Agency and Partnership (LLC) - Barbri
Generally, in Maryland, at what time is an LLC formed? A When its members adopt a written operating agreement. B When the articles of organization are filed with the SDAT. C When its members express intent to form an LLC. D When the SDAT accepts the articles of organization.
When the SDAT accepts the articles of organization. In Maryland, an LLC is usually formed at the time that the SDAT accepts the articles of organization for record, provided that there has been substantial compliance with the statutory requirements. The articles of organization may, however, fix a later time for the formation of the LLC.
Who can be bound to a contract when the principal's identity is disclosed to the third party and the agent had authority to enter the contract? A Both the principal and the agent, regardless of whether the parties intended the agent to be a party to the contract. B Only the principal. C Only the agent. D The principal and, if the parties intended the agent to be a party to the contract, the agent.
A disclosed principal is one whose existence and identity are known to the third party. A disclosed principal is always liable on a contract entered into by an authorized agent. The agent generally is not bound unless the parties intended that the agent would be a party.
Implied actual authority is the authority: A An agent has based on the principal holding the agent out to third parties. B An agent believes she has based on her communications and relationship with the principal. C A third party believes the agent has based on the principal's communications with the third party. D Granted within the four corners of the agency agreement.
An agent believes she has based on her communications and relationship with the principal. Implied actual authority is the authority that the agent reasonably believes she has as a result of the actions of the principal.
What elements are required to establish a principal's liability under the doctrine of respondeat superior? A An employer-employee relationship. B An employer-employee relationship and conduct within the scope of employment. C Apparent authority. D A principal-independent contractor relationship and conduct within the scope of the job.
An employer-employee relationship and conduct within the scope of employment. To establish a principal's liability under the doctrine of respondeat superior, two basic elements must be established: (i) an employer-employee relationship, and (ii) conduct within the scope of employment. A principal may be vicariously liable in certain instances where her agent acted with apparent authority where respondeat superior does not apply. A principal is not liable for torts committed by an agent functioning as an independent contractor.
____________________ is created where a principal holds another out as his agent to a third party. A Apparent authority. B Actual authority. C Authority by proxy. D Ratification.
Apparent authority. Apparent authority is created where a principal holds another out as his agent to a third party. Apparent authority makes the principal a party to the contract—with contractual rights and liabilities. Actual authority is created when the agent and principal agree that the agency shall exist. Authority by proxy is incorrect terminology. Ratification is when the principal agrees to be bound by the previously unauthorized acts of another.
____________________ authority results in a situation where a principal limits the actual authority of his agent to act, the agent acts beyond the scope of the limitation, and a third party with whom the agent dealt was unaware of the limitation. A Specific. B Implied. C Apparent. D Inherent.
Apparent. Apparent authority results from a situation where a principal gives a secret limiting instruction, and the agent, when dealing with a third party, acts beyond the scope of the limitation. In such situations, the principal is bound by the agreement made.
Which of the following is required to create an agency relationship? A Consideration. B A writing. C Consent by both the principal and the agent. D Representation by independent counsel.
Consent by both the principal and the agent. Consent must be manifested by both the principal and the agent to create an agency relationship. Consideration is not necessary for the creation of an agency relationship and, absent an express statutory provision to the contrary, neither is a writing. It is not necessary for either party to be represented by counsel before entering into an agency relationship.
A partner is liable for each of the following EXCEPT: A Crimes committed by a co-partner within the scope of partnership business of which the partner had knowledge. B Torts committed by a co-partner or an employee of the partnership within the scope of partnership business. C Contracts made by a co-partner within the scope of partnership business. D Frauds committed by a co-partner in the course of partnership business, even if the other partners have no connection with, knowledge of, or participation in the fraud.
Crimes committed by a co-partner within the scope of partnership business of which the partner had knowledge. A partner is not criminally responsible for crimes committed by a co-partner unless the partner participated in the commission of the crime as a principal or accessory. A partner is liable for any torts committed by a copartner or by an employee of the partnership within the ordinary scope of partnership business or with authority of the partnership, including any fraud—even if the partner has no connection with, knowledge of, or participation in the fraud. Additionally, a partner is liable on contracts made by a co-partner within the scope of partnership business, as well as any other contracts expressly authorized by the partners.
If a principal negligently selects an incompetent independent contractor, the principal will be liable to the injured third party for: A Her own negligence in selection. B The independent contractor's negligence. C Both her own negligence in selection and the independent contractor's negligence. D The independent contractor's negligence and intentional torts.
If a principal negligently selects an incompetent independent contractor, she will be liable to the injured third party for her own negligence in selection. A principal will be liable for the independent contractor's negligence if the principal hired the incompetent contractor with knowledge of the contractor's incompetence.
Which of the following is NOT a consequence of a partner's dissociation? A If the partnership continues, the partnership must buy out the dissociated partner's interest. B The dissociated partner is not liable for any obligation incurred after dissociation. C The dissociated partner's right to participate in management ceases. D The dissociated partner generally remains liable for obligations incurred by the partnership before dissociation.
The dissociated partner is not liable for any obligation incurred after dissociation. Dissociation is a change in relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business. The dissociated partner generally remains liable for obligations incurred by the partnership before the partner's dissociation, and also after the dissociation if the other party to the transaction: (i) reasonably believed when entering the transaction that the dissociated partner was still a partner, and (ii) did not have notice of the partner's dissociation. When a partner dissociates, the partner's right to participate in management ceases. If the partnership business continues after a partner dissociates, the partnership must buy out the dissociated partner's interest.
A principal gives his agent authority to enter a contract with a third party. The agent discloses to the third party that a principal exists, but does not disclose the principal's identity. Who can be bound to the contract? A Both the principal and the agent. B Only the principal. C Only the agent. D Neither the principal nor the agent, because the identity of the principal has not been disclosed.
Where the third party knows of the principal's existence but does not know his identity, both the authorized agent and the principal are liable on the contract.
What is the primary overriding factor in determining whether a person is an employee? A Whether the person was hired to perform a particular job. B Whether the person is to be compensated on the basis of time. C Whether the principal has the right to control the manner and method of performance. D Whether the parties believe they have entered into an employer-employee relationship.
Whether the principal has the right to control the manner and method of performance. The single overriding factor in determining whether a person is an employee is whether the principal (i.e., the employer) has the right to control the manner and method by which the person performs his tasks.
A minor deviation from an employer's directions, also known as a ____________________, generally falls ____________________ the scope of employment. A Detour; within. B Detour; outside. C Frolic; within. D Frolic; outside.
Detour; within. A small or minor deviation from an employer's directions, also known as a detour, generally falls within the scope of employment.
Which of the following is true of the agent-subagent relationship? A The subagent owes duties to the principal even if appointed by the agent without authority. B An agent will be held liable to the principal for breaches of the subagent. C A subagent is appointed by the principal. D A subagent is another agent of the principal.
(B) is correct. A subagent is a person appointed by the agent to perform functions assigned to the agent by the principal. The agent will be held liable to the principal for breaches of the subagent. This is so even though the agent exercised diligence and good faith in appointing the subagent. Where the subagent has been appointed without authority, the subagent owes no duties to the principal. The agent alone will be responsible to the principal for performance of the agency duties and for any loss sustained because of the subagent's conduct, with the agent's only recourse being against the subagent. A subagent is not to be confused with a co-agent, who is another agent of the principal.
The existence of apparent authority usually requires: A The reasonable belief by an agent of her authority to act. B The reasonable belief by a third party that the agent had authority to act. C The assertion by an agent of her powers. D The declaration by the principal to the agent that the agent has apparent authority to act.
(B) is correct. Apparent authority arises out of the reasonable beliefs of third parties, whereas actual authority arises out of the reasonable beliefs of agents. Where the principal "holds out" another as possessing certain authority, thereby inducing third parties to reasonably believe that authority exists, the agent has apparent authority to act, even though as between herself and the principal such authority has not been granted. The mere assertion by an agent of her powers is not sufficient to bind the principal; the principal must have done or failed to do something that causes the third party's belief.
Which of the following is NOT a duty implied by law that an agent owes to a principal? A Duty of loyalty. B Duty of obedience. C Duty to indemnify. D Duty of reasonable care.
(C) is correct. The duty to indemnify is a duty owed by a principal to an agent, not an agent to a principal. In the absence of anything contrary in an agreement, the agent has three major duties implied by law: loyalty, obedience, and reasonable care.
A principal may hold out another as possessing authority, inducing a third party to reasonably believe authority exists, by all the following means EXCEPT: A Words stated by the principal. B Conduct on the part of the principal. C Another's assertion of authority to act for the principal. D Inaction on the part of the principal.
(C) is correct. The mere assertion of authority by one other than the principal is not sufficient to bind the principal. An agent cannot bootstrap her own authority; the principal must have done or failed to do something that causes the third party's belief. The holding out may be by word or conduct on the part of the principal, and may also be by inaction on the part of the principal where there is some duty to act (i.e., disclose). For example, if a person, in a principal's presence, tells a third party that she is the principal's agent when in fact she is not, the principal has a duty to correct the person's representation. If the principal does not, then the person will have apparent authority to act on the principal's behalf.
Which of the following is true of an employer's liability for an employee's intentional torts? A If the employee intentionally chooses a wrongful means to promote the employer's business, the employer will not be held liable for any torts that result. B An employer will be liable for the misrepresentations of her employee only if the employee had actual authority to make statements concerning the subject matter involved. C An employer usually is liable for the intentional torts of an employee committed during regular work hours. D An employer will be liable for torts that result from friction naturally engendered by the employer's business.
(D) is correct. An employer will be liable for torts that result from friction naturally engendered by the employer's business, such as the friction inherent in a bill collection business. An employer usually is not liable for the intentional torts of her employee on the simple ground that an intentional tort is clearly outside the scope of employment. However, where the intentional tort occurs as a natural incident to the carrying out of the employer's business, or if any benefit may be found running to the employer, courts tend to hold the employer liable. If an employee intentionally chooses a wrongful means to promote the employer's business, the employer will be held liable for any torts that result. An employer will be held liable for the misrepresentations of her employee if the employee had any authority (actual, apparent, or inherent) to make statements concerning the subject matter involved.
A person is disqualified from being an agent in which of the following situations? A The person is a minor. B The person has minimal mental competency. C The person does not have contractual capacity. D The person is an insurance agent and her license has been suspended.
(D) is correct. If the law requires an agent to have a license (e.g., brokers, insurance agents), she cannot act without one. Any person may be an agent, even a minor or a person with minimal mental competency. A person is not required to have contractual capacity to act as an agent.
Which of the following is a situation where an employer will be held liable for his employee's torts? A Where the employee, without authorization, invites a third party to ride in the employer's vehicle and that party is injured as a result of the employee's negligence. B Where an employee causes harm in the use of an instrumentality substantially different from that authorized. C Where an employee hired as a bouncer assaults one of his coworkers during a non-work related dispute. D An employee driving the employer's vehicle within the scope of employment negligently causes an automobile accident.
(D) is correct. The mere fact that an employee is driving an employer's vehicle at the time the employee commits a tort does not impose liability on the employer for the tort. However, if the tort occurred while the employee was within the scope of employment, the employer will be held liable. Where the employee, without authority, invites a third party to ride in the employer's vehicle and that party is injured as a result of the employee's negligence, the employer is not liable for the third party's injuries. Moreover, the employer generally is not liable for torts caused by the employee in the use of an instrumentality substantially different from that authorized, or for an intentional tort committed by an employee unless it occurred as a natural incident to the carrying out of the employer's business.
With respect to limited partnerships, which of the following statements regarding the liability of limited partners is true? A A limited partner is always personally liable for obligations of the limited partnership if he participates in control of the partnership, including when he advises a general partner on partnership matters. B A limited partner is personally liable for all obligations of the limited partnership, no matter the circumstances. C A limited partner is not personally liable for obligations of the limited partnership under any circumstances. D A limited partner is personally liable for obligations of the limited partnership if he also is a general partner.
A limited partner is personally liable for obligations of the limited partnership if he also is a general partner. A limited partnership is composed of at least one general partner and one limited partner. The general partners (including limited partners who also are general partners) are personally liable for partnership obligations, while the limited partners are not personally liable for partnership obligations solely by reason of being limited partners. A limited partner who takes part in the control of the partnership is liable as a general partner, but only when the third person reasonably believes, on the basis of the limited partner's conduct, that he is a general partner. Furthermore, Maryland's definition of "control" is very narrow, and excludes activities such as advising a general partner on partnership matters.
Which of the following statements regarding remuneration of a partner is correct? A partner is entitled to remuneration for all services rendered. B A partner is not entitled to remuneration for any services rendered. C A partner is not entitled to remuneration except for services rendered in winding up the partnership's business. D A partner is entitled to remuneration for all services rendered except for those services rendered in winding up the partnership's business.
A partner is not entitled to remuneration except for services rendered in winding up the partnership's business. Absent an agreement to the contrary, a partner is not entitled to remuneration except for reasonable compensation for services rendered in winding up the partnership's business.
Which of the following statements regarding a partner's interest in the partnership is correct? A A partner may transfer his interest in partnership property. B A partner may transfer his interest in management. C A partner may transfer his interest in profits, losses, and distributions. D A partner is prohibited from transferring any interest he has in the partnership.
A partner may transfer his interest in profits, losses, and distributions. Each partner has a transferable interest in the partnership, which consists of a right to receive his share of the profits and losses and the right to receive distributions. A partner is not a co-owner of partnership property and has no interest in partnership property. As such, a partner cannot transfer his interest in individual items of partnership property or use partnership property for personal purposes. Furthermore, a partner may not transfer his interest in management.
Under the Revised Uniform Partnership Act, which of the following statements regarding lawsuits involving a partnership is correct? A A partnership may sue or be sued only in the partnership name. B Suits by and against the partnership must name the individual partners. C A partnership may sue or be sued in the names of the individual partners. D Partners may not be sued in their individual capacity.
A partnership may sue or be sued in the names of the individual partners. A partnership may sue or be sued in the partnership name or in the names of the individual partners, or both.
All of the following are examples of actual authority granted by a principal to an agent EXCEPT: A A principal has failed to object to a series of an agent's unauthorized acts, reasonably leading the agent to believe that she has authority to do those acts in the future. B A principal tells a third party that a person is the principal's agent and has the power to contract on the principal's behalf, but the person does not know she has this power. C An agent employs a subagent to execute ministerial acts. D A principal conveys authority to his agent to purchase a piece of property that the principal did not actually intend to purchase.
A principal tells a third party that a person is the principal's agent and has the power to contract on the principal's behalf, but the person does not know she has this power. Actual authority arises out of the reasonable belief of agents whereas apparent authority arises out of the reasonable belief of third parties. If a principal tells a third party that a person is the principal's agent and has the power to contract on the principal's behalf, but the person does not know she has this power, then the person does not have actual authority to contract for the principal. In such a case, the person has apparent authority to contract for the principal, because the third party reasonably believes that the person has such authority.
Under the Revised Uniform Partnership Act ("RUPA"), which of the following statements regarding dissolution is correct? A After dissolution, a partnership ceases to be bound by a partner's acts. B A partner who wrongfully dissolves a partnership may be entitled to wind up the affairs of the partnership. C After a partnership is dissolved, its liabilities must be paid in the following order: first to creditors (including partners who are creditors), then to partners in settlement of their accounts. D Any time after dissolution and before winding up is completed, the partners may decide by majority vote to continue the partnership business.
After a partnership is dissolved, its liabilities must be paid in the following order: first to creditors (including partners who are creditors), then to partners in settlement of their accounts. After a partnership is dissolved and its assets are reduced to cash, the cash must be used to pay its liabilities in the following order under RUPA: first to creditors (including partners who are creditors), then to partners in settlement of their accounts. A partnership will be bound by a partner's act after dissolution if the act is appropriate for winding up the partnership (e.g., settling claims, selling partnership assets, collecting debts, paying creditors), A partner who wrongfully dissolves a partnership is not entitled to wind up the affairs of the partnership. Any time after dissolution and before winding up is completed, the partners may decide to continue the partnership business, but they must do so by unanimous vote.
Which of the following statements regarding a partner's right to participate in management of the partnership is correct? A Decisions regarding matters within the ordinary course of partnership business require the consent of all partners, but matters outside the ordinary course of partnership business may be controlled by a majority vote of all the partners. B Decisions regarding matters within the ordinary course of partnership business may be controlled by a majority vote of all the partners, but matters outside the ordinary course of partnership business require the consent of all partners. C Decisions regarding matters both within and outside the ordinary course of partnership business require the consent of all partners. D Decisions regarding matters both within and outside the ordinary course of partnership business may be controlled by a majority vote of all the partners.
Decisions regarding matters within the ordinary course of partnership business may be controlled by a majority vote of all the partners, but matters outside the ordinary course of partnership business require the consent of all partners. Decisions regarding matters within the ordinary course of partnership business may be controlled by a majority vote of all the partners, but matters outside the ordinary course of partnership business require the consent of all partners.
The absence of an agreement to share losses is: A Necessary to create a partnership. B Not permitted by the Revised Uniform Partnership Act ("RUPA"). C Evidence that the parties did not intend to form a partnership. D Evidence that the parties intended to form a partnership.
Evidence that the parties did not intend to form a partnership. While there is no requirement under RUPA that sharing losses is necessary to create a partnership, the absence of an agreement to share losses is evidence that the parties did not intend to form a partnership.
A major deviation from an employer's directions, also known as a ____________________, falls ____________________ the scope of employment. A Detour; within. B Detour; outside. C Frolic; within. D Frolic; outside.
Frolic; outside.A major deviation from an employer's directions, also known as a frolic, falls outside the scope of employment.
The type of actual authority contained within the four corners of an agency agreement is: A General authority. B Specific authority. C Express authority. D Implied authority.
The type of actual authority contained within the four corners of an agency agreement is express authority.
Which of the following statements regarding actual authority of a partner is true? A If the partnership agreement authorizes a partner to act, no further action is required for a partner to act. B A partner is prohibited from taking any action that is not specifically authorized by the partnership agreement. C A partner has actual authority to act on behalf of the partnership by virtue of being a partner. D Unanimous consent is required to grant a partner actual authority to act on behalf of the partnership in all cases.
If the partnership agreement authorizes a partner to act, no further action is required for a partner to act. A partnership will be bound by an act of a partner if the partner has actual authority. One way that actual authority can be granted is in the partnership agreement. If the agreement authorizes a partner to act, no further action is required for a partner to act. Actual authority also can be granted by the consent of the partners. Generally, a majority vote of the partners is all that is needed to grant a partner actual authority. However, for acts outside the ordinary course of business, the unanimous vote of the partners is required. A partner does not have actual authority to act on behalf of the partnership simply by virtue of being a partner (although a partner may have apparent authority to carry on business apparently within the scope of partnership business by virtue of being a partner).
Who can be bound on a contract when the principal is undisclosed to the third party and the agent had authority to enter the contract? A Both the principal and the agent. B Only the principal. C Only the agent. D Neither the principal nor the agent, because the identity of the principal has not been disclosed.
In an undisclosed principal situation, the third party does not know of the principal's existence or his identity. Both the agent and the principal are liable on a contract entered into by an authorized agent on behalf of an undisclosed principal.
Generally, is a member of an LLC personally liable for the LLC's obligations to third parties? A No. B Yes, if the member is also a manager. C Yes, unless the operating agreement provides otherwise. D Yes, always.
No. Unless rendering professional services, a member of an LLC is not personally liable for obligations of the LLC, whether tort, contract, or otherwise, solely by reason of being a member of the LLC. (If an LLC renders professional services, its members are subject to the same liability constraints imposed on employees of a professional service corporation.) Furthermore, if an LLC has managers, they are treated like corporate directors and are not personally liable for the LLC's obligations.
In what situation may a member of a limited liability company ("LLC") bring a derivative action on behalf of the LLC? A Only if the member is also a manager. B As a matter of right, regardless of the circumstances. C Only if the member demanded that the LLC bring suit and they refused, or if such a demand would be unsuccessful. D Never.
Only if the member demanded that the LLC bring suit and they refused, or if such a demand would be unsuccessful. A member of an LLC may not bring a derivative action unless the persons managing the LLC have refused to do so or any effort to cause them to bring such an action is not likely to succeed. The member-plaintiff must fairly and adequately represent the interests of the members in enforcing the LLC's right. Also, the member-plaintiff must be a member at the time that the action is brought and must have been a member at the time of the transaction of which the member-plaintiff complains, or had membership status devolve upon the member-plaintiff by operation of law.
Which of the following statements regarding a partner's liability is NOT true? A Partners are jointly and severally liable for all obligations of the partnership. B Partners are personally and individually liable for the entire amount of all partnership obligations. C Incoming partners are not personally liable for any partnership obligation incurred before their admission to the partnership. D Outgoing partners cease to be personally liable for any obligations incurred by the partnership while members 90 days after they leave the partnership.
Outgoing partners cease to be personally liable for any obligations incurred by the partnership while members 90 days after they leave the partnership. An outgoing partner remains liable on all obligations incurred by the partnership while a member of the partnership, unless there has been payment, release, or novation, or the creditor has agreed to a material alteration in the obligation without the partner's consent. Thus, it is not true that an outgoing partner's liability automatically ends 90 days after leaving the partnership. All partners are jointly and severally liable for all obligations of the partnership, whether they arise in contract or tort. As such, an action may be brought against any one or more of the partners or the partnership. Moreover, each partner is personally and individually liable for the entire amount of all partnership obligations. An incoming partner is not personally liable for any partnership obligation incurred before her admission to the partnership, although the incoming partner's contributions to the partnership may be used to satisfy existing partnership obligations.
Which of the following statements is true regarding a way in which limited liability partnerships ("LLPs") and general partnerships are similar? A Partners of both entities have the same financial rights and obligations. B Both entities must file a certificate of partnership with the SDAT. C Partners of both entities are personally liable for any obligations of the partnership. D Both entities have the same naming requirements.
Partners of both entities have the same financial rights and obligations. Financial rights and obligations of partners in an LLP, including profit/loss sharing and indemnity, are identical to those of general partners. To become an LLP in Maryland, a partnership must file a certificate of limited liability partnership with the SDAT. The major advantage of operating as an LLP is that the partners are not personally liable for the obligations of the partnership, whether arising in contract, tort, or otherwise; on the contrary, partners in a general partnership are personally liable for such obligations. The LLP name must contain the phrase "Limited Liability Partnership," or the abbreviation "L.L.P." or "LLP"; a general partnership has no specific naming requirements.
A transfer of a partner's transferable interest in a partnership entitles the transferee to: A Become involved in the management or administration of the partnership business or affairs. B Demand an accounting of partnership transactions. C Inspect the partnership books. D Receive distributions to which the transferring partner would otherwise be entitled.
Receive distributions to which the transferring partner would otherwise be entitled. As against the other partners, in the absence of an agreement, a transfer of a partner's transferable interest entitles the transferee to receive, in accordance with his contract, distributions to which the transferring partner would otherwise be entitled. A transferee is not entitled to become involved in the management or administration of the partnership business or affairs, demand an accounting of partnership transactions, or to inspect the partnership books.
Pursuant to the duty of loyalty, a partner must do all of the following EXCEPT: Pursuant to the duty of loyalty, a partner must do all of the following EXCEPT: A Account for profits, property, opportunities, or other benefits derived by the partner in conjunction with partnership business. B Refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law. C Refrain from dealing with the partnership as, or on behalf of, a party having an interest adverse to the partnership. D Refrain from competing with the partnership.
Refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law. Partners have a duty to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law, but this duty is part of the duty of care rather than the duty of loyalty. Partners owe the partnership and other partners the duty of loyalty. This duty is threefold: (i) to account for profits, property, opportunities, or other benefits derived by the partner in conjunction with the partnership business; (ii) to refrain from dealing with the partnership as, or on behalf of, a party having an interest adverse to the partnership; and (iii) to refrain from competing with the partnership.
Under the Revised Uniform Partnership Act, which of the following provisions may be waived in a partnership agreement? A The right to inspect the books and records of the partnership. B The power to dissociate as a partner. C The equal sharing of profits and losses. D A partner's duties of loyalty and care.
The equal sharing of profits and losses. Each partner is entitled to an equal share of the partnership profits and must contribute towards the partnership losses in proportion to his share of the profits, but this rule may be modified in a partnership agreement. Under RUPA, partners are free to adopt a partnership agreement governing the relationships among themselves, and RUPA will govern only those issues not provided for in the agreement. However, certain provisions of RUPA may not be waived in an agreement, including a partner's right to access the books and records of the partnership, the power to dissociate as a partner, and a partner's duties of care and loyalty.
Under the Revised Uniform Partnership Act ("RUPA"), how long does a partnership continue to exist after dissolution? A The partnership continues until a statement of dissolution is filed with the secretary of state. B The partnership continues until winding up of the business is complete. C The partnership continues for 90 days after a statement of dissolution is filed with the secretary of state. D The partnership continues for 120 days after a statement of dissolution is filed with the secretary of state.
The partnership continues until winding up of the business is complete. Under RUPA, after an event of dissolution occurs, a partnership continues until the winding up of business is completed, at which time the partnership is terminated. A statement of dissolution does not end a partnership. The partnership will be bound by a partner's post-dissolution acts where the party with whom the partner dealt did not have notice of the dissolution. If a partner files a statement of dissolution with the secretary of state, third parties will be deemed to have notice of the dissolution 90 days after it is filed.
Which of the following parties must have contractual capacity to enter into an agency relationship? A The principal. B The agent. C The principal and the agent. D No party is required to have contractual capacity to enter into an agency relationship.
The principal and the agent. Only the principal must have contractual capacity to enter into an agency relationship. To create an agency relationship, the respective parties must have capacity, but the degree of capacity required for a principal differs from that required for an agent. Generally, any person (including entities) having capacity to contract may appoint an agent. Any person may be an agent, even if she has no contractual capacity herself.
Unless otherwise agreed, a principal owes an agent a duty of: A Compensation. B Obedience. C Reasonable care. D Loyalty.
The principal owes the agent a duty to compensate her reasonably for her services. The principal also owes the agent a duty to indemnify her for all expenses or losses reasonably incurred in discharging any authorized duties, a duty to cooperate, and whatever duties may be imposed by a contract with an agent. Obedience, reasonable care, and loyalty are all duties owed by the agent to the principal.
The Uniform Limited Partnership Act ("ULPA") grants certain rights to general and limited partners. Which of the following rights is exclusive to general partners? A The right to manage the limited partnership's activities. B The right to information. C The right to distributions. D The right to assign the partner's interest in the partnership.
The right to manage the limited partnership's activities. The ULPA's grant of management rights is exclusive to general partners. However, as a matter of contract, the partnership agreement may allocate the right to manage or control the partnership to limited partners. Both general and limited partners are granted the right to information, although the right is not identical. Furthermore, both general and limited partners are granted the right to distributions and to assign the partner's interest in the partnership.
Titled property is deemed or presumed to be partnership property UNLESS it is: A Titled in the partnership name. B Titled in the name of one or more partners and the instrument transferring title notes the titleholder's capacity as a partner or the existence of a partnership. C Purchased with partnership funds. D Titled in the name of one or more partners.
Titled in the name of one or more partners. It is not enough for title to be in the name of one or more partners for the property to be deemed partnership property. Under the Revised Uniform Partnership Act, titled property is deemed to be partnership property if it is titled in the partnership name, or it is titled in the name of one or more partners and the instrument transferring title notes the titleholder's capacity as a partner or the existence of a partnership. Property is rebuttably presumed to be partnership property if it was purchased with partnership funds (i.e., cash and credit), regardless of in whose name title is held.
All of the following are duties owed by an agent to a principal EXCEPT: A To carry out the agency with reasonable care. B To obey all reasonable directions of the principal. C To indemnify the principal for all expenses or losses incurred in discharging any authorized duties. D To notify the principal of all matters that come to the agent's knowledge affecting the subject of the agency.
To indemnify the principal for all expenses or losses incurred in discharging any authorized duties. The duty to indemnify is a duty owed by the principal to the agent (rather than owed by an agent to a principal) for all expenses or losses reasonably incurred by the agent in discharging any authorized duties.
Which of the following is required to form a partnership? A A written partnership agreement. B Intent to form a partnership. C At least two persons. D Contributions to partnership capital.
Under the Revised Uniform Partnership Act ("RUPA"), a partnership is an association of two or more persons to carry on as co-owners a business for profit. Although the partners need not intend to form a partnership, they must intend to carry on as co-owners of a business for profit. A writing is not required; a partnership can be formed by conduct (i.e., associating to form a business for profit). Partner contributions to partnership capital are not required to form a partnership.
Which of the following factors raise a presumption that a partnership has been formed? A Sharing of profits. B Designation by the parties of the entity as a partnership. C Sharing of gross returns. D Joint or common tenancies of property.
Under the Revised Uniform Partnership Act ("RUPA"), a person who receives a share of the profits of a business is presumed to be a partner. Designation by the parties of the entity as a partnership, the sharing of gross returns, and joint or common tenancies of property are indicative of the intent to form a partnership, but they are not conclusive.
When is a limited partner (who is not also a general partner) personally liable for obligations of the limited partnership to third parties? A Whenever the limited partner participates in control of the partnership AND, on the basis of the action, the third party reasonably believes that the limited partner is a general partner. B Always. C Never. D Whenever the limited partner participates in the control of the partnership.
Whenever the limited partner participates in control of the partnership AND, on the basis of the action, the third party reasonably believes that the limited partner is a general partner. A limited partner is not liable for the obligations of the limited partnership except to the extent of her contribution to the partnership. A limited partner will lose limited partner status if she takes part in the control of the partnership and, on the basis of the limited partner's action, a third party reasonably believes that the limited partner is a general partner. It is important to note that a broad range of activities do not constitute participating in control.
