Deck 39: Partners Dissociation and Partnerships Dissolution and Winding up

Question 1

Normally, the implied authority of a winding up partner includes no power to borrow money in the name of the partnership.

Answer 1

True

Question 2

Hagus was a partner at Ace-Star General partnership. The partnership agreement stated that all partners would continue as partners until the year 2010. However, in 2006, Hagus was offered another business opportunity that was more attractive than remaining a partner with Ace-Star. Following this, he dissociated himself from Ace-Star. Which of the following is true with regard to this situation?

A) Hagus dissolved the Ace-Star General partnership.
B) Hagus used his power to dissociate to withdraw from the partnership.
C) Hagus eliminated his liability to the partnership obligations.
D) Hagus used his right to dissociate to withdraw from the partnership.

Answer 2

B

Question 3

A & K Inc. obtains a charging order against Bob, a partner in Foter and Poter Partnership. Such an act will cause the partnership to dissociate.

Answer 3

False

Question 4

Andrew, being a partner, has appointed a caretaker for his property. Therefore, he has committed a wrongful dissociation.

Question 5

Anthony, a partner of a partnership firm, was convicted for rash driving. Following this, all other partners dissociated him from the partnership, as per the terms of the agreement. This is an example of _____ dissociation.

A) wrongful
B) nonwrongful
C) discriminatory
D) valid

Question 6

Which of the following is a nonwrongful dissociation?

A) A partner's filing a bankruptcy petition
B) A partner's retirement at age 60 when the partnership agreement requires the partners to retire at age 70
C) A partner's willful and persistent breach of the partnership agreement
D) Death of a partner

Question 7

A novation is said to take place when continuing partners release a dissociated partner from liability but creditors do not release him.

Question 8

In the absence of a partnership agreement, the RUPA provides that any partner who has not wrongfully dissociated may perform the winding up.

Question 9

Mark, John, and Graham are partners. Mark voluntarily and nonwrongfully leaves the partnership. However, the partnership has a three-year lease with Green Real Estate Inc. So long as Mark leaves the partnership, he is no longer liable for the lease agreement.

Question 10

Which of the following causes a dissociation of a partnership?

A) Withdrawal of a partner from a partnership at will
B) Three partners disagreeing on a matter in the ordinary course of business
C) A partner being provided his partnership interest
D) Addition of a partner to the partnership

Question 11

Barks and Paws partnership is in the business of selling pit bull dogs. After operating the partnership for one year, the state outlawed the breeding and sales of pit bulls. Assuming this is the only activity of the partnership, dissolution of the partnership will be required.

Question 12

Termination occurs after all partnership assets have been distributed.

Question 13

Under the RUPA, when the dissociated partner has not wrongfully dissociated and there is no partnership agreement on the issue, he should be paid within 120 days.

Question 14

Which of the following is true about dissociation?

A) It is a partner's right to dissociate himself from the partnership.
B) A partner has the power to dissociate from the partnership at any time.
C) When a partner's dissociation violates the partnership agreement, it is nonwrongful dissociation.
D) Consequences of wrongful and nonwrongful dissociations are always the same.

Question 15

A partner charged with winding up of the partnership has implied authority to take such appropriate actions necessary to accomplish the wind up.

Question 16

The partnership rules of dissociation and dissolution apply to joint ventures.

Question 17

The death of a partner before the expiration of the term of a partnership is a nonwrongful dissociation.

Question 18

Partners who wind up the business of a dissociated partnership have implied authority to sell all the assets of the partnership.

Question 19

A partner has the power to dissociate a partnership at will at any time.

Question 20

Under RUPA, a new partner just joining a partnership has no liability for past debts of the business.

Question 21

Which of the following is an apparent authority during winding up?

A) Providing a third party notification of the dissolution.
B) Continue making new contracts with disregard to the third parties' awareness about the same.
C) Conducting business the way it was before dissolution.
D) Filing a Statement of Dissolution with the secretary of state.

Question 22

Which of the following causes dissolution and winding up?

A) A partner's transfer of his transferable partnership interest
B) When the partnership has completed the undertaking for which it was created
C) A creditor's obtaining a charging order
D) The addition of a new partner to the partnership

Question 23

When the winding up partners disagree during the process:

A) majority partner approval is required for actions in the ordinary course of winding up.
B) unanimous partner approval is required for every decision.
C) unanimous partner approval is required for actions in the ordinary course of winding up.
D) majority partner approval is required for every decision.

Question 24

If a partner fails to contribute the amount equal to her negative capital account balance, then it can be recovered:

A) from that partner's assets.
B) by obtaining an undertaking from that partner.
C) from the other partners.
D) by charging the creditor's account.

Question 25

Amos, Beverly, Carlos, and Dan were partners in a partnership in which the agreement states that the partnership will continue until 2010. Amos died in 2006. What vote of the remaining partners is necessary to continue operating the partnership business?

A) A simple majority vote
B) A two-thirds majority vote
C) A three-quarters majority vote
D) A unanimous vote

Question 26

Which of the following causes dissociation?

A) A partner's transfer of his transferable partnership interest
B) A creditor's obtaining a charging order
C) A partner's wrongful conduct materially affecting the partnership business
D) The addition of a new partner to a partnership

Question 27

Which of the following is true about eliminating partners' apparent authority?

A) Eliminating the apparent authority is not a safe practice during winding up.
B) Apparent authority cannot be eliminated by merely informing the existing business clients.
C) Filing a Statement of Dissolution will increase the partners' apparent authority.
D) The partnership should post notice of the dissolution at its place of business to let third parties know.

Question 28

Which of the following is true about dissolution and winding up the partnership?

A) In liquidation, the assets may not be sold separately.
B) Winding up always requires the sale of assets.
C) During winding up, the partners continue as fiduciaries to each other.
D) Most firms provide the partners with the firms' assets rather than proceeds from the sale of the same.

Question 29

Which of the following is a consequence of wrongful dissociation?

A) The dissociated partner may demand dissolution of the partnership.
B) The partnership must terminate on grounds of wrongful dissociation.
C) The dissociated partner should contribute to performing the winding up.
D) The dissociated partner is not entitled to receive the buyout price until the term of the partnership has expired.

Question 30

Which of the following is true about a wrongfully dissociated partner?

A) He may perform the winding up.
B) He may demand the partnership be dissolved.
C) He is not entitled to the value of any of his partnership interest.
D) He is entitled to his share of the partnership interest; minus the damages he caused the partnership.

Question 31

To avoid winding up:

A) a unanimous vote of all partners, who have not wrongfully dissociated, is necessary to continue business.
B) two-thirds majority of partners wanting to continue business is necessary.
C) the court has to pass judgment to continue business.
D) the remaining partners must file a continuing statement with the public office.

Question 32

Which of the following is true about charging a partner's capital account during distribution?

A) Losses from sale of partnership assets during winding up are not charged against a partner's capital account.
B) Partners are given the gross amount existing in their capital accounts.
C) On account of negative balance in a partner's account, other partners are under no obligation to contribute to set off the shortage.
D) If partnership creditors cannot be paid from the partnership assets, the creditors may proceed against the partners' capital accounts.

Question 33

In limited liability partnership, most of the partners have liability for partnership obligations:

A) beyond the partnership assets.
B) upto the extent of the partnership assets.
C) as per the partnership rules & regulation.
D) as per the demand of the partner.

Question 34

When proceeds from the sale of partnership assets are being distributed during winding up, which of the following is settled first?

A) Payment to partners to the extent of their capital contributions.
B) Payment to creditors of the partnership.
C) Payment to partners to the extent of their share of profits.
D) Payment to creditors after charging the partners' shares of losses.

Question 35

The Barrel & Wine partnership is being wound up and liquidated. Net assets are to be distributed according to which of the following order of priority?

A) First to creditors who are not partners, then to creditors who are partners
B) First to all creditors, then to partners as per their capital accounts
C) First to partners per their capital accounts, then to all creditors
D) First to partners who have made loans to the partnership, then to all other creditors

Question 36

Which of the following is true about the effect of partnership agreement?

A) The dissociations listed in the RUPA are merely default rules.
B) The partners cannot change the definition of wrongful dissociations.
C) Partners cannot require dissociation if a partner transfers his transferable partnership interest.
D) The effects of nonwrongful dissociation cannot be changed.

Question 37

Which of the following is true about asset distribution in an LLP?

A) If the LLP has been profitable, each partner will receive the net amount in his capital account.
B) The partners have liability for partnership obligations beyond the firms' assets.
C) An LLP partner has to contribute an amount equal to the negative balance in his account to pay creditors.
D) The creditors must sue the partner to force the partner to pay the debt.

Question 38

Which of the following is a wrongful dissociation?

A) A partner retires at age 70 when the partnership agreement allows partners to retire at age 60
B) A partner assigns his partnership assets to a personal creditor
C) A judicial dissociation due to a partner's persistent and substantial use of partnership property for his own benefit
D) Death of a partner

Question 39

Which of the following is true about partnership rules for mining partnerships?

A) Mining partnerships are easiest to dissolve.
B) The transferability of mining partnership interest is restricted.
C) A mining partner may sell his interest to another person.
D) The death of a mining partner affects a dissolution.

Question 40

Which of the following is an implied authority of a partner winding up the business of an accounting partnership?

A) Entering into new contracts made after the dissolution
B) Disposing of the partnership's excess supplies
C) Making a contract to audit the financial records of a new client
D) Borrowing money in the name of the partnership

Question 41

Which of the following is true about the effect of LLP statutes after appointment of a new partner?

A) RUPA provides that the new partner has full liability for the LLP's obligations.
B) The former partners will be personally responsible on committing a malpractice.
C) For obligations incurred before his admission, the new partner may not be held liable.
D) LLP partnership agreements often change the RUPA rule about a new partner's liability.

Question 42

Bob was a partner in F & B Co., a partnership. Bob dissociated himself from it on June 1, 2000. On December 1, 2000, F & B Co. entered into a contract with Carey. Under which of the following scenarios may Bob be held liable to Carey, even though he is no longer a partner?

A) Bob files a Statement of Dissociation with the secretary of state.
B) Bob tells Carey on November 1, 2000 that he is no longer a partner.
C) The contract was entered into on the company's premises and Bob's name is still listed as a partner on the office door.
D) Bob files a Statement of Dissociation with the court.

Question 43

In an LLP that is continuing business after dissociation:

A) a dissociated partner has high risk of continuing liability for contracts.
B) a dissociated partner has less risk of torts occurring before or after the partner leaves the LLP.
C) the partner's liability is limited beyond the LLP's assets.
D) the buyout payment made to a dissociated LLP partner will impair the ability of the LLP to pay its creditors.

Question 44

Which of the following is true about the liability of a dissociated partner for obligations incurred while a partner?

A) To complete the requirements for novation, a dissociated partner must also secure his release by the partnership's creditors.
B) Dissociated partners are not liable to partnership creditors for partnership liabilities incurred while they were partners.
C) Continuing partners must not indemnify dissociated partners from liability on partnership obligations.
D) A creditor's agreement to release an outgoing partner from liability may be implied, but usually it is express.

Question 45

Discuss the rules of dissociation and dissolution for mining partnerships.

Question 46

Which of the following is true about buyout of nonwrongfully dissociated partners?

A) The partnership may wait to buy out the partner until the end of the partnership's term.
B) The buyout price must deduct the interest from the date of dissociation.
C) The dissociated partner cannot ask the court to determine the buyout price.
D) The partner must be paid in cash within 120 days.

Question 47

Discuss a partner's authority to borrow money during winding up.

Question 48

Poxabogue Associates, a partnership, is dissociated by the retirement of a partner. The business is continued by the remaining partners and a new partner, Enrica. What is Enrica's liability to creditors for partnership obligations that arose before she became a partner?

A) Enrica is liable to the extent of partnership assets.
B) Enrica is liable only if she agrees to assume the retired partner's liability.
C) Enrica is fully liable.
D) Enrica has no liability.

Question 49

Termination of a partnership occurs automatically after:

A) wrongful dissociation has occurred.
B) dissolution has occurred.
C) the assets of the partnership have been distributed.
D) the winding up process has begun.

Question 50

As per RUPA, if a nonwrongfully dissociated partner demands payment from the partnership, he should be paid:

A) within 90 days from the date of demand.
B) within 120 days from the date of demand.
C) within no such specified period.
D) within such time as per the terms and conditions of the partnership.

Question 51

Carlita retires from Mortex Associates, a partnership. The business is continued by the remaining partners. What is Carlita's liability on debts incurred while she was a partner?

A) Carlita has liability to the extent of her capital contribution.
B) Carlita is fully liable.
C) Carlita has no liability.
D) Carlita has liability to the extent of partnership assets at the time of dissociation.

Question 52

Leonard, Ted, and Julius are partners at Jutle Associates. They signed a two year lease agreement with Property Company for business purposes. Five months into the new agreement, Leonard dissociates from the partnership. Under what circumstances will Leonard no longer be liable on the lease agreement?

A) Leonard gives proper notice to Property Company of his intent to dissociate from Jutle.
B) The three partners and Property Company enter into an appropriate novation agreement.
C) Leonard filed a Statement of Dissociation more than 90 days prior to leaving the partnership.
D) Property Company will not serve to relieve Leonard of liability under the lease agreement.

Question 53

The RUPA makes a dissociated partner liable as a partner to a party that entered into a transaction with the continuing partnership, unless:

A) the other party believed the dissociated partner was still a partner.
B) the transaction was entered into more than two years after the partner has dissociated.
C) the transaction was entered into 90 days before the filing of a Statement of Dissociation with the secretary of state.
D) the other party was not made aware of the partner's dissociation.

Question 54

Which of the following is true about successor's liability for predecessor's obligations?

A) Once continuation begins after dissociation, the creditors remain the creditors of the predecessor.
B) Partners may escape prior liabilities by forming new partnerships.
C) There has to be an agreement with creditors to eliminate liability for prior obligations.
D) The original partners are not liable for obligations incurred prior to dissociation.

Question 55

Karla retires from Orton Associates, a partnership. The business is continued by the remaining partners and Wes, a new partner who has agreed to assume Karla's liability for partnership obligations. Creditors have not been notified of Karla's retirement. What are Karla's and Wes's liabilities to the creditors?

Question 56

Abraham, who is a partner in Adona's firm, has been declared a terrorist by the court following investigations of a criminal case. His partners at the firm want to expel him from partnership but they are not ready to give his interest in partnership. Is Abraham entitled to his interest in partnership?

Question 57

Xavier, Yellie, and Zelda are partners of Koral Associates. The term of the partnership is 5 years, but Zelda withdraws after 1 year because she no longer wished to continue. Discuss the nature and consequences of Zelda's dissociation.

Question 58

Emmy, Shane, and Rusty are partners of the firm Esha Associates. Rusty nonwrongfully dissociates himself from the partnership. Under these circumstances, Rusty will not be liable to the creditors for the liabilities incurred while he was partner only:

A) if all the partners consent to it.
B) if there is an agreement.
C) if there is a court order.
D) by novation.

Question 59

Ace Software Co. signed a deal with Gill Associates, a partnership, and has extended credit to it. Paul, a partner in Gill associates, retires but his partners continue the business. In order to release Paul from the debt owned to Ace, which of the following must occur?

A) The continuing partners must release Paul from liability on the debt.
B) Paul must not secure his release from Ace.
C) Paul has to contribute toward the debt as early as possible.
D) The continuing partners should volunteer to set off Paul's liability.

Question 60

Mark is a partner in Harbin Associates, a partnership. The term of the partnership agreement is one year and includes a clause on buyouts. After the term expires, Mark decides to dissociate while the remaining partners wish to continue. Under the RUPA:

A) the remaining partners must wind up and terminate the partnership.
B) they must buy out Mark of his interest on Mark's demand for the same.
C) they must not pay Mark the greater of the liquidation price or the sale price of the business.
D) they can renew their partnership agreement.