership.Amy is considering opening a business similar to that of the limited partnership.One of the reasons that Amy is considering taking this step is that Amy believes that the limited partnership is being poorly managed.Amy wants to review the books and records of the partnership,but the general partners have refused to allow her to have access.Which of the following is true?

A) As a limited partner,Amy has no rights to review the books and records of the partnership.
B) Amy has unlimited rights to review financial statements,tax returns,and a few other specified items,but has no rights to review other business records.
C) Amy has unlimited rights to review financial statements,tax returns,and a few other specified items,but must demonstrate a legitimate purpose in order to review any other business records of the partnership.
D) Amy must demonstrate a legitimate purpose in order to obtain any information on the business of the partnership.
E) Amy has an unlimited right to obtain information regarding the operations of the partnership business.

Question 50

Which of the following is true about the admission of new partners to a limited partnership under the Revised Uniform Limited Partnership Act?

A) Admission of either general or limited partners requires a majority vote of all partners.
B) Admission of either general or limited partners requires the unanimous written consent of all partners,but this requirement can be eliminated by agreement for admission of new limited partners.
C) Admission of either general or limited partners requires the unanimous written consent of all partners,but this requirement can be eliminated by agreement for admission of new general and/or limited partners.
D) Admission of new general partners requires the unanimous written consent of all partners,and the admission of new limited partners requires the unanimous written consent of all general partners only.
E) Admission of new general partners requires the unanimous written consent of all partners,and the admission of new limited partners requires the consent of a majority of all partners.

Question 51

Albert joined a limited partnership with an investment of $10,000 for his interest.There were nine other limited partners who invested the same amount.There were two general partners who invested $100,000 each.The general partners filed the certificate of limited partnership in the wrong location.The general partners negotiated the purchase of two separate parcels of real estate,signing notes for both on behalf of the limited partnership.The seller of the first parcel was aware that there were only two general partners and that the remaining partners were limited partners.The seller of the second parcel thought that she was dealing with a general partnership with all of the partners as general partners.After these transactions,when Albert discovered the defective filing,he notified the general partners,who immediately made a correct filing.What personal liability does Albert have in connection with these two transactions?

A) Albert will have unlimited liability for both of the real estate purchases.
B) Albert will have unlimited liability for the purchase of the second parcel only.
C) Albert will not have unlimited liability for either of these transactions.
D) Albert will have unlimited liability for both of these transactions,but only for claims filed prior to the time that the certificate of limited partnership was filed.

Question 52

What is the effect of a limited partner making a personal guarantee on behalf of a limited partnership of which the guarantor is a limited partner?

A) It results in the limited partner being treated as a general partner for liability purposes.
B) The guarantee is void because it goes against the nature of limited liability.
C) The guarantee would be born by the general partners because they have unlimited liability.
D) The limited partner will be held liable on the guarantee up to the amount of his investment in the limited partnership.
E) The limited partner will be liable under the terms of the guarantee,but will otherwise continue to be treated as a limited partner.

Question 53

Cindy is one of 50 limited partners in a real estate investment limited partnership.The general partner is Evergreen Corporation.Evergreen Corporation invested $500,000 in the partnership and each of the limited partners all of whom are natural persons,invested $10,000.Evergreen has four shareholders.If the real estate partnership is dissolved at a time when it has debts exceeding assets,which of the following is true?

A) Because having a corporation means that no partner in the limited partnership has unlimited liability,the limited partners would have unlimited liability.
B) Because having a corporation means that no partner in the limited partnership has unlimited liability,the shareholders of the corporation would have unlimited liability.
C) Neither the corporation nor the limited partners would be required to contribute any assets toward the satisfaction of the unpaid obligations of the limited partnership.
D) The limited partners would not need to contribute any amounts to the satisfaction of the debts,but the assets of the corporation would be available for this purpose.

Question 54

What must be done by a limited partnership that is properly registered in one state in order to conduct business in another state?

A) Nothing,because the home state registration is good in all states.
B) It must obtain a certificate of limited partnership just as it had in the first state.
C) It must clearly indicate that it is formed in a different state to all parties with whom it does business.
D) It must obtain a registered agent in the new state.
E) It must obtain a certificate of registration in the new state.

Question 55

A limited partner who takes an active part in managing a limited partnership:

A) will be entitled to profit distributions as if she were a general partner
B) will be treated as a general partner with respect to parties who reasonably believed that she was a general partner
C) will be treated as a general partner with respect to all parties with whom she dealt
D) will be entitled to reasonable compensation for the value of the services provided
E) will lose the right to receive profit distributions as a limited partner

Question 56

A limited partnership must keep the copies of the following records at its principal office except:

A) certificate of limited partnership,including amendments to it
B) operating budget for the current year
C) financial statements for the 3 most recent years
D) list of full name and business address of each partner
E) federal,state,and local income tax returns

Question 57

Mary was a limited partner in a limited partnership that had four other limited partners and one general partner.Mary and one other limited partner invested $40,000 each in the partnership,the other two limited partners invested $60,000 each,and the general partner invested $800,000.The partnership agreement made no mention as to the sharing of profits and losses.In the first year of operations the partnership had a net income of $100,000.How much should be allocated to Mary?

A) $25,000
B) $20,000
C) $10,000
D) $5,000
E) $4,000

Question 58

Which of the following is a consequence of a limited partnership failing to obtain a certificate of registration before conducting business in another state?

A) Contracts that it enters into are void.
B) Contracts that it enters into are voidable.
C) The limited partners will lose their limited liability.
D) The limited partnership cannot defend itself in any lawsuits brought against it in the other state.
E) The limited partnership cannot initiate any lawsuits in the other state.

Question 59

Cindy was a limited partner in the JKL Limited Partnership.Because of her expertise in this type of business,Cindy was asked to take care of the day-to-day operations of the partnership.JKL had two primary creditors,Smith Supply Co.and Jones Discount.Smith knew that Cindy was a limited partner,but Jones thought that Cindy was a general partner.Due to unforeseen economic conditions,JKL went bankrupt owing both Smith and Jones large amounts of money.Both Smith and Jones sue Cindy as a general partner.To what extent is Cindy liable to them under the Revised Uniform Limited Partnership Act?

A) Because Cindy was a limited partner,she is not liable to either of them.
B) Because Cindy participated in the day-to-day operations of the partnership,she is liable to both of them as a general partner.
C) Even though Cindy participated in the day-to-day operations of the partnership,she is liable as a general partner only to Jones.
D) Even though Cindy participated in the day-to-day operations of the partnership,she is liable as a general partner only to Smith.

Question 60

Which of the following activities will cause a limited partner to lose his limited liability?

A) being an employee of the limited partnership
B) acting as a surety for the limited partnership
C) helping with the management of the limited partnership
D) voting on amendments to the limited partnership agreement
E) voting on the dissolution of the limited partnership

Question 61

The Good Times limited partnership has already seen all of its good times pass by.Its partnership agreement set the order of distribution as first to general partners,second to creditors,last to limited partners.Assuming there were no further details in the agreement,explain in detail the priority of distribution.

Question 62

Hank is a limited partner in a limited partnership.Hank has considerable expertise in the partnership's business,thus Hank has been hired as a consultant for the limited partnership.Hank noticed several problems with the management of the business.Hank then made several recommendations,including removing one of the general partners,expanding into an additional line of business,and borrowing substantial money to finance the expansion.At a partnership meeting to discuss Hank's recommendations,Hank voted in favor of removing the partner,expanding the business,and borrowing the money to do so.In order to get the loan on more favorable terms,Hank executed a personal guarantee on the indebtedness.The partnership expanded but could not generate sales to support the expansion.Upon dissolution,the partnership's debts exceed its assets.Numerous creditors claim that Hank should be considered a general partner.Discuss Hank's liability.

Question 63

How might an entrepreneur take steps to minimize the unlimited liability of a sole proprietorship?

Question 64

There are two general partners,each of whom contributes $5,000 in capital to a limited partnership.There are two limited partners,each of whom contributes $20,000.The total amount of capital contributed is $50,000.The limited partnership agreement does not stipulate how profits and losses are to be allocated.Assume that the limited partnership makes $300,000 in profits.Under the RULPA,how much would each partner receive?

A) All partners would receive $75,000,regardless of whether he/she is a general or limited partner.
B) Each general partner would receive $50,000,and each limited partner would receive $100,000.
C) Each general partner would receive $30,000,and each limited partner would receive $120,000.
D) Each general partner would receive $120,000,and each limited partner would receive $30,000.

Question 65

Lisa entered into a limited partnership as a limited partner by investing $25,000 in cash.There was a total of 50 limited partners and 20 general partners.The partners elected a management committee that included two of the general partners and Lisa as one of the limited partners.The certificate of limited partnership was completed,but was filed with the wrong office.The partnership then commenced business.Some of the parties with whom it conducted business assumed that the partnership was a general partnership because they searched the records of the secretary of state and found no certificate of limited partnership or any other record.Others assumed that it was a general partnership but had not actually searched the filings.Still others assumed that it was a limited partnership.In addition,among those who assumed that it was a limited partnership,some assumed that Lisa was a general partner and others did not.Discuss Lisa's situation with respect to personal liability for partnership debts.

Question 66

Why do you think that there are so many available types of business entities today? What was the motivation for the passage in the late 1980s and early 1990s of statutes authorizing limited liability companies?

Question 67

Why should the amounts contributed by both general and limited partners be required to be included in the certificate of limited partnership? Isn't this too much detail?