Deck 27: Partnerships

Question 1

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 1

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 2

The Revised Uniform Partnership Act (RUPA) describes a partnership as an association of two or more persons to carry on as co-owners of a business for profit.

Answer 2

True

Question 3

Management of a limited partnership business is in the hands of the limited partner or partners.

Answer 3

False

Question 4

A court may find two persons to be partners even though neither had the specific intent to create a partnership.

Question 5

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

Question 6

After retiring from Jones Corp., a partnership founded by Megan 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 Corp. Which of the following statements is true of Megan if Jones Corp. does not fulfill its obligations?

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D) Megan will not be liable as she has withdrawn from the partnership agreement by retiring and she is no more an actual partner.

Question 7

Dissociation refers to any change in the relationships among partners, such as one of their deaths.

Question 8

Partners can at any time unanimously agree to dissolve a partnership.

Question 9

The Revised Uniform Partnership Act (RUPA) does not permit partnerships or corporations to qualify as "persons" that can form a partnership.

Question 10

A partner who wrongfully dissociates loses the right to demand a dissolution and winding up of the partnership.

Question 11

Limited partnerships have one or more general partners and one or more limited partners.

Question 12

The doctrine of res ipsa loquitur imposes liability on the partnership for torts committed by any partner or employee of the firm while engaged in partnership business.

Question 13

Under the Revised Uniform Partnership Act (RUPA), the dissociation of a partner always causes a dissolution and winding up of the business of the partnership.

Question 14

A partner is not liable to the partnership for the value of partnership property that he or she uses for individual purposes.

Question 15

A partner is not ordinarily entitled to salary or wages.

Question 16

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 17

Partners have a duty to account for any expenditure of partnership funds they make.

Question 18

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 that requires the property used in the business be owned by it.

Question 19

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

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

Question 20

A partner has the power to dissociate a partnership even though she does not have the right.

Question 21

The partners' rights in partnership entitle them to:

A) sell any item of the firm's 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 22

If a partnership has been dissolved in violation of the partnership agreement, the _____.

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

Question 23

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 even if a contrary intent is shown.
D) Partnership property includes all property that originally was contributed to the partnership as well as anything purchased then or later for the partnership.

Question 24

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 25

Zach, Khalid, and Ira form a partnership. Zach's capital contribution to the firm is $5,000, while Khalid and Ira contribute $10,000 each. The parties do not make any express agreement concerning how profits are to be divided. However, they agree to share losses as follows: Zach, 40%, Khalid and Ira, 30% each. During the first year of the partnership, the business makes a profit of $30,000. Given this scenario, what will be Zach's share of the profit?

A) $5,000
B) $9,000
C) $10,000
D) $12,000

Question 26

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. Given this information, Derwood's share of the profit will be _____.

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

Question 27

According to Revised Uniform Partnership Act (RUPA), if a partner retires before the completion of a partnership, it is called a _____.

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

Question 28

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 29

Acme Chemical Partnership discharges a pollutant prohibited by an agency that aims to protect the environment. In this case, _____.

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 should be imprisoned as discharging pollutants is a crime

Question 30

If a partner assigns his or 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 31

Under the Revised Uniform Partnership Act (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 32

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

A) A partner is always entitled to salary or wages.
B) The partners may not 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 or her 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 33

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

A) any time by the major shareholder even without the consent of the other partners.
B) a specific time by any partner.
C) any time by any partner by the notification to other partners.
D) a specific time with the consent of any two partners.

Question 34

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 35

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 because a partnership cannot commit a tort.

Question 36

A partner has express authority to do whatever he or 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 37

Sashes Inc. is a partnership firm dealing in the manufacture of casual clothes. Rahul, one of the partners of Sashes Inc., thinks that they should clear the old stock during Thanksgiving. For this purpose, Rahul _____.

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

Question 38

_____ releases a partner from liability for having exceeded his or 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 39

MNO was a partnership that contracted for and performed a variety of painting jobs. Before the partnership was dissolved, MNO had entered into a contract under which MNO was supposed 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 this 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) do not have the authority to enter into new contracts with subcontractors, material suppliers, and workers and hence cannot borrow money in order to complete these contracts

Question 40

The Revised Uniform Partnership Act (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 a 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 41

What are articles of partnership?

Question 42

Under the Revised Uniform Partnership Act (RUPA), when a partnership that has suffered losses winds up, _____.

A) all partners are paid in full before outside creditors who loaned money are given anything
B) all partnership creditors are paid first
C) all partnership creditors are paid even when all the partners' capital accounts are negative
D) the partners who have negative capital accounts are not required by law to contribute to the partnership the amount of the deficiency

Question 43

Describe limited partnerships.

Question 44

Describe the rights and general duties of partners in a partnership.

Question 45

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 an agreement by the creditor:

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

Question 46

Which of the following is true of the liability to creditors in the process of continuation of a partnership?

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

Which of the following is true of limited partnerships?

A) A limited partner is liable for the debts of the partnership.
B) A limited partnership must file a certificate with the secretary of state.
C) A limited partner is a fiduciary.
D) A limited partnership can be created only under federal statutes.

Question 48

If a partner continues a partnership beyond the originally agreed-on term, the partner has _____.

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

Question 49

Explain what is meant by dissociation of a partnership.

Question 50

What is a limited liability limited partnership (LLLP)?