Business Law: Chapter 37 - All Forms of Partnerships

Kristin and Lindsey are partners in Mobile Devise, an online marketing firm. Refer to Fact Pattern 37-2. Kristin signs a contract with Nature's Best Chocolate, a candy maker, apparently on Mobile's behalf. The contract is binding on A) ​Kristin, Lindsey, and Mobile. B) ​Kristin only. C) ​Mobile only. D) ​Nature's Best only.

A) ​Kristin, Lindsey, and Mobile.

Roma and Swain are partners in Roma & Swain Attorneys, LLP, a limited liability partnership. Roma supervises their firm's associate Taylor, who negligently fails to appear in court on behalf of Umberto, a client. Liability to Umberto rests only with A) ​Roma and Taylor. B) Roma. ​C) ​Taylor. D) ​Roma and Swain.

A) ​Roma and Taylor.

Selections, a general partnership, operates a gift shop. Selections has five partners. Tony has a one-third interest in the partnership. Each of the other partners has a one-sixth interest. With respect to management decisions A) ​a majority of the partners must agree. B) ​Tony rules. C) ​the senior partner decides. D) ​four of the partners must agree.

A) ​a majority of the partners must agree.

Craig, Donna, and Eve do business as Fast-Track Career Consultants. Eve's relationship to Fast-Track ends, but the firm continues to do business. This is A) ​dissociation. B) ​dissolution. C) ​most likely illegal. D) ​unethical.

A) ​dissociation.

Delany and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Delaney and Efron A) ​file a certificate of limited partnership. B) ​execute a partnership agreement. C) ​accept their first client. D) ​make their capital contributions.

A) ​file a certificate of limited partnership.

Gwen and Hugo do business as Gwen & Hugo Civil Engineers, a partnership. This firm is governed by the Uniform Partnership Act A) ​in the absence of an express agreement. B) ​in the absence of an implied agreement. C) ​only under an express agreement. D) ​under all circumstances.

A) ​in the absence of an express agreement.

​Smith & Jones, Accountants, is a limited liability partnership (LLP). The major features of an LLP are that it limits the personal liability of the partners and A) ​it allows the partnership to continue as a pass-through tax entity. B) ​LLP statutes do not vary from state to state. C) ​it can only do business in the state in which it was formed. D) ​only a few states have enacted LLP statutes.

A) ​it allows the partnership to continue as a pass-through tax entity.

Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.Refer to Fact Pattern 37-3. Bryn, Cornell, and Duke decide to admit Giselle as a new partner in Equity Lending. Giselle's liability for partnership debts incurred before her admission is A) ​limited to her capital contribution to the firm. B) ​limited to her personal assets. C) ​nothing. D) ​unlimited.

A) ​limited to her capital contribution to the firm.

Ann starts up Bowls Bistro to serve and sell soups and salads. Ann leases space in an office building owned by Carly. The lease requires a base rent of $1,250, plus 10 percent of Bowls Bistro's profits, each month. The term is two years. Ann hires Demi to take and fill customers' orders at an hourly wage of $15.00, plus tips. Refer to Fact Pattern 37-1. Ann and Carly are A) ​not partners, because Carly does not have an ownership interest or management rights in Bowls Bistro. B) ​not partners, because the lease includes "base rent." C) ​not partners, because the rent includes only 10 percent of the profits. D) ​partners in a partnership for two years.

A) ​not partners, because Carly does not have an ownership interest or management rights in Bowls Bistro.

Ann starts up Bowls Bistro to serve and sell soups and salads. Ann leases space in an office building owned by Carly. The lease requires a base rent of $1,250, plus 10 percent of Bowls Bistro's profits, each month. The term is two years. Ann hires Demi to take and fill customers' orders at an hourly wage of $15.00, plus tips. Refer to Fact Pattern 37-1. Ann and Demi are A) ​not partners, because Demi does not have an ownership interest or management rights in Bowls Bistro. B) ​not partners, because the pay includes an hourly wage. C) ​not partners, because the pay includes only 10 percent of the profits. D) ​partners in a partnership.

A) ​not partners, because Demi does not have an ownership interest or management rights in Bowls Bistro.

Cherry Creek Development, LP, is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals. A Cherry Creek limited partner loses his or her limited liability if he or she A) ​participates in the firm's management. B) ​does not participate in the firm's management. C) ​invests in a project that Cherry Creek has declined. D) ​votes to sell or dissolve the firm.

A) ​participates in the firm's management.

Olivia is a partner in Pacific Traders. In the majority of states, with respect to any partnership obligations that Olivia does not participate in, know about, or ratify, she would be liable for A) ​none of the obligations. B) ​all of the obligations, jointly and severally. C) ​all of the obligations, jointly but not severally. D) ​only the contractual obligations.

B) ​all of the obligations, jointly and severally.

Colin, Debby, and Erin agree to be partners in Fajita Pizza, splitting the profits equally. Colin contributes 65 percent of the capital. When Fajita Pizza is dissolved, its liabilities are greater than its assets. The losses are paid by A) ​all of the partners in proportion to their capital contributions. B) ​all of the partners in proportion to their shares of the profits. C) ​Colin because he contributed most of the capital. D) ​Debby and Erin because they contributed the least of the capital.

B) ​all of the partners in proportion to their shares of the profits.

Nell is considering forms of business organization for Optic Center, a medical eye clinic. An advantage of a limited liability partnership is that, depending on the applicable state statute, partners can avoid personal liability for A) ​their own wrongful acts. B) ​any partnership obligation. C) ​their own and other partners' wrongful acts. D) ​none of the choices.

B) ​any partnership obligation.

Gas, LP, is a limited partnership to which its partners have contributed capital. Gas's creditors include Piping, Inc. On Gas's dissolution, its assets will be distributed to pay A) ​the partners and Piping proportionately. B) the partners before Piping.​ C) ​Piping before the partners. D) ​neither Piping nor the partners.

C) ​Piping before the partners.

Rita and Salvatore do business as Tech Fixers, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as A) ​an aggregate of individuals. B) ​a person. C) ​an entity. D) ​a non-entity.

C) ​an entity.

Nora and Owen do business as Profit & Property, a real estate investment partnership. In acting on the firm's behalf in a deal with Village Mall, Nora takes advantage of an opportunity to make a secret profit on her own behalf. To her firm, Nora is liable for A) ​breach of the duty of care. B) ​breach of contract. C) ​breach of the duty of loyalty. D) ​nothing.

C) ​breach of the duty of loyalty.

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L A) ​can continue its business for one twelve-month period. B) ​can continue its business indefinitely. C) ​dissolves immediately unless the partners change its business. D) ​is immediately subject to criminal prosecution and penalties.

C) ​dissolves immediately unless the partners change its business.

Kay and Linda decide to do business as Marketing & Promotion. To be a partnership, this association can result from an agreement that is A) ​express, but not implied. B) ​implied, but not express. C) ​oral, written, or implied by conduct. D) ​written, but not oral or implied.

C) ​oral, written, or implied by conduct.

Emma is one of three partners in Fast Work, a commercial janitorial service. With respect to her interest in the firm, when she dies, her heirs are most likely entitled to A) ​nothing. B) ​a payout of her capital contribution without more. C) ​the buyout price paid by the firm for the interest. D) ​one-third of the value of the interest.

C) ​the buyout price paid by the firm for the interest.

Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners.Refer to Fact Pattern 37-3. The partners decide to dissolve Equity Lending. Duke collects and distributes the firm's assets. This results in A) ​nothing with respect to the firm's existence. B) ​the continuation of the firm's business. C) ​the termination of the firm's legal existence. D) ​the temporary suspension of the firm's business.

C) ​the termination of the firm's legal existence.

Darin is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Darin is liable for the debts A) ​in proportion to the number of partners in the firm. B) to no extent.​ C) ​to the extent of her capital contribution to the firm. D) ​to the full extent.

C) ​to the extent of her capital contribution to the firm.

Bryn, Cornell, and Duke are general partners in Equity Lending, a consumer credit, mortgage, and investment firm. Their agreement states that it is a breach of the agreement for any partner to assign his or her interest to a creditor without the consent of the other partners. Refer to Fact Pattern 37-3. Cornell's assignment of his interest in Equity Lending to Financial Consultants Corporation results in A) ​nothing with respect to Cornell or Equity Lending. B) ​the automatic termination of Equity Lending's legal existence. C) ​Cornell's liability for all of Equity Lending's debts. D) ​Cornell's wrongful dissociation and liability for any damages.

D) ​Cornell's wrongful dissociation and liability for any damages.

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char are entitled to A) ​access in proportion to their participation in management of the firm. B) ​access to the parts that directly relate to their capital contributions. C) ​no access. D) ​complete access.

D) ​complete access.

Luke and Maya form Northeast Air Express, a general partnership. The essential elements of this partnership do not include A) ​a sharing of profits and losses. B) ​a joint ownership of the business. C) ​an equal right to management in the business. D) ​goodwill.

D) ​goodwill.

Quisa and Reilly are partners in Sport Bikes, which rents and sells bikes, bike accessories, and related gear. Quisa manages the business. Unless the partnership agreement states otherwise, Quisa is A) ​entitled to compensation in proportion to her effect on the business. B) ​entitled to compensation in proportion to her effort. C) ​entitled to compensation in proportion to her capital contribution. D) ​not entitled to compensation.

D) ​not entitled to compensation.

Rosa is a partner in Silver Dragon, a partnership consisting of the owners of a restaurant. Silver Dragon incurs debt for new dining tables and chairs. With respect to this debt, Rosa is A) ​not liable. B) ​only liable to the amount of her capital contribution. C) ​only liable in proportion to the number of partners in the firm. D) ​personally liable to the full extent.

D) ​personally liable to the full extent.

Orlando is a limited partner in Port of Call Exports, a limited partnership. By participating in the firm's management, Orlando is liable for its obligations A) ​in proportion to the number of partners in the firm. B) ​to no extent. C) ​to the extent of his capital contribution to the firm. D) ​to the full extent.

D) ​to the full extent.

Stefani and Tyler agree in an exchange of e-mail to form a partnership to buy and sell real property. Their partnership agreement is legally binding A) ​only if a copy of the agreement is filed in the appropriate state office. B) ​only if the agreement is printed in hard copy and signed by the parties. C) ​only if the parties exchange valid consideration. D) ​without more.

D) ​without more.