BLAW Chapter 31 Exam 2

Partnership by estoppel, liability

A ___ May arise when a person who is not a partner holds himself or herself out as a partner and makes representations that third parties rely on. In this situation, a Court may impose ___ on the alleged partner

Court

A ___ Will not presume that a partnership exists if shared profits are received as payment of any of the following: 1. A debt by installments or interest on a loan 2. Wages of an employee or payment for the services of an independent contractor 3. Rent to a landlord 4. An annuity to a surviving spouse or representative of a deceased partner 5. A sale of the goodwill of a business or property

Limited partnership

A ___ limits the liability in some of its owners

Court decree

A limited partnership can be dissolved by ___

before

A partner newly admitted to an existing partnership is not personally liable for any partnership obligations incurred ___ The person became a partner

Income

A partner's ___ from the partnership takes the form of a distribution of profits according to the partners share in the business

Articles of partnership

A partnership agreement, called ___, can include any terms that the parties wish, unless the terms are illegal or contrary to public policy or statute

real, personal

A partnership may hold the title to ___ or ___ property in its name rather than in the names of the individual partners

Statement of partnership authority

A partnership may limit the capacity of a partner to act as the firms agent or transfer property on its behalf by filing a ___ in a designated state office

New obligations

After dissolution, partners cannot create ___ on behalf of the partnership

Managing

All partners have equal rights in ___ The partnership

Partnership agreement

All rights and obligations of a partnership are mentioned in the ___

Buy-Sell Agreement

An agreement made at the time of partnership formation providing for one or more of the partners to buy out the other, in the event the firm is dissolved

Valued, divided

Before entering into a partnership, partners may agree on how the assets will be ___ and ___ in the event that the partnership dissolves

Assets

Both creditors of the partnership and creditors of the individual partners can make claims on the partnerships ___

Limited partner

Contributes cash or other property and owns an interest in the firm, but does not undertake any management responsibilities and is not personally liable for partnership debts beyond the amount of their investment

Unanimous

Decisions that significantly change the nature of the partnership or its ordinary course of business require the ___ consent of the partners

Compensable service

Devoting time, skill, and energy to partnership business is a partners duty and generally is not a ___

Partnership agreement

Each partner is entitled to the proportion of business profits and losses designated in the ___

Good faith, fair dealing

Each partner must act consistently with the obligation of ___ and ___

Good faith, bad faith

Each partner must exercise ___ during the dissolution of a partnership. Some states statutes allow partners injured by another partners ___ to file a tort claim for wrongful dissolution

Joint liability

Each partner shares liability for the partnerships obligations and debts. A third-party must sue all of the partners as a group, but each partner can be held liable for the full amount

Affairs

Every partner in a partnership has equal say in managing the partnership's ___

Common, statutory

General partnerships are governed both by ___ law concepts, in particular those relating to agency, and by ___ law

State statutes

Limited liability partnerships must be formed and operated in compliance with ___

UPA 101(6)

The UPA defines a partnership as an association of two or more persons to carry on as co-owners of a business for profit

UPA 101(10)

The UPA's definition of person includes corporations, so a corporation can be a partner in a partnership

Presumption

The sharing of both profits and losses from a business creates a ___ that a partnership exists

Proportionate liability

When more than one partner in a limited liability partnership is negligent, some states provide for ___, that is, four separate determination of the negligence of the partners

Partnership

___ formation agreements can be oral, written, or implied by conduct

Creditors claims

___ take priority with limited partnership asset distribution

Entities

A majority of the states follow the UPA and treat partnerships as ___

Dissolution

Any event that makes it unlawful for the partnership to continue its business will result in ___

Partnership

Arises from an agreement, express or implied, between two or more persons to carry on a business for profit

General partner

Assumes management responsibility for the partnership and so has full responsibility for the partnership and for all of its debts

Principal, agent

Each partner is an agent of every other partner and acts as both a ___ and an ___ in any business transaction

Limited liability partnership

Hybrid form of business

Intentions

Joint ownership of property does not in and of itself create a partnership. The parties ___ are key

Revised uniform limited partnership

Most states have adopted laws based on the ___ act. These rules govern limited partnerships

Profits

Partners cannot make secret ___

Partnership

Property acquired by a partnership is the property of the ___ and not of the partners individually

Uniform partnership act

The ___ governs the operation of partnerships in the absence of an express agreement

The second state

When a limited liability partnership formed in one state wishes to do business in another state, it may be required to register in ___

Limited liability partnership's

___ are especially attractive for professional service firms and family businesses

Joint and several liability

A plaintiff may sue all partners in a partnership together or one or more of the partners separately. Partners can be held liable even if they did not participate in, ratify, or know about the conduct that gave rise to the lawsuit

A) Pay the debts of the partnership C) complete transactions that were started before dissolution

After dissolution, partners still have authority to do which of the following actions on behalf of the partnership? Choose two answers A) Pay the debts of the partnership B) sign a contract to perform a service in the ordinary course of business C) complete transactions that were started before dissolution D) take out a loan to pay creditors

Aggregate

Modern law treats a partnership as an ___ of the individual partners rather than as a separate legal entity in one situation, for federal income tax purposes

Essential elements of a partnership

Sharing of profits and losses Business joint ownership Equal right to be involved in business management

Pass-through entity

The partnership is a ___ and not a tax paying entity

Central state agency, business's name

When limited liability partnerships are formed, The appropriate form must be filed with a ___, usually the secretary of states office, and the ___ must include either limited liability partnership or LLP

Dissolution

___ of a partnership generally can be brought about by acts of the partners, by operation of law, or by judicial decree

Value

An accounting of partnership assets or profits is required to determine the ___ of each partners share in the partnership

Single vote

Each partner has a ___ in the management decisions, regardless of that partners proportional interest in the business, unless the partners have agreed otherwise

Buyout

If a partner's dissociation does not result in a dissolution of the partnership, a ___ of the partners interest is mandatory

Co-owners, joint

Partners are ___ of a business and have ___ Control over its operation and the right to share its profits

Dissolution

The formal disbanding of a partnership. The commencement of the winding up process

Winding up

The process of collecting, liquidating, and distributing the partnership assets

Dissociation

The severance of a relationship between a partner and a partnership

A) by operation of law C) by a court decree D) by an act of the partners

What are the three ways in which a partnership can be dissolved? Choose three answers A) by operation of law B) by failing to make a profit C) by a court decree D) by an act of the partners

B) partnerships are not taxed D) forming a partnership is simple and relatively inexpensive

Which of the following are advantages of operating as a partnership? Choose two answers A) The partners are not personally liable for business debts if the partnership is registered with the state B) partnerships are not taxed C) any partner may add a new partner at any time to help decrease the workload and liability and to bring in more capital D) forming a partnership is simple and relatively inexpensive

Agent

A partnership by estoppel may be imposed When a partner represents, expressly or implied Lee, that a non-partner is a member of a firm, in which the non-partner may be regarded as an ___ whose acts are binding on the partnership

Limited partnership

A partnership consisting of one or more general partners and one or more limited partners

D) The scope of work for which the business is created

A partnership differs from a joint venture in: A) management rights B) how the members share profits and losses C) The minimum number of members D) The scope of work for which the business is created

D) Limited liability Limited partnership

A partnership in which the liability of all the partners is limited to the amount of their capital investment in the firm is called a: A) General partnership B) Limited liability partnership C) Limited partnership D) Limited liability Limited partnership

Partnership for a term

A partnership that is specifically limited in duration

Principal business office

A partnerships books must be kept at the firms ___ and cannot be removed without the consent of all partners

Limited partner

Bankruptcy of a ___ does not dissolve the partnership unless it causes the bankruptcy of the firm

Common terms included in a partnership agreement

Basic structure, capital contributions, sharing of profits and losses, management and control, and dissociation and dissolution

Partnership at Will

If no fixed duration is specified, the partnership is a ___, and can be dissolved at any time without liability

Duty of care

Involves refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law

Pass-through entity

Limited liability partnerships allow a partnership to continue as a ___ for tax purposes, but limits the personal liability of the partners

The rights of partners in a partnership

Management, interest in the partnership, compensation, inspection of books, accounting, and property

Agency, agent

Partner relationships are similar to an ___ relationship because each partner is deemed to be the ___ of the other partners and of the partnership

Partnership

A ___ usually can sue or be sued, collect judgments, and have all accounting procedures performed in the name of the partnership entity

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

Voluntary dissociation

A general partners ___ from the firm normally will lead to dissolution unless all partners agree to continue the business

A) A partners management rights C) The documents required for creation

A general partnership differs from a limited partnership in: choose two answers A) A partners management rights B) The limit on profits C) The documents required for creation D) The minimum number of partners

Liability

A judgment against one partner separately does not extinguish the other's ___. Those not sued in the first action may be sued subsequently

Supervise

A limited liability partner is liable if they ___ The individual who committed a wrongful act

Personal liability

A limited liability partnership allows professionals, such as attorneys and accountants, to avoid ___ for the malpractice of other partners

General, limited

A limited partnership consists of at least one ___ partner and one or more ___ partners

Transactions

After dissolution, partners have authority only to complete ___ begun but not finished at the time of dissolution and to wind up the partnerships business

C) after the winding up is complete and the partnership is dissolved

At what point in dissolution does a partners liability cease? A) after another partner has dissociated B) never C) after the winding up is complete and the partnership is dissolved D) as soon as the decision to dissolve has been made

Buy, sell

In a Byselle agreement, one or more partners will determine the value of the interest being sold and that the others Will decide whether to ___ or ___

Unlimited

In a partnership, the liability is essentially ___ because the acts of one partner in the ordinary course of business subject the other partners to personal liability

General partners

In limited partnerships, ___ are personally liable to the partnerships creditors

Personally liable

Partners are ___ for the debts of the partnership

UPA

Partners are free to establish rules for their partnership that differ from those stated in the ___

Self interest

Partners cannot put ___ before duty

Certificate of limited partnership

Partners in a limited partnership must sign a ___ which includes information such as the name, mailing address, and capital contribution of each general and limited partner

Statutory

Partners in a limited partnership must strictly follow ___ requirements

Books, records

Partnership ___ and ___ must be accessible to all partners

Voluntary contract

Partnership law is based on a ___ between two or more competent persons who agree to commit financial capital, labor, and skill to a business with the understanding that profits and losses will be shared

Fiduciary ties

Partnerships are governed by common law agency concepts, and partners, like agents, are bound by ___

Information return

Partnerships pay no taxes, and are responsible only for filing an ___ with the internal revenue service (IRS)

Duty of loyalty

Requires a partner to account to the partnership for any property, profit, or benefit derived by the partner from the partnerships business or the use of its property. Don't screw your partner

Implied powers

Some customarily ___ of partnerships include the authority to make warranties on goods in a retail sales business and the power to enter into contracts consistent with the firms ordinary course of business

Majority rule

The ___ Controls decisions in ordinary partnership matters, unless otherwise specified in the agreement

General partner

The bankruptcy, retirement, death, or mental incompetence of a ___ Will cause the dissociation of that partner and the dissolution of the limited partnership unless the other members agree to continue the firm

Broader

The extent of implied authority is generally ___ for partners than for ordinary agents

Care, loyalty

The fiduciary duties a partner owes to the partnership and to the other partners are the duty of ___ and the duty of ___

Public, formal

The formation of a limited partnership is a ___ and ___ proceeding

UPA 401(i)

The intent to associate is a key element of a partnership, and a person cannot join a partnership unless all of the other partners consent

Events that cause dissociation

Voluntary notice of express will to withdraw Occurrence of a greed event in partnership agreement Unanimous vote under certain circumstances Court or arbitrator order due to wrongful conduct Bankruptcy, benefiting creditors, physical or mental incapacitation, or death

Partnership by estoppel

When a third person has reasonably and detrimentally relied on a representation that a non-partner was part of a partnership, a Court may conclude that a ___ exists

Partners

When two or more persons agree to do business as ___, they enter into a special relationship with each other

C) completion of the purpose of the partnership

Which of the following actions will usually dissolve a partnership? A) The partnership defaults on a loan B) A limited partner assigns his financial rights C) completion of the purpose of the partnership D) One of the limited partners moves to another state

A) all members have equal right to be involved in the management of the business D) profits and losses are shared among the members

Which of the following are essential elements of a partnership? Choose two answers A) all members have equal right to be involved in the management of the business B) The name must include the word partnership C) all members have signed a written partnership agreement D) profits and losses are shared among the members

A) Partners may suffer financial loss if the partnership is not profitable

Which of the following is a disadvantage of operating as a partnership? A) Partners may suffer financial loss if the partnership is not profitable B) A partnership may not own real or personal property C) partnerships are taxed at the same rate as corporations D) A partnership may be formed for only one year at a time and the registration must be renewed annually

Winding up

___ includes collecting and preserving partnership assets, discharging liabilities (paying debts), and accounting to each partner for the value of that partners interest in the partnership. During this process, partners continue to have fiduciary duties to one another and to the firm