Deck 28: Partnerships

Question 1

General Partnerships are created by filing a form with the state or government.

Answer 1

False

Question 2

If a partnership agreement does not cover certain items then default rules will apply.

Answer 2

True

Question 3

If a partner makes a business decision that causes the business to lose money, that partner has automatically breached his duty of care.

Answer 3

False

Question 4

A partner's duty of loyalty means that partners cannot take advantage of a business opportunity to the detriment of the partnership.

Question 5

Unless the partnership agreement states otherwise, all partners have a right to vote on business decisions.

Question 6

The duty of a partner to act in the best interests of the partnership is called __________ duty.

A) Ethical
B) Fiduciary
C) Commercial
D) Legal

Question 7

A partnership where the partners have not agreed to remain partners until the expiration of a definite term or event is known as __________.

A) Partnership at will
B) Contractual partnership
C) UCC partnership
D) Common law partnership

Question 8

Limited partnerships are required to file a(n) __________ return with the IRS each year.

A) SEC
B) Articles of incorporation
C) Limited
D) Information

Question 9

Frank wants to leave his partnership and wants to stop being a principal. What is this process called?

A) Dissociation
B) Dissolution
C) Deduction
D) Detachment

Question 10

A __________ partner may withdraw at any time without causing dissolution of the partnership.

A) Limited
B) General
C) Fiduciary
D) Primary

Question 11

Limited liability partnerships are formed when a general partnership files a __________.

A) Statement of qualification
B) Articles of incorporation
C) Bylaw
D) DBA

Question 12

In cases where a partner has engaged in some misconduct or tortious conduct the LLP acts to shield

A) Every partner's liability.
B) Only the personal assets of other partners.
C) Only the general partner's assets.
D) Only the business assets.

Question 13

All of the following are characteristics of a general partnership except

A) It is an association of two or more people.
B) The people are considered co-owners and co-managers.
C) The people share the profits of their ongoing business.
D) The association is only recognized in the state of incorporation.

Question 14

Al and Tom are co-owners of "A & T Auto Repairs." The both consider themselves managers and the split the decision-making and profits 50/50, yet they do not have any formal paperwork stating that they are a partnership. Which of the following statements is true?

A) Since the have not file a Uniform Partnership Agreement, they are not a partnership.
B) Since their actions show they conduct themselves as a partnership, the law will consider them an implied partnership.
C) Since their actions show they conduct themselves as a partnership, the law will consider them an express partnership.
D) The law will consider each of them sole-proprietorships.

Question 15

In Waddell v. Rustin, the court determined

A) That no implied partnership existed as that the prosperity of the business was not due to the equal contribution of the two parties.
B) An implied partnership did occur because the reasonable person would assume two brothers would be partners.
C) An express partnership existed because one man acknowledged that the other man did provide a valuable service for his business.
D) The business was not a partnership because all partnerships must have some written agreement to be considered a partnership.

Question 16

To date, how many states in the US have adopted all or substantial portions of the Revised Uniform Partnership Act?

A) All 50 states
B) About 25 percent of the states, 13 states.
C) About half, 25 states
D) About 80 percent, 40 states.

Question 17

Which of the following is a major difference between the RUPA and the UPA?

A) The UPA has very stringent start up requirements and the RUPA does not.
B) The RUPA allows a partnership to survive if one partner withdraws whereas the UPA does not.
C) The RUPA requires annual fee and forms to be filed with the state where as the UPA does not.
D) The RUPA has unlimited liability of each of the partners, whereas the UPA does not.

Question 18

If a partnership does not want to abide by the default rules promulgated by the RUPA and/or the UPA, the partners

A) Are out of luck as the default rules are mandatory.
B) Can override the default rules by judicial decree.
C) Can override the default rules by a partnership agreement.
D) Are out of luck as modifying default rules is criminal misconduct.

Question 19

General partners' personal assets are at risk both together and separately for all debts and liabilities of the partnership regardless of the source of the debt or liability is called

A) Accord and satisfaction
B) Res ipsa loquitor
C) Fiduciary duty
D) Joint and several liability

Question 20

Vladamir, Alexander and Tchaicovsky are each partners in VAT Vodka. Vladamir enters into a contract with Grey Moose to make all of their vodka for them. Quickly VAT fails miserably to perform the terms of the contract and Grey Moose successfully sues them for damages. Which statement is correct?

A) Only the business assets of VAT will be used to pay the lawsuit.
B) Only Vladamir will be required to pay the lawsuit as he is the one who entered into the contract.
C) Since the facts state the only Vladamir entered into the contract, the contract will be deemed unenforceable as in a partnership, it requires all of the partners to consent to the agreement.
D) All three partners will be liable for the lawsuit.

Question 21

Siegfried and Roy enter into a white tiger training business as partners, but did not create a partnership agreement. Much to Roy's disappointment, Siegfried is terrified of tigers and refuses to do any of the work. Therefore, Roy shoulder 95 percent of the labor while Siegfried only answer the office phone on occasion when he feels like it. At the end of the fiscal year, because of all of Roy's hard work, the business makes $1,000,000.00 in profit. How much will each partner get of the profit?

A) Siegfried and Roy will split the profit 50/50.
B) Siegfried will get 95 percent of the profit and Roy will get 5 percent of the profit.
C) Roy will get 95 percent of the profit and Siegfried will get 5 percent of the profit.
D) The court will divide the profit according to notions of fair dealing and good faith.

Question 22

Idi and Amin are partners in a golf course and reception area. Idi's darling daughter, Amelda is getting married and Idi wants to use the whole reception area for his daughter's reception and that would involve shutting down the whole golf course. Amin does not want him to use the reception area and shut down the golf course. Which of the following statements is correct?

A) Since Idi and Amin are partners, they have an equal right to use the property. Therefore, Idi will be able to use all of the property for his daughter's reception.
B) Idi will not be able to use any of the property as Amin has priority rights.
C) Idi will be able to use all of the property for his daughter's reception if he pays half the normal rate for use of the property.
D) Idi will not be able to use the whole property for his daughter's reception.

Question 23

Harry and Ron are partners in a delivery business. On a delivery, the delivery truck has a flat tire and Harry pays to have the flat fixed with his own personal credit card. Harry will be paid back the expense that he incurred in the ordinary course of business because

A) All partners have a right to indemnity
B) All partners have a right to liquidate
C) All partners have a right to substitute
D) All partners have a right to reimbursement

Question 24

A responsibility to act in the best interests of a partnership by the partners is call a(n)

A) Ethical duty
B) Moral duty
C) Fiduciary duty
D) Legal duty

Question 25

All of the following are fiduciary duties of partners to the partnership except

A) Duty of loyalty
B) Duty of care
C) Duty of wisdom
D) Duty of good faith

Question 26

In the case, Meinhard v. Salmon, the court ruled

A) That Salmon breached his duty of loyalty.
B) That Salmon breached his duty of care.
C) That Salmon breached his duty of good faith.
D) That Salmon breach his duty of wisdom.

Question 27

Rocky and Paulie enter into a professional boxing partnership. Paulie, not being a very bright man, makes all partnership decisions by flipping a coin. Which of the following statements is correct?

A) As long as Paulie did not act with malice aforethought, he will not be held liable for a breach of duty of care.
B) If the court determines that Paulie's actions were grossly negligent, then he will have breached his duty of care.
C) As long as his flip of the coin decisions make money some of the time, he will not be determined to have breach his duty of care.
D) Paulie breached his duty of loyalty.

Question 28

Peggy, Crystal and Dean want to enter into a partnership, however, Dean cannot contribute an equal amount of capital or manpower to the partnership. Therefore, they want to ensure that Dean will only be able to get a portion of the profits equal to both his capital and manpower contributions. Which of the following statements would be accurate statement?

A) The partners should create a partnership agreement to override the default rule that partners have an equal right to profits.
B) The default rule will always trump a partnership agreement, therefore, they should not enter into a partnership with Dean if they do not want to split the profits with him equally.
C) Each time profits are divided the court will intervene and determine what is a fair and just distribution.
D) Peggy and Crystal should just hide a portion of the profits from Dean.

Question 29

When a partnership has reached its agreed-upon term or when the partners unanimously agree to end the partnership this is called

A) Dissociation
B) Dissolution
C) Determination
D) Destruction