Deck 27: Partnerships

Question 1

People who are involved in a nonprofit association are considered partners.

Answer 1

False

Question 2

A partnership agreement:

A)in written form is highly mandatory.
B)in written form is needed if it creates a partnership in excess of one year.
C)can be modified only after the limited partners have consented to the modification,unless the agreement states otherwise.
D)normally does not state the salary or drawing accounts.

Answer 2

B
Explanation: Partnership agreements may need writing when they create an interest in real property or have a term in excess of one year.Although generally not required,it is highly desirable to have written articles of partnership.A written contract tends to minimize misunderstanding and disagreement.

Question 3

Statutory law has been supplanted by the common law of partnerships.

Answer 3

False

Question 4

Which of the following is an element of a joint venture?

A)An express or implied agreement to carry on a continuing business.
B)A measure of proprietorship of joint control of the enterprise.
C)A manifestation of intent by one of the parties to be associated as joint venturers.
D)A joint interest as reflected in the contribution of skill by at least one party to the joint venture.

Question 5

The significant difference between a joint venture and partnership is that:

A)joint venturers sometimes are held to have less implied and apparent authority than partners.
B)a joint venture relates to a continuing business,and a partnership relates to a single enterprise.
C)the requirement for joint ventures is more formal in comparison with partnership agreements.
D)joint ventures unlike partnership agreements come into existence only when there is an express contract.

Question 6

Normally,management of the business of the limited partnership is in the hands of the limited partner or partners.

Question 7

Partners no longer have fiduciary duties to one another during the winding up process.

Question 8

The partnership will not be liable for contracts created by a partner acting outside the scope of her authority,even when the other partners ratify the unauthorized action.

Question 9

An individual who joins an existing partnership has no liability for partnership debts that arose prior to his joining the partnership.

Question 10

A continuing partnership becomes liable for the debts incurred by the original partnership.

Question 11

The limited partnership certificate must be canceled when all limited partners have died or withdrawn.

Question 12

No express agreement is needed to create a partnership.

Question 13

Partners may agree at any time that the interest of one partner shall be purchased by the partnership or by one or more of the other partners.

Question 14

A partner is free to engage in activities that are in competition with the partnership.

Question 15

In the partnership agreement,the partners also may provide for expelling a partner.Such a provision eliminates the right the expelled partner would otherwise have to insist on liquidation.

Question 16

A partnership is a:

A)limited association in which parties sign a contract expressing their intent to form the partnership.
B)voluntary and consensual association involving two or more persons.
C)voluntary association formed by an express agreement.
D)consensual association which requires the property to be used in the business to be owned by it.

Question 17

A creditor of a partner can attach any property owned by the partnership.

Question 18

After retiring from Jones & Co.,a partnership founded by Megan,Jim Jones,and other partners,Megan grew tired of staying at home and started visiting the firm's place of business.The other partners would introduce her to prospective customers as "My partner,Ms.Jones," or "Our partner,Ms.Jones." Megan did not bother to correct anybody about this.She was introduced in this manner to Tiffany,a new customer.Relying on the idea that Megan was a partner,Tiffany entered into a contract with Jones & Co.If Jones & Co.does not fulfill its obligations,can Megan be held liable?

A)Under the RUPA,Megan is not liable as she did not make any claims to partnership.
B)Megan is liable,as she failed to correct the statement when she was being introduced as a partner.
C)Megan is not liable,but the partner who introduced Megan is liable.
D)Megan is not liable as she has withdrawn from the partnership agreement by retiring.She is no more an actual partner.

Question 19

Partners have the right to sell,mortgage,or devise to an heir any individual item of the firm's property.

Question 20

The final act of winding up a dissolved partnership is the distribution of assets.

Question 21

Fillmore,Willis,and Polk form a partnership.Fillmore's capital contribution to the firm is $10,000.Willis and Polk contribute $5,000 each.The parties make no express agreement concerning how profits are to be divided,but they agree to share losses as follows: Fillmore,40%,Willis and Polk,30% each.During the partnership's first year,the business has a profit of $30,000.What is Fillmore's share of the profit?

A)$7,500
B)$9,000
C)$10,000
D)$12,000

Question 22

_____ releases the partner from liability for having exceeded his/her authority and binds the partnership to the contract as if it had been authorized all along.

A)Devolution
B)Emancipation
C)Rescission
D)Ratification

Question 23

In terms of a partnership at will,the partnership can be dissolved:

A)at any time by the major share holder even without the consent of the other partners.
B)at a specific time by any partner.
C)at any time by any partner by the notification to other partners.
D)at a specific time with the consent of both partners.

Question 24

The liability of partners for torts committed by the partnership:

A)is on the partner who committed the tort.
B)is joint and several,permitting the injured person to sue any partner individually or all of them together.
C)depends on whether a partner or an employee commits the tort and if it is a partner the injured person has to sue all of the partners together.
D)is nonexistent since a partnership cannot commit a tort.

Question 25

If a partner assigns his/her partnership interest to a creditor,the creditor is entitled to:

A)receive that partner's share of the profits.
B)any information about partnership interests.
C)look at the partnership's books.
D)obtain a charging order against the other partners.

Question 26

If a partner retires before the completion of the partnership,it is called a:

A)termination.
B)dissolution.
C)dissociation.
D)winding up.

Question 27

MNO was a partnership which contracted for and performed all types of painting jobs.Before the partnership was dissolved,MNO had entered into a contract under which MNO was to paint every room in the state capitol building.At the time of the partnership dissolution,MNO had not yet performed the work called for by such contract.If the partners involved in the winding up elect to perform the contract,they:

A)have the authority to enter into new contracts with subcontractors,material suppliers,and workers.
B)have no authority to enter into new contracts.
C)cannot assign long-term contracts to other contractors.
D)have the authority to enter into new contracts with subcontractors,material suppliers,and workers,but cannot borrow money in order to complete these contracts.

Question 28

A partner who wrongfully dissociates:

A)loses the right to demand a dissolution.
B)can participate in the winding up process.
C)must not be paid the value of his interest for the breach,if the firm continues.
D)can ask the court to appoint a receiver on his behalf.

Question 29

If Acme Chemical Partnership discharges a pollutant prohibited by the EPA:

A)the firm is liable for the resulting fines.
B)only the general partners are liable if the firm has inadequate assets.
C)only the partner who ordered the discharge is liable.
D)all the partners will be imprisoned as discharging pollutants is a crime.

Question 30

The partnership is liable for torts committed by any partner of the firm while engaged in partnership business under the doctrine of:

A)estoppel.
B)respondeat superior.
C)caveat emptor.
D)ultra vires.

Question 31

The partners' rights in partnership property,as tenants in partnership,entitle them to:

A)sell any item of property if its value does not exceed their share of the assets of the partnership.
B)take possession of any item of partnership property for partnership purposes only.
C)take possession of any item of partnership property for personal purposes if its value does not exceed their share of the assets of the partnership.
D)devise to an heir any individual item of the firm's property.

Question 32

The RUPA holds that property belongs to the partnership if it was transferred to:

A)the partners in their individual capacities.
B)general partners only by a transfer document that specifically names the partnership indicating that partnership exists.
C)any partner by transfer document indicating the partner's status as a partner or otherwise indicating that a partnership exists.
D)any partner by transfer document under the charging order.

Question 33

Charlene,Derwood,and Elwyn form a partnership.They make no express agreement concerning how profits are to be divided.Of the $30,000 initial capital of the firm,Charlene and Derwood each contributed $12,000.Elwyn contributed $6,000.The partnership had a profit of $15,000 during the first year of operation of the business.What is Derwood's share of the profit?

A)$5,000
B)$6,000
C)$10,000
D)$12,000

Question 34

A partner has express authority to do whatever he/she is authorized to do by:

A)the written articles of partnership.
B)the written articles of incorporation.
C)customs and usages of a particular partnership.
D)customs and usages of similar businesses in a particular area.

Question 35

Which of the following is true of partnership property?

A)The fact that property is used in the business makes it partnership property though it does not show in the account books.
B)Payment by the partnership of taxes or insurance on property is conclusive evidence that the property is owned by the partnership.
C)Any property acquired with partnership funds is partnership property though a contrary intent is clearly shown.
D)It includes all property that originally was contributed to the partnership as well as anything purchased then or later for the partnership.

Question 36

If a partnership has been dissolved in violation of the partnership agreement:

A)the court,by itself,liquidates the assets of the business.
B)the court appoints a representative as receiver to wind up the business.
C)the remaining partners forfeit the right to wind up the business.
D)the innocent partners have the right to liquidate the partnership assets.

Question 37

To act contrary to a partnership agreement:

A)vote of the majority prevails.
B)unanimous agreement is required.
C)implied authority by RUPA is provided.
D)approval of senior partners is required.

Question 38

Which of the following is true of a partner's right to compensation?

A)A partner is entitled to salary or wages.
B)The partners may agree that one or more of them is to be paid a salary which will not be deducted at the end of the year from his profits.
C)Compensation is never presumed to be the partner's share of the profits.
D)The partners may agree that one or more of them is to be paid a salary in addition to sharing in profits.

Question 39

In terms of the RUPA,when a partner dies,the surviving partners:

A)cannot continue the business.
B)are entitled to compensation for winding up the partnership business.
C)must accept the deceased partner's heir as a full partner.
D)are relieved from personal liability on partnership debts.

Question 40

Jo & Co.Dresses is a partnership firm dealing in the manufacture of casual clothes.One of the partners of Jo & Co.thinks that they should clear the old stock during Thanksgiving.For this purpose:

A)he requires unanimous agreement of all the partners.
B)he requires unanimous agreement of the general partners only.
C)he has the express authority to act.
D)he requires his decision to be ratified by any two general partners.

Question 41

Describe limited partnerships.

Question 42

Define "partnership" and explain its key elements.

Question 43

When continuing partners agree to relieve the withdrawing partners of liability on the debts of the old partnership,the act of novation can take place which involves:

A)an agreement by the creditor with both the withdrawing partners and the continuing partners.
B)an agreement by the creditor with the withdrawing partners themselves and not their representatives.
C)an agreement by the creditor only with the continuing partners.
D)an agreement by the creditor with the new partners replacing the withdrawing partners to hold them liable for the debts.

Question 44

What right does a partner have to continue a partnership beyond the originally agreed-on term?

A)The partner has an unconditional right.
B)The partner has no right to continue.
C)The partner has a right to continue until the firm is liquidated or a new partner joins the firm.
D)The partner has no right to continue until it is agreed upon by the majority of partners.

Question 45

Paul and Betty were partners doing business as Granite Stone Co.The firm became indebted to Monster Equipment Co.The partnership later was dissolved,with Betty leaving the partnership and Paul continuing to operate the business.Monster Equipment sued the former partnership,Paul and Betty,to recover the price of equipment supplied to the firm before Betty withdrew.Betty claims that she is not liable on the debt because at the time she withdrew,the partnership had sufficient assets to pay all firm debts in full.Is Betty liable? State the reasons for your answer.

Question 46

Which of the following is true of the liability to creditors in the process of continuation of partnership beyond an agreed-on-term?

A)Withdrawing partners are liable for new obligations though they have given a notice of withdrawal.
B)New partners are liable for prior obligations only to extent of contribution unless they agree to greater liability.
C)Continuing partners are the only people liable for prior obligations.
D)Withdrawing partners are liable for prior obligations even though they are released by novation.

Question 47

Under the RUPA,when a partnership that has suffered losses winds up,which party is paid first?

A)All the partners
B)All partnership creditors
C)Major share holder in the partnership business
D)Both partners and creditors have equal rights to be paid first

Question 48

What is the difference between a limited partnership and a limited liability limited partnership?

Question 49

Describe the rights and general duties of partners.

Question 50

Which of the following is true of limited partnerships?

A)Limited partners are liable for the debts of the partnership.
B)The partnership must file a certificate with the secretary of state.
C)Limited partners are fiduciaries.
D)Limited partnerships can be created only under federal statutes.