Deck 35: All Forms of Partnerships

Question 1

When a person who is not a partner holds himself or herself out as a partner, a court may impose liability-and partnership rights-on the alleged partner.

Answer 1

False

Question 2

The payment of a percentage of profits from the ownership of property to repay a loan does not prove the existence of a partnership.

Answer 2

True

Question 3

When there is no formal, written partnership agreement, an agreement to form a partnership is unenforceable .

Answer 3

False

Question 4

Generally, the law recognizes a partnership as an independent entity .

Question 5

A partner can put his or her self-interest before the interest of the partnership without violating any fiduciary duty owed to the firm.

Question 6

One of the essential elements of a partnership is an equal right to be involved in the management of the business.

Question 7

In most states, in a dispute on a partnership matter, a third party cannot sue an individual partner but must file an action against the entire firm.

Question 8

A partner who withdraws from a partnership for a term before its expiration date can be held liable for any resulting losses.

Question 9

A partnership agreement must apportion profits and losses in the same ratio as the partners' investment of time and capital in the business.

Question 10

The Uniform Partnership Act governs the operation of partnerships in spite of a different agreement among the partners.

Question 11

Only a managing partner has the right to full and complete information concerning the conduct of all aspects of partnership business.

Question 12

A key element of a partnership is the intent to act in good faith.

Question 13

Among three partners, unless they agree otherwise, unanimous consent is required to manage the business of the partnership.

Question 14

A single person carrying on a business for profit, with control over its operation, can constitute a partnership.

Question 15

A partner is liable for simple negligence in judgment in conducting partnership business because such an act implies intent to engage in misconduct.

Question 16

Every act of a partner concerning partnership business binds the firm.

Question 17

A partner can be held liable for a partnership obligation only if he or she participated in, or knew about, whatever it was that gave rise to the obligation.

Question 18

In many instances, agency law governs the relationships among partners.

Question 19

The articles of partnership can include any terms that the partners wish, including terms that might be illegal or against public policy in other situations.

Question 20

At the option of the partners, a partnership can be a pass-through entity or a taxpaying entity.

Question 21

In a limited partnership, a general partner assumes no liability for partnership debts beyond the amount of capital contributed.

Question 22

In a limited partnership, every partner has full responsibility for the management of the partnership and its obligations.

Question 23

In some states, limited partners cannot withdraw from a limited partnership.

Question 24

Bhat and Cho do business as Data Security, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as

A)a combination of individuals.
B)a proprietorship.
C)an independent entity.
D)an aggregate.

Question 25

Dissociation occurs when a partner ceases to be associated in the carrying on of the partnership business.

Question 26

Amber owns and operates Bistro Café in space leased in a building owned by Ciera. The lease requires a base rent of $1,500, plus 10 percent of Bistro's profits, each month. The term is two years. Amber and Ciera are

A)not partners, because Ciera does not have an ownership interest or management rights in Bistro.
B)not partners, because the lease includes "base rent."
C)not partners, because the rent includes only 10 percent of the profits.
D)partners in a partnership for two years.

Question 27

During the winding up stage of dissolution, no party can make a claim on the partnership assets.

Question 28

Regardless of the partners' consent or agreement, the voluntary dissociation of a partner begins the dissolution of the partnership.

Question 29

Dissociation terminates some of the rights of the dissociated partner, requires the firm to buy his or her interest, and alters the parties' liability to third parties.

Question 30

A partner always has the right to dissociate from the partnership.

Question 31

A court can order the dissolution of a partnership if the business can only be operated at a loss.

Question 32

A partner always has the power to dissociate from the partnership.

Question 33

The essential elements of a partnership do not include

A)a sharing of profits and losses.
B)a joint ownership of the business.
C)an equal right in the management of the business.
D)an intent to act in good faith.

Question 34

A limited partner can force the dissolution of a limited partnership even if the other partners want to continue the business.

Question 35

Vaughn starts Wind Systems to make and sell turbines. Later, Vaughn contracts with Xi to invest additional capital in the firm in exchange for 25 percent of the profits. Vaughn and Xi are not partners in Wind Systems because

A)they do not share the profits equally.
B)their agreement does not provide for the sharing of losses.
C)Vaughn started the firm before Xi agreed to invest additional capital.
D)they do not have joint control over the business.

Question 36

To eliminate costly negotiations or litigation, partners may agree on how the firm's assets will be valued or divided if the partnership dissolves.

Question 37

A limited liability partnership allows professionals to avoid personal liability for the malpractice of other partners.

Question 38

Gwen and Hera do business as G&H Civil Engineers, a partnership. The Uniform Partnership Act governs the firm

A)in the absence of an express agreement.
B)in the absence of an implied agreement.
C)only under an express agreement.
D)under all circumstances.

Question 39

A partner can bring an action for an accounting during the term of the partnership and the firm's property can be sold to satisfy the partner's personal debts.

Question 40

When a partnership that was supposed to dissolve after one partner's death continues to operate, a court is estopped from ordering its dissolution.

Question 41

Oscar is a partner in Party Caterers. Oscar's death will

A)dissolve the partnership.
B)breach the partnership agreement.
C)dissociate the partner from the firm.
D)wind up the business.

Question 42

Vern is one of three partners in Waffles Food Truck. Concerning all aspects of the partnership business, Vern is entitled to information

A)on a complete basis.
B)only on an "as needed" basis.
C)only for a reasonable purpose.
D)only related to the partner's capital contribution.

Question 43

Olin is a partner in Precision Plumbing. When the partners decide to dissolve the firm, Olin collects and distributes the assets. This results in

A)nothing with respect to the firm's existence.
B)the continuation of the firm's business.
C)the termination of the firm's legal existence.
D)the temporary suspension of the firm's business.

Question 44

Kris and Linda are partners in Mobile Devise, an online marketing firm. Kris signs a contract with Nature's Best Chocolate, a candy maker, apparently on Mobile's behalf. The contract is binding on

A)Kris, Linda, and Mobile.
B)Kris only.
C)Mobile only.
D)Nature's Best only.

Question 45

Cathy, Don, and Ethel are partners in Fruit Orchard Farms. Cathy gives notice to quit the firm, which otherwise continues to do business. This is

A)dissociation.
B)dissolution.
C)unethical.
D)illegal.

Question 46

Cornell and Duke are partners in Equity Lending. They decide to admit Fran to the firm as a new partner. Fran's liability for partnership debts incurred before her admission is

A)limited to her capital contribution to the firm.
B)limited to her personal assets.
C)nothing.
D)unlimited.

Question 47

Quint and Reba are partners in Sofas Plus, a furniture store. Quint dissociates from the business. This ends Quint's

A)right to participate in the partnership business.
B)right to have his interest in the partnership purchased by the firm.
C)duty of care with respect to events that occurred before dissociation.
D)all of the choices.

Question 48

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

A)none of the obligations.
B)all of the obligations, jointly and severally.
C)all of the obligations, jointly but not severally.
D)only the contractual obligations.

Question 49

Beth and Connie do business as Dig Excavators. In acting on the firm's behalf, Beth makes an honest error in underestimating the cost of a certain project. In this situation, to her firm, Beth is liable for a breach of the duty of

A)care.
B)accounting.
C)loyalty.
D)none of the choices.

Question 50

Rosa is a partner in Sugar & Spice, a partnership consisting of the owners of a bakery. Sugar & Spice incurs debt for new ovens. With respect to this debt, Rosa is

A)not liable.
B)only liable to the amount of her capital contribution.
C)only liable in proportion to the number of partners in the firm.
D)personally liable to the full extent.

Question 51

Deb and Eve are partners in Foundations, a construction outfit. Deb manages the business. For this service, unless the partnership agreement states otherwise, she is entitled to pay in proportion to her

A)effect on the business.
B)effort.
C)capital contribution.
D)none of the choices.

Question 52

Brad and Carol are partners in Doctors for Children, a medical clinic. Brad's dissociation from the firm results in

A)the automatic termination of the firm's legal existence.
B)the partnership's buyout of Brad's interest in the firm.
C)the immediate maturity of all partnership debts.
D)the temporary suspension of the partnership's business.

Question 53

Glen is a partner in Home Builders, a construction firm. Glen's assignment of his interest in the partnership to Investment Consultants results in

A)nothing with respect to Home Builders.
B)the automatic termination of Home Builders' legal existence.
C)Glen's liability for all of Home Builders' debts.
D)Glen's wrongful dissociation and liability for any damages.

Question 54

Resort Gift Shop is operated as a partnership, with five partners. Shan has a one-third interest in the firm. Each of the other partners has a one-sixth interest. Thieu is the senior partner. With respect to management decisions

A)a majority of the partners must agree.
B)Shan rules.
C)Thieu decides.
D)unanimous consent is required.

Question 55

Obie operates Pizza Palace. Obie hires Qua to take and fill customers' orders at an hourly wage of $15.00, plus tips. Obie and Qua are

A)not partners, because Qua does not have an ownership interest or management rights in Pizza Palace.
B)not partners, because the pay includes an hourly wage.
C)not partners, because the pay includes tips.
D)partners in a partnership.

Question 56

Nora and Owen do business as Property & Profit, a real estate investment partnership. In acting on the firm's behalf, Nora takes advantage of an opportunity to make a secret profit. To her firm, Nora is liable for a breach of

A)the duty of care.
B)contract.
C)the duty of loyalty.
D)none of the choices.

Question 57

Dean, a partner in Equipment Sales, applies for a loan with Farmers Bank allegedly on Equipment's behalf but without the authorization of the other partners. The bank knows that Dean is not authorized to take out the loan. Liability in the event of default will be imposed on

A)none of the choices.
B)Dean.
C)Equipment.
D)Farmers Bank.

Question 58

Blake is one of three partners in Commercial Custodial. With respect to Blake's interest in the firm, when she dies, her heirs are most likely entitled to

A)nothing.
B)a payout of her capital contribution without more.
C)the buyout price paid by the firm for the interest.
D)one-third of the value of the interest.

Question 59

Stef and Tyler agree in an exchange of e-mail to form a partnership to buy and sell real property. Their partnership agreement is legally binding

A)only if a copy of the agreement is filed in the appropriate state office.
B)only if the agreement is printed in hard copy and signed by the parties.
C)only if the parties exchange valid consideration.
D)without more.

Question 60

Sol and Thom agree to form a partnership to sell real property. To be enforceable under the Statute of Frauds, their agreement must be

A)filed in the appropriate state office.
B)in writing.
C)signed by a witness.
D)all of the choices.

Question 61

Jana and Kwan are partners in Lawyers LLP, a limited liability partnership. Jana supervises the firm's associate Milo, who negligently fails to appear in court on behalf of Norm, a client. Liability to Norm rests only with

A)Jana and Milo.
B)Jana.
C)Milo.
D)Jana and Kwan.

Question 62

Otto is a limited partner in Port Exports, a limited partnership. By participating in the firm's management, Otto is liable for its obligations

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution to the firm.
D)to the full extent.

Question 63

Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for

A)their own wrongful acts.
B)any partnership obligation.
C)their own and other partners' wrongful acts.
D)none of the choices.

Question 64

Del and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Del and Efron

A)file a certificate of limited partnership.
B)execute a partnership agreement.
C)accept their first client.
D)make their capital contributions.

Question 65

The major features of an LLP are that it limits the personal liability of the partners and

A)it allows the partnership to continue as a pass-through tax entity.
B)LLP statutes do not vary from state to state.
C)it can only do business in the state in which it was formed.
D)only a few states have enacted LLP statutes.

Question 66

Cal, Dex, and Erin agree to be partners in Fajitas, a food cart outfit, splitting the profits equally. Cal contributes 65 percent of the capital. When Fajitas is dissolved, its liabilities are greater than its assets. The losses are paid by

A)all of the partners in proportion to their capital contributions.
B)all of the partners in proportion to their shares of the profits.
C)Cal because he contributed most of the capital.
D)Dex and Erin because they contributed the least of the capital.

Question 67

Dain is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Dain is liable for the debts

A)in proportion to the number of partners in the firm.
B)to no extent.
C)to the extent of his capital contribution to the firm.
D)to the full extent.

Question 68

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char are entitled to

A)access in proportion to their participation in management of the firm.
B)access to the parts that directly relate to their capital contributions.
C)no access.
D)complete access.

Question 69

Development LP is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals, including Ethan. Ethan loses his limited liability if he

A)participates in the firm's management.
B)does not participate in the firm's management.
C)invests in a project that the firm has declined.
D)votes to sell or dissolve the firm.

Question 70

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L

A)can continue its business for one twelve-month period.
B)can continue its business indefinitely.
C)dissolves immediately unless the partners change its business.
D)is immediately subject to criminal prosecution and penalties.

Question 71

Shih was the manager of Thai Bistro, a restaurant specializing in Southeast Asian foods. Shih opened a bank account in Thai Bistro's name, signing the account signature card as "owner." Umeko, who was often at Thai Bistro and had free access to its office, told others that she was "an owner" and "a partner." She also opened a bank account in Thai Bistro's name, and signed the account signature card as "owner." Shih told Vijay, the owner of Wong Noodles Inc., that Umeko was a member of a partnership that owned Thai Bistro. On this basis, Wong Noodles delivered its goods to Thai Bistro on credit. In fact, Thai Bistro was owned by a corporation. When the unpaid account totaled more than $10,000, Wong Noodles filed a suit against Umeko to collect. On what basis might Umeko be liable for the debt?

Question 72

Fresco and Garcia form a partnership-HVAC Pros. Garcia's capital contribution is $10,000, and Fresco's is $15,000. The partnership agreement provides that profits are to be shared, with 40 percent for Garcia and 60 percent for Fresco. Later, Garcia makes a $10,000 loan to the partnership when it needs working capital. When the partnership is dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be distributed?