Deck 30: Formation and Internal Relations of General Partnerships

Question 1

No minimum amount of capitalization is necessary before a partnership may commence business.

Answer 1

True

Question 2

General partnerships are used frequently in finance, insurance, accounting, real estate, law, and other services.

Answer 2

True

Question 3

No person may become a member of a partnership without the consent of all the partners.

Answer 3

True

Question 4

Under the common law, a partnership was generally considered to be a legal entity rather than an aggregate of individuals.

Question 5

A sole proprietorship dissolves upon the death of the owner.

Question 6

Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a tenant in partnership.

Question 7

Michelle and Margaret agree to form a partnership called "Double M." The partnership contract between Michelle and Margaret must be in writing in order to be enforceable in the courts.

Question 8

Owners of interests in businesses with unlimited liability place their entire estate at risk.

Question 9

Whether an individual partner or the partnership owns certain property determines who gets it upon dissolution of the partnership and who shares in income from it.

Question 10

Landrum voluntarily assigns his transferable interest in a partnership to McClendon.This act does not by itself result in the dissolution of the partnership, nor does it result in McClendon's being entitled to participate in the management of the partnership business.

Question 11

Miller and Baker formed a partnership and purchased a cycle shop.The name of the new business cannot be "Miller Cycle Shop" because the name of the partnership must include the names of both partners if it includes the name of one partner.

Question 12

The RUPA cannot be modified by agreement of the partners to a partnership.Its provisions must be strictly followed in any partnership agreement.

Question 13

A person who receives a share of profits of a business is presumed to be a partner.

Question 14

Sole proprietors have limited liability for the sole proprietorship's debts.

Question 15

General partners differ from limited partners only in the amount of input they have in partnership decisions.

Question 16

Afterburn Corporation and the Mangus Trust can be partners in a partnership if they carry on as co-owners a business for profit.

Question 17

"Partnership property" is the sum of the partnership's assets, including all property acquired by a partnership.

Question 18

The UPA treats a partnership as a legal entity for all purposes.

Question 19

Partners may elect whether or not the partnership will be taxed as a separate entity.

Question 20

A partner can withdraw his partnership capital at any time.

Question 21

Kean and Bubnick are real estate agents who share commissions on joint sales.This sharing of gross returns establishes a partnership unless Kean and Bubnick have a written agreement to the contrary.

Question 22

Rosella, a general partner of Jones and Thorne,  extends credit of $2,000 to a friend.This is  in violation of a specific agreement not to extend credit over $1,000 without the other partners' approval.Rosella will be held personally liable to the partners for any unpaid debt since she violated the duty of obedience.

Question 23

Assignment of a partner's interest will cause dissolution.

Question 24

A judicial lien against a partner's transferable interest in a partnership is known as:

A) a legal aggregate.
B) a delegation of assets.
C) a charging order.
D) an assignment.

Question 25

Some states allow the formation of partnerships in which all partners have limited liability.

Question 26

The type of business enterprise with the most entities is the sole proprietorship, followed by the corporation; but the type of business enterprise with the greatest total revenue generation per year is the corporation.

Question 27

Sole proprietorships today outnumber other unincorporated business associations.

Question 28

Any natural person having full capacity may enter a partnership.

Question 29

Under the RUPA, a partner violates the duty of loyalty if the conduct furthers the partner's own interest.

Question 30

A general partnership is formed without any formality and no documents need be filed with the state.

Question 31

States have authorized the formation of limited liability companies.

Question 32

A partner's fiduciary duty under the UPA differs in some respects from that under the RUPA.

Question 33

Under the RUPA, a partner is a co-owner of partnership property.

Question 34

Because the statute of frauds does not apply expressly to a contract for the formation of a partnership, usually no writing is required to create the relationship.

Question 35

The 1997 Revised Act was amended in 2011 and 2013 as part of the Harmonization of Business Entity Acts project.

Question 36

Alice and Brad enter into a partnership, which becomes insolvent, as does Brad.Alice is fully liable for the debts of the partnership.

Question 37

Each partner has an interest in the partnership, which includes his share of profits and losses, his right to receive distributions, and his management rights.

Question 38

Former partners, as well as current partners, have some rights to access partnership books and records.

Question 39

A charitable organization cannot be formed as a partnership.

Question 40

Each partner, unless otherwise agreed, has equal rights in the management and conduct of the business of a general or a limited partnership.

Question 41

Which of the following would lack the capacity to become a partner?

A) A trust.
B) An adjudicated incompetent.
C) A corporation.
D) All of these.

Question 42

A partner has all but which of the following duties?

A) A duty of faithful service to the best of his ability.
B) A duty to act in accordance with the partnership agreement.
C) A duty not to engage in any other business while a partner.
D) A duty not to acquire for himself a partnership opportunity without the consent of all the partners.

Question 43

In the case of Thomas v.Lloyd , the court held:

A) the use of land by a partnership is determinative of the fact that the land is owned by the partnership.
B) whether real estate titled in the names of individual partners is partnership property is a question of fact, and the burden of proof is on the one alleging that the actual ownership does not match the names on the legal title.
C) payment of real estate taxes out of partnership funds is determinative of the fact that the land is a partnership asset.
D) payment of promissory note payments for the real estate out of partnership funds is determinative of the fact that the realty is a partnership asset.

Question 44

In the case of In Re KeyTronics , the court held that:

A) the intent of the parties to form a partnership is controlling as to partnership formation under the RUPA.
B) there is a requirement that the parties have a specific agreement in order to form a partnership.
C) the intent of the parties to form a partnership will be ascertained objectively from all the evidence and circumstances.
D) under Section 202(a) of the RUPA, the intent necessary to form an association refers to the intent to form a partnership per se.

Question 45

A partnership agreement should include all but which one of the following?

A) The duties of the partners.
B) The capital contribution of the partners.
C) The agreement for dividing tax liability of the partnership.
D) The division of profits and losses.

Question 46

Sue, Barb, and Carlotta agree to put in $1,000 each to set up a shelter for lost animals.They each work two days a week.Donations fund the day-to-day operations.Do they have a partnership?

A) Yes, since each has control of the operation.
B) Yes, because they are all co-equals in ownership of the shelter.
C) No, because they have made no formal agreement.
D) No, because there is no business for profit.

Question 47

A __________ is an unincorporated business association consisting of at least one general partner and at least one limited partner.

A) joint venture
B) limited liability company
C) limited liability partnership
D) limited partnership

Question 48

Arthur, Betty, and Clara each inherit an undivided one-third interest in an apartment complex.Instead of selling it, they decide to continue to operate it for the next few years as a sideline to their other occupations just to see if they can earn some extra money.What are they?

A) A partnership.
B) Co-owners only.
C) A corporation.
D) Creditors of the apartment complex.

Question 49

A partner's transferable interest is subject to the claims of that partner's creditors who may obtain a judicial lien known as a(n) __________ against the partner's transferable interest.

A) foreclosure
B) redemption
C) charging order
D) None of these.

Question 50

Which of the following is the correct definition for a partnership?

A) An association of two or more persons with one or more general partners and one or more limited partners.
B) A legal entity ordinarily consisting of an association of numerous individuals.
C) An association of two or more persons to carry on as co-tenants in business.
D) An association of two or more persons to carry on as co-owners a business for profit.

Question 51

Ruben invested $40,000 in a partnership with Clark and Louis.Ruben's contract with the partnership states he will receive a portion of partnership profits, but he will be liable for partnership's debts only to the extent of the $40,000 he invested.Ruben is:

A) a general partner.
B) a dormant partner.
C) a limited partner.
D) an aggregate partner.

Question 52

Which of the following is correct with regard to partnership property?

A) Like partnership capital, it is a fixed amount set forth in the articles of partnership.
B) Under the RUPA, there is a rebuttable presumption that unless a contrary intention appears, property acquired with partnership funds is partnership property.
C) The RUPA sets forth two irrebuttable presumptions that apply when the partners did not express their intent, one of which is that property acquired in the name of one of the partners without an indication of her capacity as a partner and without use of partnership funds is presumed to be that partner's separate property.
D) If there is no express agreement whether property owned by a partner before formation of the partnership and used in the partnership business is an asset of the partnership, the fact that taxes, liens, and expenses have been paid by the partnership is irrelevant.

Question 53

Which of the following is the most convincing evidence of a partnership arrangement?

A) Two or more persons are co-owners of property used in a business.
B) Two or more persons have a written agreement regarding a fundraiser for charity.
C) Two or more persons carry on a business for profit, but they have no formal agreement.
D) Two person share a joint savings account in which they deposit money and share the interest.

Question 54

Co-ownership of the means or instrumentality of accomplishing a single business transaction or a limited series of transactions ordinarily results in a:

A) partnership.
B) joint venture.
C) corporation.
D) R & D partnership.

Question 55

The RUPA treats a partnership as a legal entity in which one of the following respects?

A) Liability of partners for partnership obligations.
B) For the purpose of suing or being sued.
C) For all purposes.
D) Assignment of a partner's interest.

Question 56

To be partnership property, title to real estate bought with partnership assets and used by the partnership may be put in the name of:

A) any partner in that individual's name.
B) the partnership only.
C) the partnership in its name, or one or more partners in their capacity as partners in the partnership if the name of the partnership is indicated in the instrument transferring title.
D) the agent who represented the partnership in the transaction.

Question 57

Marilyn, George, and Christine pool their money to buy land to operate a vegetable farm from which they plan to sell the produce and share the profits or losses.Are they partners?

A) Yes, since they are associating to carry on a for-profit business which they co-own.
B) No, because they each control the use of the land.
C) Yes, because if there is a loss in the land's value, they will all share that loss.
D) No, they are merely joint venturers.

Question 58

The law establishes a test for determining whether a partnership has been formed.The test includes which of the following?

A) An association of two or more persons.
B) Conducting a business not necessarily for profit.
C) That the partnership agreement is filed with the Secretary of State.
D) The sharing of gross returns.

Question 59

Which of the following is NOT an advantage of a partnership?

A) Partners' income taxes may be less than the income taxes would be on a corporation.
B) Each partner has limited liability.
C) It is possible to bring together more managerial skills than in a sole proprietorship.
D) It is possible to bring together more capital than in a sole proprietorship.

Question 60

Under the UPA, a partner's ownership interest in any specific item of partnership property is that of a:

A) joint tenant.
B) tenant in common.
C) tenant in partnership.
D) tenant by the entireties.

Question 61

In choosing the form in which to conduct business, if ease of formation is the primary concern, the owners would choose a:

A) corporation.
B) limited liability partnership.
C) limited partnership.
D) general partnership.

Question 62

Anita is hired to manage an unincorporated dress boutique owned by Betty.The two agree that Anita will receive one-third of the net profits, which amount is to be paid to her on a monthly basis.Is Anita a partner? If the boutique has a loss instead of a profit, would Anita have to share the loss? Explain.

Question 63

Mount Pleasant Tires does not have sufficient funds to pay damages for a tort that arose out of the operation of the business.Jess, a business owner, is not personally liable if:

A) he is a sole proprietor of the business.
B) the business is a corporation and he is a shareholder.
C) he committed the tort.
D) he is a general partner of the business.

Question 64

Ed, Vivian, and Pablo enter a partnership.Identify the source of the duties among the partners and whether these can be waived or varied.Name the principal duties Ed, Vivian, and Pablo have to each other and to the partnership.

Question 65

Luke typically spends 50-55 hours per week working in the real estate partnership he co-owns with Spencer.Spencer only spends about 30 hours a week on partnership business.Under the RUPA:

A) Luke would be entitled to payment from the partnership for the extra 20-25 hours per week he spends on partnership business unless a partnership agreement denies this right.
B) the partners cannot agree to deny extra payment for extra work by a partner.
C) unless the partners have otherwise agreed, Luke is not entitled to payment for his work for the partnership, even if it is disproportionate to his partner's work.
D) Luke would be entitled to payment from the partnership only if the amount of time and effort he expends on partnership business is grossly disproportionate to that spent by his partner.

Question 66

Compare "partnership property" with a "partner's interest." Consider such factors as the definition, the possession, the assignability, how attachment occurs, and the inheritability of each.

Question 67

What are the ways the RUPA recognizes a partnership as an entity?

Question 68

Assume that you and your best friend have decided to form a partnership after graduation.You have both studied business law, so you both know the importance of having a written partnership agreement.Summarize the clauses that you would include in your partnership agreement.

Question 69

Which of the following would be the most convincing evidence of a partnership?

A) An agreement to share in the management of a business.
B) Agreements to share gross returns.
C) An agreement to share profits and losses.
D) An agreement to pay a firm manager a percentage of the profits for his salary.

Question 70

Bert and Philip have decided to form a partnership to operate a lawn care service.Discuss whether they should name the business and, if so, what considerations affect the name they might choose.

Question 71

A business form devised to avoid the burdens of corporate regulation, particularly the formerly widespread prohibition denying corporations the power to own and deal in real estate, and used primarily for asset securitization ventures is the:

A) limited liability limited partnership.
B) limited partnership.
C) limited liability company.
D) business trust.