Deck 37: A: Partnerships and Limited Liability Partnerships

Question 1

Each partner is deemed to be an agent of the other partners and of the partnerships.

Answer 1

True

Question 2

Property acquired by the partnership is the property of the partners individually.

Answer 2

False

Question 3

Some states have passed laws prohibiting the withdrawal of general partners from a limited partnership.

Answer 3

True

Question 4

In a limited partnership,a general partner's dissociation from the firm may lead to dissolution.

Question 5

If the partnership agreement does not apportion profits,profits are shared in the same proportion as a partner's investment of capital in the firm.

Question 6

In a general partnership,the acts of one partner in the ordinary course of business subjects the other partners to personal liability.

Question 7

In a limited partnership,limited partners have essentially the same right as general partners to participate in management.

Question 8

If a partnership's liabilities are greater than its assets,the partners bear the losses.

Question 9

A partner is entitled to make secret profits or put self-interest before his or her duty to the interest of the partnership.

Question 10

In a limited partnership,a general partner has full responsibility for the partnership and for all its debts.

Question 11

On a partner's dissociation,his or her duty of care to the partnership ends with respect to events that occurred before the dissociation.

Question 12

Devoting time,energy,and skill to partnership business is a partner's duty and a compensable service.

Question 13

The majority rule controls decisions on ordinary matters connected with partnership business.

Question 14

A partnership agreement can include almost any terms that the part?ners wish.

Question 15

A limited liability partnership may exempt its partners from personal liability for any partnership obligation.

Question 16

For most purposes,most states treat a partnership as an aggregate of its members.

Question 17

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

Question 18

Joint ownership of property does not in and of itself creates a partnership.

Question 19

A partnership ends if one partner dissociates from the firm.

Question 20

A partner owes to the partnership and the other partners a duty of care.

Question 21

Fact Pattern 37-1B
Brad,Carlos,and Dora are general partners in Eastside Physicians,a medical clinic.Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 37-1B.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 22

Ryder and Sergei are partners in Timberline Gear,which sells mountain- and rock-climbing equipment.Ryder manages the business.Unless the partnership agreement states otherwise,Ryder is

A)entitled to compensation in proportion to his effect on the business.
B)entitled to compensation in proportion to his effort.
C)entitled to compensation in proportion to his capital contribution.
D)not entitled to compensation.

Question 23

Parker and Oscar sign a partnership agreement to do business as "Parker's Plumbing" without specifying a duration.This partnership is terminable

A)at any time by either partner.
B)only after a reasonable term.
C)only if Parker dissociates from the firm.
D)only if Oscar dissociates from the firm.

Question 24

Bo and Clancy decide to do business as Deck & Patio Awnings.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 25

Fact Pattern 37-1B
Brad,Carlos,and Dora are general partners in Eastside Physicians,a medical clinic.Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 37-1B.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 26

Rick and Sandy are limited partners in Total Profit Enterprises,a lim?ited 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 27

Free Range Western Ranch is a family limited liability partnership.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 28

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 29

Genetic Innovations,LP,is a limited partnership.The partners sign an agreement purporting to state how the firm's profits and losses are to be di?vided.The profits and losses of the firm will be divided

A)according to the agreement.
B)equally,despite the agreement.
C)in proportion to capital contributions,despite the agreement.
D)in proportion to each partner's participation in the firm's manage?ment,despite the agreement.

Question 30

Fact Pattern 37-1B
Brad,Carlos,and Dora are general partners in Eastside Physicians,a medical clinic.Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 37-1B.Carlos's assignment of his interest in Eastside to General Credit Corporation results in

A)nothing with respect to Carlos or Eastside.
B)the automatic termination of Eastside's legal existence.
C)Carlos's liability for all of Eastside's debts.
D)Carlos's wrongful dissociation and liability for any damages.

Question 31

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 32

Mead,Nero,and Olen do business as Pipe & Stream Irrigation Services.After Mead's relationship to the firm ends,Nero and Olen agree to dis?continue the business.This is

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

Question 33

Trina and Uri do business as Value Gems.In acting on the firm's behalf in a deal with World Diamond Exchange,Trina recklessly exceeds what Value Gems can afford to pay,causing damage to the firm.Trina 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 34

Cody is a partner in Derivative Investment Service (DIS).Cody can inspect

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

Question 35

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 36

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 37

Hollister and Gladys do business as partners in Frothy Confections.For federal income tax purposes,Frothy Confections would be treated as

A)a pass-through entity.
B)a natural person.
C)a tax-paying entity.
D)a partnership by estoppel.

Question 38

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 39

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 40

Fact Pattern 37-1B
Brad,Carlos,and Dora are general partners in Eastside Physicians,a medical clinic.Their agreement states it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.
Refer to Fact Pattern 37-1B.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 41

Irwin was the manager of Highlights Grill,a sports bar and restaurant.Irwin opened a bank account in Highlights's name,signing the account signature card as "owner." Jody,who was often at Highlights and had free access to its office,told others that she was "an owner" and "a part?ner." She also opened a bank account in Highlights's name,and signed the account signature card as "owner." Irwin told Kelton,the owner of Natural Cheeses,Inc. ,that Jody was a member of a partnership that owned Highlights.On this basis,Natural Cheeses delivered its goods to Highlights on credit.In fact,Highlights was owned by a corporation.When the unpaid account totaled more than $10,000,Natural Cheeses filed a suit against Jody to collect.On what basis might Jody be liable for the debt?

Question 42

Dill and Edy form a partnership.Edy's capital contribution is $10,000,and Dill's is $15,000.The partnership agreement provides that profits are to be shared,with 40 percent for Edy and 60 percent for Dill.Later,Edy makes a $10,000 loan to the partnership when it needs working capital.When the partnership is dissolved,its assets are $50,000,and its debts are $8,000.How should the assets be distributed?