Deck 27: All Forms of Partnerships

Question 1

A partner owes a partnership and its partners a duty of gross negligence and reckless conduct.

Answer 1

False

Question 2

The Uniform Partnership Act has done much to reduce controversies in the law relating to partnerships.

Answer 2

True

Question 3

Joint ownership of property in and of itself creates a partnership.

Answer 3

False

Question 4

On a partner's dissociation,his or her right to participate in the management and conduct of the business terminates.

Question 5

In most states,a general partner is jointly and severally liable for all partnership obligations.

Question 6

For most purposes,the law recognizes a partnership as an aggregate of its members.

Question 7

A partner may use and possess partnership property for any purpose.

Question 8

An association cannot be a partnership without an express agreement.

Question 9

The extent of implied authority is generally broader for agents than for partners.

Question 10

A partner's fiduciary duties may be waived or eliminated in the partnership agreement.

Question 11

In winding up a general partnership,partners receive distributions of profits before non-partner creditors are paid.

Question 12

A sharing of profits from the sale of the goodwill of a business creates a presumption that a partnership exists.

Question 13

A corporation can be a partner.

Question 14

A partner may not pursue his or her own interest without vio?lating the fiduciary duties that he or she owes to the firm.

Question 15

A partner cannot "wrongfully" dissociate from a partnership.

Question 16

On a partner's dissociation,his or her interest in the partnership must be purchased.

Question 17

A partnership dissolves if any partner ceases to "carry on" partnership business.

Question 18

Any limit on a partner's capacity to act on the partnership's behalf does not affect a third party who does not know about it.

Question 19

The Uniform Commercial Code governs the operation of partnerships.

Question 20

General principles of agency law pertain to a partner's authority to bind a part?nership in contract.

Question 21

A limited liability partnership must be formed in compliance with state law.

Question 22

In a family limited liability partnership,only persons related to each other may be partners.

Question 23

Bo and Clancy decide to do business as Marketing & Promotion Services.To be a partnership,this association can result from an agreement that is

A) express, but not from an agreement that is implied.
B) implied, but not from an agreement that is express.
C) oral, written, or implied by conduct.
D) written, but not from an agreement that is oral or implied.

Question 24

In a limited partnership,the liability of a general partner is limited to the amount of capital he or she has invested in the partnership.

Question 25

Grady and Hedy do business as Island Tours.For federal income tax purposes,Island Tours would be treated as

A) an aggregate of the individual partners.
B) a natural person.
C) an entity.
D) a non-existent party.

Question 26

A limited partner who gives a general partner ad?vice on matters relating to the management of the partnership cannot be liable as a general partner.

Question 27

In a limited liability partnership,a partner can be exempt from personal liability for partnership obligations.

Question 28

With a few exceptions,all of the rules that govern partnerships apply to limited liability partnerships.

Question 29

A limited liability partnership can be formed in virtually any state.

Question 30

The maximum amount of money at risk by a limited partner is the amount of his or her investment in the limited partnership.

Question 31

A limited partner who participates in the management of the partner?ship may be personally liable to the firm's creditors.

Question 32

A general partner has the power to dissociate from a limited partnership regardless of what the partnership agreement specifies.

Question 33

Guy and Hanna do business as G-H Associates.If G-H is a partnership,it is governed by the Uniform Partnership Act

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

Question 34

The death of a limited partner dissolves a limited partnership.

Question 35

In winding up a general partnership,creditors are paid before partners receive their capital contributions.

Question 36

Only a limited partnership's limited partners have a fiduciary obligation to the other partners.

Question 37

Ben,who runs a livestock breeding business,owes the Circle C Ranch $40,000.Ben agrees to pay the Circle C a percentage of his profits each month until the debt is paid.Because of this agreement,the Circle C is

A) Ben's creditor and partner.
B) Ben's creditor only.
C) Ben's partner only.
D) neither Ben's creditor nor his partner.

Question 38

A general partner is personally liable for partnership debts if its as?sets are insufficient to pay its creditors.

Question 39

In a limited liability limited partnership,the liability of a general part?ner is the same as the liability of a limited partner.

Question 40

Noah and Orin do business as Personnel Partners.In most states,for purposes of suing and being sued,Personnel Partners would be treated as

A) an aggregate of the individual partners.
B) a natural person.
C) an entity.
D) a non-existent party.

Question 41

Denise and Elke do business as Final Curtain Decorators.In most states,for purposes of holding title to property,this partnership would be treated as

A) an aggregate of the individual partners.
B) a natural person.
C) an entity.
D) a non-existent party.

Question 42

Fact Pattern 27-2 (Questions 18-20 apply)
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
Refer to Fact Pattern 27-2.The partners decide to dissolve Eastside.Dora collects and distributes the firm's 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 43

Tundi is a partner in YooHoo! Amusement,a new partnership.A YooHoo! debt comes due.Tundi is

A) not liable for the debt.
B) only liable for the debt up to the amount of his capital contribution.
C) personally liable only to the extent the other partners do not pay.
D) personally liable to the full extent of the debt.

Question 44

Kelly,Lars,and Mona agree to be partners in Neighborhood Delivery Service (NDS),splitting the profits equally.Kelly contributes 67 percent of the capital.When NDS 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) Kelly because she contributed most of the capital.
D) Lars and Mona because they contributed the least of the capital.

Question 45

Clu,Dolf,and Elton do business as Fertile Valley Farm.Clu's relationship to the firm ends,but it continues to do business.This is

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

Question 46

Cody is a partner in Delta Accounting Service.Cody can inspect

A) all of Delta's books and records.
B) Delta's books and records only as the firm's management permits.
C) Delta's books and records only for a reasonable purpose.
D) Delta's books and records relating to Cody's capital contribution only.

Question 47

Mabel and Nicol do business as One World Realty.In acting on the firm's behalf in a deal with Property Acquisition Company,Mabel fails to account for the profit.To her firm,Mabel is

A) liable for breach of the duty of care.
B) liable for breach of the duty of economic sense.
C) liable for breach of the duty of loyalty.
D) not liable.

Question 48

Dave and Eiger are partners in First-Place Athletic Supplies,which sells sports equipment.Dave manages the business.Unless the partnership agreement states otherwise,Dave is

A) entitled to compensation in proportion to its effect on the business.
B) entitled to compensation in proportion to the effort expended.
C) entitled to compensation in proportion to the effort required.
D) not entitled to compensation for his effort.

Question 49

Fact Pattern 27-2 (Questions 18-20 apply)
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
Refer to Fact Pattern 27-2.Brad,Carlos,and Dora decide to admit Faisal as a new partner in Eastside Physicians.Faisal's liability for partnership debts incurred before his admission is

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

Question 50

Jay is considering forms of business organization for Jay's Designs,an ar?chitectural firm.An advantage of a limited liability partnership is that partners can avoid personal liability for

A) any partnership obligation.
B) only other partners' wrongdoing.
C) only partnership obligations that exceed capital contributions.
D) only partnership obligations that fall within capital contributions.

Question 51

Fact Pattern 27-1 (Questions 14-15 apply)
Hal, Ira, and Jill are partners in Kappa Accessories, a computer peripherals firm.
Refer to Fact Pattern 27-1.Hal signs a contract with Lycra Chips,a retail component supplier,allegedly on Kappa's behalf.The contract is binding on

A) Hal, Ira, Jill, and Kappa.
B) Hal only.
C) Kappa only.
D) no one.

Question 52

Erte,a partner in Fluoride Dental Associates,applies for a loan with Great State Bank allegedly on Fluoride's behalf but without the authorization of the other partners.Great State knows that Erte is not authorized to take out the loan.Erte's default on the loan results in

A) Erte and Fluoride's joint liability for the amount.
B) Erte's sole liability for the amount.
C) Fluoride's sole liability for the amount.
D) neither Erte's nor Fluoride's liability.

Question 53

Mead,Nero,and Olen do business as Pipe & Plumbing Services.After Mead's relationship to the firm ends,Nero and Olen agree to discontinue the business.This is

A) dissociation.
B) dissolution.
C) gross negligence.
D) simple misconduct.

Question 54

Rona and Stiv do business as Treasure Island Traders.In acting on the firm's behalf in a deal with Unlimited Potential,Inc.,Rona makes an honest error in overestimating the profit.To her firm,Rona is

A) liable for breach of the duty of care.
B) liable for breach of the duty of economic sense.
C) liable for breach of the duty of loyalty.
D) not liable.

Question 55

Fay is admitted to Global Associates,an existing partnership.A partnership debt incurred before the date of her admission comes due.Fay is

A) not liable for the debt.
B) only liable for the debt up to the amount of his capital contribution.
C) personally liable only to the extent the other partners do not pay.
D) personally liable to the full extent of the debt.

Question 56

Jim and Kyle are partners in J&K Sales,which exports technical equip?ment under a three-year partnership agreement.The U.S.gov?ernment declares that the equipment can no longer be ex?ported.J&K

A) dissolves as soon as the stated term expires.
B) dissolves as soon as the partners agree to dissolve it.
C) dissolves immediately unless the partners change its business.
D) does not dissolve.

Question 57

Pat and Quint sign a five-year partnership agreement to do business as "Pat's Landscaping Service." At the end of the fifth year,they decide to continue without specifying a new term.This partnership is terminable

A) at any time by either partner.
B) only after an additional five-year term.
C) only if Pat dissociates from the firm.
D) only if Quint dissociates from the firm.

Question 58

Sabin and Tyler agree while talking on the phone to form a partner?ship.Their partnership agreement is legally binding

A) only if a third person knows of the agreement.
B) only if the agreement is reduced to writing.
C) only if the parties exchange valid consideration.
D) without more.

Question 59

Fact Pattern 27-2 (Questions 18-20 apply)
Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.
Refer to Fact Pattern 27-2.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 60

Fact Pattern 27-1 (Questions 14-15 apply)
Hal, Ira, and Jill are partners in Kappa Accessories, a computer peripherals firm.
Refer to Fact Pattern 27-1.Ira dissociates from Kappa.Jill signs a con?tract with Micro Drives,a wholesale component supplier,allegedly on Kappa's behalf.Micro knows of Ira's dissociation.The contract is binding on

A) Hal, Jill, and Kappa only.
B) Jill only.
C) Kappa only.
D) no one.

Question 61

Venture Capital,LP,is a limited partnership.A Venture limited partner loses his or her limited liability if he or she

A) acts as the firm's manager.
B) has full awareness of the firm's business activities.
C) invests in the firm's competitor.
D) votes on the firm's sale or dissolution.

Question 62

Rick and Sandy are limited partners in Total Profit Enterprises,a limited part?ner?ship.To avoid personal liability for partnership obligations,they must not

A) acquire an interest in the firm.
B) contribute property to the firm.
C) engage in activities independent of the firm's business.
D) participate in the firm's management.

Question 63

Gallop Western Ranch is a family limited liability partnership (FLLP).In an FLLP,all of the partners must be

A) natural persons only.
B) natural persons or persons acting as fiduciaries for natural persons.
C) persons acting as fiduciaries for natural persons only.
D) related.

Question 64

Energy Unlimited,LP,is a limited partnership to which its partners,in?cluding Fink,have contributed capital.Energy's creditors include Graves Engineering,Inc.On Energy's dissolution,its assets will be distributed to pay

A) Fink and Graves proportionately.
B) Fink first.
C) Graves first.
D) neither Fink nor Graves.

Question 65

Dunn and Etta are limited partners in Fancee Fashion Stores,a limited partner?ship.In terms of the firm's books,Dunn and Etta 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) total access.

Question 66

Bret is a general partner in Capitol Realty,LLLP,a limited liability lim?ited partnership,which cannot pay its debts.Bret is personally li?able 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.
D) to the full extent.

Question 67

Lucy is a limited partner in Metro Contractors,a limited partnership,which cannot pay its debts.Lucy is personally liable for the debts

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

Question 68

Fern and Gray want to form a limited partnership to manage two restaurants: Café Latte and Deli Delite.In most states,a limited partnership will be created when

A) a certificate of limited partnership is filed.
B) a partnership agreement is executed.
C) the business for which the firm is formed actually begins.
D) the partners make their capital contributions.

Question 69

Jack and Kyra are partners in Law Firm,LLP,a limited liability partnership.Jack supervises Kyra,who negligently fails to appear in court on behalf of Milo,a client.Liability to Milo rests with

A) Jack and Kyra.
B) Jack only.
C) Kyra only.
D) neither Jack nor Kyra.

Question 70

Sally and Tom decide to go into business,selling discounted merchandise through their Web site "e-Buy." They sign a partnership agreement that requires Sally to contribute $12,000 and Tom to contribute $8,000 in capital to start the firm.The agreement also states that only Sally will have the authority to bind the partnership in deals with third parties,but the agreement says nothing about the management of the firm or a division of profits.Without Sally's knowledge,Tom tells United Computer Products,Inc.,that he represents the firm and signs a contract with United to buy hard drives for resale on e-Buy.In the first year,e-Buy makes a profit of $50,000.What are the partners' rights with respect to the management of the firm? Is the partnership bound to the contract with United? Do the partners split the first year's profits? If so,how much is each entitled to?

Question 71

Connie,Drew,and Ellen are the general partners of Foreign Auto Repair,a lim?ited partner?ship.Connie dies.The partnership can

A) continue only after a distribution of its assets.
B) continue only as a general partnership.
C) continue only if Drew and Ellen consent.
D) not continue because Connie's death dissolves the firm.

Question 72

International Exports,L.P.,is a limited partnership,with $100,000 in de?clared but unpaid profits.International's creditors include Friendly Credit Corporation for $5,000 and Gwen,one of International's limited partners,also for $5,000.When Harry,one of International's general partners,de?cides to retire,the other general partners vote to liquidate and dissolve the firm.The limited partners,who are not asked their opinions,want Interna?tional to continue in business and file a suit against the general partners to compel this result.Can the court order International to continue? If not,what is the priority of the distribution of International's assets on its dissolution?