Deck 31: Formation and Internal Relations of General Partnerships

Question 1

A limited liability partnership is a limited partnership which falls under special statutes not requiring filings to limit partners' liability.

Answer 1

False

Question 2

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.

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

Under the RUPA, no person may become a member of a partnership without the consent of all the partners.

Question 6

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

Question 7

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

Question 8

A partner cannot assign his interest in the partnership without dissolving the partnership.

Question 9

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

Question 10

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

Question 11

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 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

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

Question 14

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

Question 15

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

Question 16

Michelle and Margaret agree to form a partnership.The partnership contract between Michelle and Margaret does not have to be in writing in order to be enforceable in the courts.

Question 17

A partner can withdraw his partnership capital at any time.

Question 18

A corporation may not be a partner in a partnership.

Question 19

A sole proprietorship dissolves upon the death of the owner.

Question 20

A corporation is a legal entity separate from its owners who have limited liability for the corporation's obligations.

Question 21

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

Question 22

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 23

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

Question 24

The form of business association known as partnership is a relatively recent creation, being developed in the United States during the Industrial Revolution.

Question 25

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

Question 26

Any natural person having full capacity may enter a partnership.

Question 27

Partners can be classified as either general or limited.

Question 28

Under the UPA, one of the advantages of the partnership form of doing business is continuity of existence.

Question 29

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

Question 30

States have authorized the formation of limited liability companies.

Question 31

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

Question 32

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

Question 33

Corporations today outnumber unincorporated business associations plus sole proprietorships.

Question 34

A partner who has no right to participate in control of the business and who has limited liability is called a:

A)limited partner.
B)nominal partner.
C)secret partner.
D)general partner.

Question 35

A charitable organization cannot be formed as a partnership.

Question 36

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

Question 37

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

Question 38

The statute of frauds expressly applies to a contract for the formation of a partnership.

Question 39

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 40

Assignment of a partner's interest will cause dissolution.

Question 41

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 42

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)Unless contrary intention appears, property acquired with partnership funds is partnership property.
C)Under the UPA, title to real estate purchased with partnership funds cannot be taken in the partnership name.
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 43

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 44

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 the above.

Question 45

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 46

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)None of the above.

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

Which of the following forms of business association may elect that only the partners/members are taxed?

A)General partnership.
B)Limited partnership.
C)Limited liability company.
D)All of the above.

Question 49

Andre invested $100,000 in a partnership with Erik and Louis.Andre'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 $100,000 he invested.Andre is:

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

Question 50

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 51

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 52

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 53

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 54

A partner's 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)assignability
B)creditors' rights
C)charging order
D)None of the above.

Question 55

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 56

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 57

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 58

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 59

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 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

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 62

Compare sole proprietorships, general partnerships, and limited partnerships with regard to ease of formation, liability of owners, control, taxation, and continuity.

Question 63

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

Question 64

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 65

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 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.
E)All of the above except (b).

Question 66

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 67

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 68

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 69

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

Question 70

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.