Chapter 38: Operation of Partnerships and Related Forms (SmartBook Assignment)

____________ are most likely to encourage honest partners to take reasonable business risks without fearing liability.

Acts of good faith and honest belief

Suppose Clayton manages a business consulting firm with his partner, James. Choose one of the following scenarios that will create a conflict of interest to their partnership agreement: ____________.

Clayton sells an asset he owns to the partnership without disclosing his ownership.

____________ authority is created by agreement of the partners.

Express

____________ may be stated orally, or in writing, or may be obtained by acquiescence.

Express authority

______________ is one of the most effective ways a partnership can use to notify third parties on a partner's limitation and restriction on actual authority.

Filing a Statement of Denial

____________ refers to a payment made from personal funds and for personal liabilities incurred during an ordinary conduct of a business.

Indemnity

One scenario that best describes ratification is: _______________.

Jose makes payment to a creditor, which he should not according to the partnership agreement. The other partners accept this and acknowledge his act.

______________ occurs when partners accept an act of a partner who had no actual or apparent authority to do the act at the time it was done.

Ratification

According to ___________, partners owe to the partnership and each other the highest degree of loyalty.

Revised Uniform Partnership Act

____________ merely contribute capital to their partnership and are relieved of their duty to serve.

Silent partners

Suppose Smith manages a refurbishing business with his partner, Tony. Choose one of the following scenarios that is least likely to create a conflict of interest to their partnership: ________________.

Smith and Tony are both compensated from the business' profit.

Suppose Kyle and Stacy are best friends who run the KS Parlor together in their neighborhood. Kyle has two jobs and Stacy runs the parlor because of her passion in pursuing a business. She is the major contributor of capital for setting up the parlor and spends a lot of time bettering it. However, if Stacy decides to take a minor share of profits and losses of the parlor it is most likely because _______________.

Stacy wants the tax deductions

Suppose Tim and Ray are partners of a business. While collaborating, they made an agreement that Tim would share 70% of the profits and Ray 30%, making no agreements on how to share losses. Assuming these facts, how will a loss in this scenario be shared by Tim and Ray?

Tim shares 70% while Ray shares 30%.

The ______________ Act states that a partners is not entitled to a salary or wages, even if one spends a disproportionate amount of time conducting a business.

Uniform Partnership

A partner's compensation for working for a partnership is ______________.

a share of the profits of a business

In the absence of an agreement, the UPA requires _____________ for several important partnership actions.

a unanimous decision of all partners

Respondeat superior, a legal standard that is used to determine the liability of partner's for their torts committed, is part of _____________.

agency law

Generally, removals of management powers will not eliminate a partner's ________________ authority to bind the partnership for her acts within the usual course of business.

apparent

The lack of knowledge of third parties on the limitations and restrictions of a partner's actual authority may lead to ______________ authority.

apparent

The term ____________ refers to maintaining partnership information such as trade secrets or customer lists.

confidentiality

Apart from indemnification, partners paying a partnership obligation may seek ____________ from other partners who are liable for their shares of liability.

contribution

Partners who are sued and paying a partnership obligation may seek _____ and _____ from other partners for their share of the liability. (Choose two correct answers)

contribution indemnification

If a partner directly competes against a partnership, the partnership has a remedy called _____________, which is returning the profits of the partner's competing venture.

disgorgement

One true statement regarding a partner's duty to account is that: _____________.

each partner is required to keep a record of business transactions.

Every partner must ___________ before making a decision to have an adequate basis for making the decision.

exercise her duty to investigate

In a partnership, every partner is a(n) ______________ of the business and has the power to make contracts that bind a partnership.

general manager

The partnership agreement gives a managing partner (or a managing partners' committee) control over much of the firm's day-to-day management, such as:

hiring, firing and promotion of employees drawing and indorsing partnership checks investment of the firm's extra cash

Together, a partner's ______________ and _____________ authority, constitute her actual authority. (Choose TWO correct answers)

implied express

The scope of ______________ is determined with reference to what is usual business for partnerships of the same general type.

implied authority

If a partnership agreement specifies how profits are shared and not how losses are shared, losses are shared ____________.

in the same proportion as the profits

It is the right of a partner to be ____________ for payments made from personal funds.

indemnified

Limited liability partnership statues grant ____________ broad protection from a partner's liability for errors and negligence.

innocent partners

A partnership and its partners usually have no liability for a partner's ______________.

intentional torts

A partnership agreement in a large partnership organization considers both ___________ and _________ as factors in deciding a partners' compensation. (Choose two correct answers)

level of partner years of service as a partner

Under RUPA, partners owe to the partnership and each other the highest degree of _________.

loyalty

Profits in a partnership business are shared according the ____________.

number of partners

In a breach of contract action involving an LLP, _______________. (Choose three correct answers)

only the LLP is liable the LLP partners are not personally liable only the LLP can be sued on such a claim

One true statement about crimes committed by partners in a partnership business is that _____________.

only the partner who commits a crime in the course of business is criminally liable.

According to the RUPA, any partnership act not in the _____________ must be approved by all the partners, absent a contrary agreement of the partners.

ordinary course of business

Choose one of the following who is most likely to set the authority held by partners: _____________.

other partners

A partner's accountability means that: _______________.

partners are accountable for the use of partnership funds.

A statement that is true of lawsuits filed by or filed against partnerships or partners is that: _______________.

partners are jointly and severally liable for partnership obligations.

In a large partnership, both a ______________ and a ____________ are included in the compensation article. (Choose two correct answers.)

partners' expense accounts partners' leaves and vacations

Modern criminal codes usually define a partnership as a(n) ________________ that may a commit a crime when a partner engages in a criminal act.

person

Suppose Lee is one of the partners of a partnership business that produces circuit boards. According to the partnership agreement of Lee's business, he is in-charge of client support. However, Lee, using his network, brings a customer to the business. The partners see the situation and agree to work with the client. Assuming these facts, the most likely answer is that __________ occurred.

ratification

A partnership can ____________ any unauthorized acts of partners.

ratify

The standards and principles of ____________ are applied in determining the liability of a partnership for the torts of a partner and other partnership employees.

respondeat superior

A Statement of Partnership Authority or Statement of Denial can be filed with the _____________ or the _____________. (Choose two correct answers)

secretary of the state real estate recording office

The duty to ___________ refers to a partner taking charge of one's responsibility in running the daily operations of a partnership business.

serve

A partner may not compete against her partnership unless: _____________.

she obtains consent from the remaining partners.

Apart from a wrongdoing partner, the ___________ and the __________ are liable for the torts committed by the partner. (Choose two correct answers.)

supervisor partner of the wrongdoing partner limited liability partnership

One true statement about the allocation of profits to partners in a partnership business is that: _________________.

the default RUPA rule allocates profits equally to partners.

A partner has a duty to maintain confidentiality of partnership information from her ______________.

third party suppliers

A partner's duty _____________ places limits on the activities and decisions of a partner.

to act within actual authority

Generally, the partners may modify the rules of management only a by a(n) _________________ agreement.

unanimous

Selling the partnership's real property or moving the partnership's place of business, may require a(n) ______ approval of partners.

unanimous

One true statement from the following is that: ___________.

under the RUPA, a partnership may sue in its own name.

In the case of an LLP and wrongdoing, the LLP itself is liable for the tort of a(n) ___________ or employee under the doctrine of __________. (Choose TWO correct answers).

wrongdoing partner respondeat superior