16.2 Partnerships

Pass-through entity

A business entity that has no tax liability. The entity's income is passed through to the owners, and they pay taxes on the income.

partnership by estoppel

A judicially created partnership found when a third party has reasonably and detrimentally relied on the representation that a non partner was part of a partnership

Information return

A tax return submitted by a partnership that only reports the income earned by the business

Partnership

An agreement by two or more persons to carry on, as co-owners, a business for profit.

Drag and drop the appropriate words to complete, Three Essential Elements to Determine Whether a Partnership Exists:

Sharing Ownership Equal

Dissolution

The formal disbanding of a partnership or a corporation. It can take place by (1) acts of the partners or, in a corporation, of the shareholders and board of directors; (2) the death of a partner; (3) the expiration of a time period stated in a partnership agreement or a certificate of incorporation; or (4) judicial decree.

How is the buyout price of a dissociated partner calculated?

The price is based on the amount that would have been distributed to the partner if the partnership had shutdown on the date of dissociation

Which of the following fiduciary duties does a partner owe the partnership? Choose two.

loyalty and care

A partnership's assets are distributed according to the following priorities: _________ then ____________

payment of debts, including those owed to partner and non partner creditors; return of capital contributions and distribution of profits to partners

joint liability

shared liability. each partner in a partnership generally is jointly liable for the partnership's obligations

All but one of the following is included in partnership winding up activities:

singing new contracts for the partnership

If the partnership agreement does not indicate how the profits will be shared, the Uniform Partnership Act provides that profits will be shared equally.

true

Drag and drop the appropriate words to complete, Events That Cause Dissociation.

voluntarily event unanimous wrongful incapacitated

Joint and several liability

in partnership law, a doctrine under which a plaintiff may sue, and collect a judgement from, one or more the partners separately (severally, or individually) or all the partners together (jointly)

Dissolution of a partnership generally can be brought about by all of the following except:

insistence of a competitor

What type of liability occurs when a third party has the option of suing all the partners together or one or more of the partners separately?

joint and several liability

Changing order

In partnership law, an order granted by a court to a judgement creditor that entitles the creditor to attach profits or assets of a partner on the dissolution of the partnership

buy-sell agreement

In the context of partnerships, an express agreement made at the time of partnership formation for one or more of the partners to buy out the other or others should the situation warrant—and thus provide for the smooth dissolution of the partnership.

Drag and drop the appropriate words to complete, A Partnership Probably Does Not Exist if Shared Profits Were Received as Payment of Any of the Following:

Installments Services Rent Annuity Sale

winding up

The second of two stages involved in the termination of a partnership or corporation. Once the firm is dissolved, it continues to exist legally until the process of winding up all business affairs (collecting and distributing the firm's assets) is complete.

What governs the operation of a partnership when there is no express partnership agreement?

The uniform partnership act

Articles of partnership

an agreement that sets forth the rights and duties of partners

When one partner's relationship with a partnership comes to an end but the partnership continues to do business, it is known as_____________ .

dissociation

Generally, a partner obtains compensation from the partnership by

distribution of profits according to the partner's share in the business

Although each partner must continue to exercise good faith, partners no longer have fiduciary duties to one another during the winding up process and the distribution of assets.

false