SU 16
A valid limited partnership A. Cannot be treated as an "association" for federal income tax purposes. B. May have an unlimited number of partners. C. Is exempt from all Securities and Exchange Commission regulations. D. Must designate in its certificate the name, address, and capital contribution of each general partner and each limited partner.
B. May have an unlimited number of partners.
Unless otherwise provided for in the partnership agreement, the assignment of a partner's interest in a general partnership will A. Result in the termination of the partnership. B. Not affect the assigning partner's liability to third parties for obligations existing at the time of the assignment. C. Transfer the assigning partner's rights in specific partnership property to the assignee. D. Transfer the assigning partner's right to bind the partnership to contracts to the assignee.
B. Not affect the assigning partner's liability to third parties for obligations existing at the time of the assignment.
If no provisions are made in an agreement, a general partnership allocates profits and losses based on the A. Value of actual contributions made by each partner. B. Number of partners. C. Number of hours each partner worked in the partnership during the year. D. Number of years each partner belonged to the partnership.
B. Number of partners.
A general partner will not be personally liable for which of the following acts or transactions? A. The gross negligence of one of the partnership's employees while carrying out the partnership business. B. A contract entered into by the majority of the other partners but to which the general partner objects. C. A personal mortgage loan obtained by one of the other partners on his or her residence to which that partner, without authority, signed the partnership name on the note. D. A contract entered into by the partnership in which the other partners agree among themselves to hold the general partner harmless.
C. A personal mortgage loan obtained by one of the other partners on his or her residence to which that partner, without authority, signed the partnership name on the note.
The apparent authority of a partner to bind the partnership in dealing with third parties A. Will be effectively limited by a formal resolution of the partners of which third parties are unaware. B. Will be effectively limited by the filing of a statement of partnership authority. C. Would permit a partner to submit a claim against the partnership to arbitration. D. Must be derived from the express powers and purposes contained in the partnership agreement.
B. Will be effectively limited by the filing of a statement of partnership authority.
D, E, F, and G formed a general partnership. Their written partnership agreement provides that the profits will be divided so that D will receive 40%; E, 30%; F, 20%; and G, 10%. There is no provision for allocating losses. At the end of its first year, the partnership has losses of $200,000. Before allocating losses, the partners' capital account balances are D, $120,000; E, $100,000; F, $75,000; and G, $11,000. G refuses to make any further contributions to the partnership. Ignore the effects of federal partnership tax law. After losses are allocated to the partners' capital accounts and all liabilities are paid, the partnership's sole asset is $106,000 in cash. How much will E receive on dissolution of the partnership? A. $29,500 B. $35,333 C. $37,000 D. $40,000
C. $37,000
Fact Pattern: Downs, Frey, and Vick formed the DFV General Partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for 5 years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000. Vick's share of the undistributed losses will be A. $0 B. $1,000 C. $9,000 D. $10,000
C. $9,000
Which of the following statements is true with respect to a limited partnership? A. A limited partner may not be an unsecured creditor of the limited partnership. B. A general partner may not also be a limited partner at the same time. C. A general partner may be a secured creditor of the limited partnership. D. A limited partnership can be formed with limited liability for all partners.
C. A general partner may be a secured creditor of the limited partnership.
Absent any contrary provisions in the agreement, under which of the following circumstances will a limited partnership be dissolved? A. A limited partner dies and his or her estate is insolvent. B. A personal creditor of a general partner obtains a judgment against the general partner's interest in the limited partnership. C. A general partner retires and all the remaining general partners do not consent to continue. D. A limited partner assigns his or her partnership interest to an outsider and the purchaser becomes a substituted limited partner.
C. A general partner retires and all the remaining general partners do not consent to continue.
What type of business organization may generally be formed without filing an organizational document or certificate with a state government agency or office? A. A corporation. B. A limited liability company. C. A general partnership. D. A limited partnership.
C. A general partnership.
Fil and Breed are 50% partners in F&B Cars, a used-car dealership. F&B maintains an average used-car inventory worth $150,000. On January 5, National Bank obtained a $30,000 judgment against Fil and Fil's child on a loan that Fil had cosigned and on which Fil's child had defaulted. National sued F&B to be allowed to attach $30,000 worth of cars as part of Fil's interest in F&B's inventory. Will National prevail in its suit? A. No, because the judgment was not against the partnership. B. No, because attachment of the cars would dissolve the partnership by operation of law. C. Yes, because National had a valid judgment against Fil. D. Yes, because Fil's interest in the partnership inventory is an asset owned by Fil.
A. No, because the judgment was not against the partnership.
Park and Graham entered into a written partnership agreement to operate a retail store. Their agreement was silent as to the duration of the partnership or its purposes. Which of the following statements is true? A. Park may dissociate from the partnership at any time. B. Unless Graham consents to a dissolution, Park must apply to a court and obtain a decree ordering the dissolution. C. Park may dissolve the partnership by any reasonable means. D. Park may dissolve the partnership only after notice of the proposed dissolution is given to all partnership creditors.
A. Park may dissociate from the partnership at any time.
Eric, Teri, and Jana formed a partnership. Their cash contributions were $60,000 by Eric, $36,000 by Teri, and $24,000 by Jana. Jana will be responsible for 80% of day-to-day operations. Teri has unlimited liability, and each of the other partners is liable for 25% of the partnership debt. If the partnership agreement does not state how profits are to be shared, the Revised Uniform Partnership Act (RUPA) provides for which arrangement? A. Eric: 50% Teri: 30% Jana: 20% B. Eric: 33 1/3% Teri: 33 1/3% Jana: 33 1/3% C. Eric: 25% Teri: 50% Jana: 25% D. Eric: 10% Teri: 10% Jana: 80%
B. Eric: 33 1/3% Teri: 33 1/3% Jana: 33 1/3%
Gillie, Taft, and Dall are partners in an architectural firm. The partnership agreement is silent about the payment of salaries and the division of profits and losses. Gillie works full-time in the firm, and Taft and Dall each work half-time. Taft invested $120,000 in the firm, and Gillie and Dall invested $60,000 each. Dall is responsible for bringing in 50% of the business, and Gillie and Taft 25% each. How should profits of $120,000 for the year be divided? A. Gillie: $60,000 Taft: $30,000 Dall: $30,000 B. Gillie: $40,000 Taft: $40,000 Dall: $40,000 C. Gillie: $30,000 Taft: $60,000 Dall: $30,000 D. Gillie: $30,000 Taft: $30,000 Dall: $60,000
B. Gillie: $40,000 Taft: $40,000 Dall: $40,000
Grey and Carr entered into a written partnership agreement to operate a hardware store. Their agreement was silent as to the duration of the partnership. Grey wishes to dissolve the partnership. Which of the following is true? A. Unless Carr consents to a dissolution, Grey must apply to a court and obtain a decree ordering the dissolution. B. Grey may dissociate from the partnership and not be liable for any pre- or post-dissociation obligations. C. Grey may dissolve the partnership only after notice of the proposed dissolution is given to all partnership creditors. D. Grey may dissociate from the partnership at any time.
D. Grey may dissociate from the partnership at any time.
Many states require partnerships to file the partnership name under laws known as fictitious name statutes. These statutes A. Require a proper filing as a condition precedent to the valid creation of a partnership. B. Are designed primarily to provide registration for tax purposes. C. Are designed to clarify the rights and duties of the members of the partnership. D. Have little effect on the creation or operation of a partnership other than the imposition of a fine or other minor penalty for noncompliance.
D. Have little effect on the creation or operation of a partnership other than the imposition of a fine or other minor penalty for noncompliance.
Which of the following rights would a limited partner not be entitled to assert? A. To have a formal accounting of partnership affairs whenever the circumstances render it just and reasonable. B. To have the same rights as a general partner to a distribution in the winding up of the partnership. C. To have reasonable access to the partnership books and to inspect and copy them. D. To be elected as a general partner by a majority vote of the limited partners in number and amount.
D. To be elected as a general partner by a majority vote of the limited partners in number and amount.
A partner in a general partnership is usually not entitled to which of the following? A. To participate in management. B. To review accounting records. C. To enter into a contract with a third party without the consent of the other partners. D. To be liable only for personal negligence.
D. To be liable only for personal negligence.
A general partnership by estoppel may be recognized when A. The business is carried on for profit. B. The partnership files to do business under a fictitious name. C. A contract cannot be performed within 1 year of its making. D. To prevent injustice, an actual partnership does not exist.
D. To prevent injustice, an actual partnership does not exist.
Generally, under the Revised Uniform Partnership Act, a partnership has which of the following characteristics? A. Unlimited Duration: Yes Obligation for Payment of Federal Income Tax: Yes B. Unlimited Duration: Yes Obligation for Payment of Federal Income Tax: No C. Unlimited Duration: No Obligation for Payment of Federal Income Tax: Yes D. Unlimited Duration: No Obligation for Payment of Federal Income Tax: No
D. Unlimited Duration: No Obligation for Payment of Federal Income Tax: No
Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves, and Gage sought to enforce the contract. Gage will A. Lose, because Locke's action was not authorized by the partnership agreement. B. Lose, because Locke was not an agent of the partnership. C. Win, because Locke had express authority to bind the partnership. D. Win, because Locke had apparent authority to bind the partnership.
D. Win, because Locke had apparent authority to bind the partnership.
Ms. Wall is a limited partner of the Amalgamated Limited Partnership. She is insolvent, and her debts exceed her assets by $28,000. Goldsmith, one of Wall's largest creditors, is resorting to legal process to obtain the payment of Wall's debt to him. Goldsmith has obtained a charging order against Wall's limited partnership interest for the unsatisfied amount of the debt. As a result of Goldsmith's action, which of the following will happen? A. The partnership will be dissolved. B. Wall's partnership interest must be redeemed with partnership property. C. Goldsmith automatically becomes a substituted limited partner. D. Goldsmith becomes in effect an assignee of Wall's partnership interest.
D. Goldsmith becomes in effect an assignee of Wall's partnership interest.
The partnership agreement for Owen Associates, a general partnership, provided that profits be paid to the partners in the ratio of their financial contribution to the partnership. Moore contributed $10,000, Noon contributed $30,000, and Kale contributed $50,000. For the year ended December 31, Owen had losses of $180,000. What amount of the losses should be allocated to Kale? A. $20,000 B. $60,000 C. $90,000 D. $100,000
D. $100,000
What term is used to describe a partnership without a specified duration? A. A perpetual partnership. B. A partnership by estoppel. C. An indefinite partnership. D. A partnership at will.
D. A partnership at will.
Which of the following partners of a limited liability partnership (LLP) may avoid personal liability when a partner commits a negligent act? A. All the partners. B. The supervisor of the negligent partner. C. All the partners other than the negligent partner. D. All the partners other than the negligent partner and his or her supervisor.
D. All the partners other than the negligent partner and his or her supervisor.
A joint venture is A. An association limited to no more than two persons in business for profit. B. An enterprise of numerous co-owners in a nonprofit undertaking. C. A corporate enterprise for a single undertaking of limited duration. D. An association of persons engaged as co-owners in a single undertaking for profit.
D. An association of persons engaged as co-owners in a single undertaking for profit.
A partner's interest in specific partnership property is A. Assignable to the Partner's Individual Creditors: Yes Subject to the Attachment by the Partner's Individual Creditors: Yes B. Assignable to the Partner's Individual Creditors: Yes Subject to the Attachment by the Partner's Individual Creditors: No C. Assignable to the Partner's Individual Creditors: No Subject to the Attachment by the Partner's Individual Creditors: Yes D. Assignable to the Partner's Individual Creditors: No Subject to the Attachment by the Partner's Individual Creditors: No
D. Assignable to the Partner's Individual Creditors: No Subject to the Attachment by the Partner's Individual Creditors: No
After withdrawal of a general partner, Johnson contributed $25,000 for a 25% share of the general partnership's profits and losses. The partnership had a $120,000 basis in assets and $20,000 in liabilities before Johnson's contribution. After admission to an existing partnership, the new general partner A. Has a right to participate in management in proportion to the partner's interest. B. Assumes the debts of the withdrawing partner. C. Does not have the right to inspect partnership books and records. D. Assumes a proportionate share of previously existing partnership liabilities.
D. Assumes a proportionate share of previously existing partnership liabilities.
Marshall formed a limited partnership for the purpose of engaging in the export-import business. Marshall obtained additional working capital from Franklin and Lee by selling them each a limited partnership interest. Under these circumstances, the limited partnership A. Will usually be treated as a taxable entity for federal income tax purposes. B. Will lose its status as a limited partnership if it has more than one general partner. C. Can limit the liability of all partners. D. Can exist as such only if it is formed under the authority of a state statute.
D. Can exist as such only if it is formed under the authority of a state statute.
Eller, Fort, and Owens do business as Venture Associates, a general partnership. Trent Corp. brought a breach of contract suit against Venture and Eller individually. Trent won the suit and filed a judgment against both Venture and Eller. Venture then entered bankruptcy. Under the RUPA, Trent will generally be able to collect the judgment in full from A. Partnership assets but not partner personal assets. B. The personal assets of Eller, Fort, and Owens. C. Eller's personal assets only after partnership assets are exhausted. D. Eller's personal assets.
D. Eller's personal assets.
Smith and James were partners in S and J Partnership. The partnership agreement stated that all profits and losses were allocated 60% to Smith and 40% to James. The partners decided to terminate and wind up the partnership. The following was the balance sheet for S and J on the day of the windup: Cash $40,000 Accounts receivable 12,000 Property & equipment 38,000 Total Assets $90,000 Accounts payable $24,000 Smith, capital 30,000 James, capital 36,000 Total liabilities & capital $90,000 Of the total accounts receivable, $10,000 was collected, and the remainder was written off as bad debt. All liabilities of S and J were paid by the partnership. The property and equipment are sold for $32,000. Under the Revised Uniform Partnership Act, what amount of cash was distributed to Smith? A. $25,200 B. $26,000 C. $30,000 D. $34,800
A. $25,200
In general, which of the following statements is true with respect to a limited partnership? A. A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership. B. A limited partnership can be formed with limited liability for all partners. C. A limited partner may not also be a general partner at the same time. D. A limited partner may hire employees on behalf of the partnership.
A. A limited partner has the right to obtain from the general partner(s) financial information and tax returns of the limited partnership.
Harry, Harriet, and Horance operate the Triple H used car lot as a general partnership. Pursuant to their agreement, each drives a Triple H vehicle to and from work, makes various business trips about the city either from home or the lot, and keeps a "for sale" sign displayed in the vehicle's windshield. Each car is for sale at all times of the day and night and at any location. One afternoon, Harriet was driving on a business trip when her car collided with one driven by Paine, who was seriously injured. Harriet's conduct was found to be criminally negligent. In a tort action by Paine against Harry, Harriet, and Horance, both as individuals and as the Triple H partnership, who is liable? A. All defendants because Harriet was acting within the ordinary course of the partnership business. B. Only Harriet because her tort was not authorized by the other partners. C. Only Harriet because a crime cannot be imputed to the partnership. D. Only Harriet and Triple H.
A. All defendants because Harriet was acting within the ordinary course of the partnership business.
What is a possible disadvantage of forming a limited liability partnership (LLP) as opposed to remaining a general partnership? A. Creation and continuation require compliance with statutory provisions. B. Partners are subject to a broad personal liability shield. C. LLPs are pass-through entities. D. Termination of an LLP involves the same process as in a general partnership.
A. Creation and continuation require compliance with statutory provisions.
Dawn was properly admitted as a partner in the ABC Partnership after purchasing Jim's partnership interest. Jim immediately withdrew. The partnership agreement states that the partnership will continue on the withdrawal or admission of a partner. Unless the partners otherwise agree, A. Dawn's personal liability for existing partnership debts will be limited to Dawn's interest in partnership property. B. Jim will automatically be released from personal liability for partnership debts incurred before Dawn's admission. C. Jim will be permitted to recover from the other partners the full amount that Jim paid on account of partnership debts incurred before Dawn's admission. D. Dawn will be subjected to unlimited personal liability for partnership debts incurred before being admitted.
A. Dawn's personal liability for existing partnership debts will be limited to Dawn's interest in partnership property.
Fact Pattern: Downs, Frey, and Vick formed the DFV General Partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for 5 years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000. Under the RUPA, if Frey died before the partnership terminated, A. Downs and Vick, as a majority of the partners, would have been able to continue the partnership. B. The partnership would have continued even if Downs and Vick decided not to purchase Frey's partnership interest. C. The partnership would automatically dissolve. D. Downs and Vick would have Frey's interest in the partnership.
A. Downs and Vick, as a majority of the partners, would have been able to continue the partnership.
Which of the following statement(s) is (are) usually true regarding general partners' liability? I. All general partners are jointly and severally liable for partnership torts. II. All general partners are liable only for those partnership obligations they actually authorized. A. I only. B. II only. C. Both I and II. D. Neither I nor II.
A. I only. I. All general partners are jointly and severally liable for partnership torts.
Stanley is a well-known retired movie personality who purchased a limited partnership interest in Terrific Movie Productions upon its initial syndication. Which of the following is true? A. If Stanley permits his name to be used in connection with the business and is held out as a participant in the management of the venture, he will be liable as a general partner. B. The sale of these limited partnership interests is not subject to SEC registration. C. This limited partnership may be formed with the same informality as a general partnership. D. The general partners are prohibited from also owning limited partnership interests.
A. If Stanley permits his name to be used in connection with the business and is held out as a participant in the management of the venture, he will be liable as a general partner.
Which of the following statements about the form of a general partnership agreement is true? A. It must be in writing if the partnership is to last for longer than 1 year. B. It must be in writing if partnership profits would not be equally divided. C. It must be in writing if any partner contributes more than $500 in capital. D. It could not be oral if the partnership would deal in real estate.
A. It must be in writing if the partnership is to last for longer than 1 year.
A limited partner A. May not withdraw his or her capital contribution absent sufficient limited-partnership property to pay all general creditors. B. Must not own limited-partnership interests in other competing limited partnerships. C. Is automatically an agent for the partnership with apparent authority to bind the limited partnership in contract. D. Has no liability to creditors even if (s)he takes part in the control of the business as long as (s)he is held out as being a limited partner.
A. May not withdraw his or her capital contribution absent sufficient limited-partnership property to pay all general creditors.
A CPA firm, operated as a general partnership, will dissolve by mutual agreement at the end of the year. During the year, distributions have been made to some partners in excess of their capital invested in the partnership. Which of the following statements is correct regarding the distribution of assets at the end of the partnership's existence? A. Partners with negative capital accounts must contribute additional funds to the partnership. B. Creditors whose debts cannot be satisfied by the partnership assets will have no further recourse. C. The partnership must engage in additional activity to generate sufficient cash to pay all creditors. D. Bankrupt partners must contribute capital to resolve their bankruptcy proceedings.
A. Partners with negative capital accounts must contribute additional funds to the partnership.
A limited partner's capital contribution to the limited partnership A. Results in the limited partner having an intangible personal property right. B. Can be withdrawn at the limited partner's option at any time prior to the filing of a petition in bankruptcy against the limited partnership. C. Can only consist of cash or marketable securities. D. Must be indicated in the limited partnership's certificate.
A. Results in the limited partner having an intangible personal property right.
Wilson and Thomas are partners. Wilson contributed $150,000 to the partnership, and Thomas contributed $50,000. Wilson does 40% of the work, and Thomas does 60%. They do not have a partnership agreement that addresses the sharing of profits and losses. By the end of the year, the partnership has earned a profit of $200,000. What is Wilson's share of the profit under the Revised Uniform Partnership Act? A. $80,000 B. $100,000 C. $120,000 D. $150,000
B. $100,000
D, E, F, and G formed a general partnership. Their written partnership agreement provides that the profits will be divided so that D will receive 40%; E, 30%; F, 20%; and G, 10%. There is no provision for allocating losses. At the end of its first year, the partnership has losses of $200,000. Before allocating losses, the partners' capital account balances are D, $120,000; E, $100,000; F, $75,000; and G, $11,000. G refuses to make any further contributions to the partnership. Ignore the effects of federal partnership tax law. What is G's share of the partnership losses? A. $9,000 B. $20,000 C. $39,000 D. $50,000
B. $20,000
What business entity can be voluntarily dissolved and terminated without filing a dissolution document with the state of organization? A. A corporation. B. A general partnership. C. A limited liability partnership. D. A limited partnership.
B. A general partnership.
The most significant distinction between a general partner and a joint venturer is that A. A joint venturer is personally liable for debts of the entity. B. A joint venturer has less apparent authority. C. Only a partner has a right to an accounting. D. Neither is liable for taxes on entity profits.
B. A joint venturer has less apparent authority.
Mary is a general partner in Goldilock Bookstore, a brick and mortar store. Due to a decline in business, Mary and her partners have decided to close the bookstore and dissolve the partnership. Which of the following statements is true? A. A statement of dissociation may be filed only by a dissociated partner. B. A partner without actual authority is liable for partnership debts after dissolution. C. The partnership is liable for a negative balance in a partner's account. D. The partners' liability for partnership debts will be discharged in bankruptcy.
B. A partner without actual authority is liable for partnership debts after dissolution.
In a general partnership, which of the following acts must be approved by all the partners? A. Dissolution of the partnership. B. Admission of a partner. C. Authorization of a partnership capital expenditure. D. Conveyance of real property owned by the partnership.
B. Admission of a partner.
When parties intend to create a partnership that will be recognized under the Revised Uniform Partnership Act, they must agree to A. Conduct a Business for Profit: Yes Share Gross Receipts from a Business: Yes B. Conduct a Business for Profit: Yes Share Gross Receipts from a Business: No C. Conduct a Business for Profit: No Share Gross Receipts from a Business: Yes D. Conduct a Business for Profit: No Share Gross Receipts from a Business: No
B. Conduct a Business for Profit: Yes Share Gross Receipts from a Business: No
Ann Grand, a general partner, retired. The partnership held a testimonial dinner for her and invited 10 of its largest customers. A week later a notice was placed in various trade journals indicating that Grand had retired and was no longer associated with the partnership in any capacity. After the appropriate public notice of Grand's retirement, which of the following best describes her legal status? A. The release of Grand by the remaining partners and the assumption of all past and future debts of the partnership by them via a hold-harmless clause constitutes a novation. B. Grand has the apparent authority to bind the partnership in contracts she makes with persons unaware of her retirement who have previously dealt with the partnership. C. Grand has no liability to past creditors upon her retirement from the partnership if they all have been informed of her withdrawal and her release from liability. D. Grand has the legal status of a limited partner for the 3 years it takes to pay her the balance of the purchase price of her partnership interest.
B. Grand has the apparent authority to bind the partnership in contracts she makes with persons unaware of her retirement who have previously dealt with the partnership.
Unless otherwise provided in the certificate of limited partnership, which of the following is true if Grey, one of the limited partners, dies? A. Grey's personal representative will automatically become a substituted limited partner. B. Grey's personal representative will have all the rights of a limited partner for the purpose of settling the estate. C. The partnership will automatically be dissolved. D. Grey's estate will be free from any liabilities incurred by Grey as a limited partner.
B. Grey's personal representative will have all the rights of a limited partner for the purpose of settling the estate.
A partner's duty of loyalty does not extend to A. Competing with the partnership. B. Gross negligence. C. Acting as a party with an adverse interest. D. Exploiting a partnership opportunity.
B. Gross negligence.
Laura Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell her interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission, Ward A. Acquired only the right to receive Lark's share of DSJ profits. B. Has the right to participate in DSJ's management. C. Is personally liable for partnership liabilities arising before and after being admitted as a partner. D. Must contribute cash or property to DSJ to be admitted with full partnership rights.
B. Has the right to participate in DSJ's management.
Fact Pattern: Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Ian Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. As a result of Fein's withdrawal and Gold's admission to the partnership, Gold A. Is personally liable for partnership liabilities arising before and after his admission as a partner. B. Has the right to participate in the management of ABC. C. Acquired only the right to receive Fein's share of the profits of ABC. D. Must contribute cash or property to ABC to be admitted with the same rights as the other partners.
B. Has the right to participate in the management of ABC.
A general partnership must A. Pay federal income tax. B. Have two or more partners. C. Have written articles of partnership. D. Provide for apportionment of liability for partnership debts.
B. Have two or more partners.
Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean may assert the rights to I. Participation in the management of TLC II. Cobb's share of TLC's partnership profits A. I only. B. II only. C. I and II. D. Neither I nor II.
B. II only. II. Cobb's share of TLC's partnership profits
Under the Revised Uniform Partnership Act, which of the following statements, if any, are correct regarding the effect of the assignment of an interest in a general partnership? I. The assignee is personally responsible for the assigning partner's share of past and future partnership debts. II. The assignee is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership. A. I only. B. II only. C. Both I and II. D. Neither I nor II.
B. II only. II. The assignee is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership.
In the absence of a specific provision in a general partnership agreement, partnership losses will be allocated A. Equally among the partners irrespective of the allocation of partnership profits. B. In the same manner as partnership profits. C. In proportion to the partners' capital contributions. D. In proportion to the partners' capital contributions and outstanding loan balances.
B. In the same manner as partnership profits.
A limited liability partnership (LLP) A. Starts as a corporation. B. Is typically adopted by providers of professional services. C. Is ordinarily treated as a legal entity to the same extent as a corporation. D. Offers a liability shield only for professional malpractice.
B. Is typically adopted by providers of professional services.
Leslie, Kelly, and Blair wanted to form a business. Which of the following business entities does not require the filing of organization documents with the state? A. Limited partnership. B. Joint venture. C. Limited liability company. D. Subchapter S corporation.
B. Joint venture.
The XYZ Limited Partnership has two general partners: Smith and Jones. A provision in the partnership agreement allows the removal of a general partner by a majority vote of the limited partners. The limited partners vote to remove Jones as a general partner. Which of the following statements is true? A. The limited partners are now liable to third parties for partnership obligations. B. Limited partners may vote to remove a general partner without losing their status as limited partners. C. By voting to remove a general partner, the limited partners are presumed to exercise control of the business. D. Limited partners may participate in management decisions without limitation if this right is provided for in the limited partnership agreement.
B. Limited partners may vote to remove a general partner without losing their status as limited partners.
Joe Perone was a member of Caddy, Shack, & Perone, a general trading partnership. He died and the partnership is being liquidated in a bankruptcy proceeding, but Perone's estate is substantial. The creditors of the partnership are seeking to collect on their claims from Perone's estate. Which of the following statements is true insofar as their claims are concerned? A. The death of Perone caused a dissolution of the firm, thereby freeing his estate from personal liability. B. Partnership creditors and Perone's personal creditors are on an equal footing regarding the assets of Perone's estate. C. The creditors must first proceed against the remaining partners before Perone's estate can be held liable for the partnership's debts. D. The liability of Perone's estate cannot exceed his capital contribution plus that percentage of the deficit attributable to his capital contribution.
B. Partnership creditors and Perone's personal creditors are on an equal footing regarding the assets of Perone's estate.
Lewis, Clark, and Beal entered into a written agreement to form a partnership. The agreement required that the partners make the following capital contributions: Lewis, $40,000; Clark, $30,000; and Beal, $10,000. It was also agreed that, in the event the partnership experienced losses in excess of available capital, Beal would contribute additional capital to the extent of the losses. The partnership agreement was otherwise silent about division of profits and losses. Which of the following statements is true? A. Profits are to be divided among the partners in proportion to their relative capital contributions. B. Profits are to be divided equally among the partners. C. Losses will be allocated in a manner different from the allocation of profits because the partners contributed different amounts of capital. D. Beal's obligation to contribute additional capital would have an effect on the allocation of profit or loss to Beal.
B. Profits are to be divided equally among the partners.
Jackie Daniels, Jess Beal, and Sid Wade agreed to form the DBW Partnership to engage in the import-export business. They had been life-long friends and had engaged in numerous business dealings with each other. It was orally agreed that Daniels would contribute $20,000, Beal $15,000 and Wade $5,000. It was also orally agreed that in the event the venture proved to be a financial disaster all losses above the amounts of capital contributed would be assumed by Daniels and that she would hold her fellow partners harmless from any additional amounts lost. The partnership was consummated with a handshake and the contribution of the agreed-upon capital by the partners. There were no other express agreements. Under these circumstances, which of the following is true? A. Profits are to be divided in accordance with the relative capital contributions of each partner. B. Profits are to be divided equally. C. The partnership is a nullity because the agreement is not contained in a signed writing. D. Profits are to be shared in accordance with the relative time each devotes to partnership business during the year.
B. Profits are to be divided equally.
When a party deals with a partner who lacks actual or apparent authority, a general partnership will be bound by the resulting contract if the other partners A. Ratify the Contract: Yes Amend the Partnership Agreement: Yes B. Ratify the Contract: Yes Amend the Partnership Agreement: No C. Ratify the Contract: No Amend the Partnership Agreement: Yes D. Ratify the Contract: No Amend the Partnership Agreement: No
B. Ratify the Contract: Yes Amend the Partnership Agreement: No
Billie Donovan, a partner of Monroe, Lincoln, and Washington, is considering selling or pledging all or part of her interest in the partnership. The partnership agreement is silent on the matter. Donovan may A. Sell part but not all of her partnership interest. B. Sell or pledge her entire partnership interest without causing a dissolution. C. Pledge her partnership interest, but only with the consent of the other partners. D. Sell her entire partnership interest and confer partner status upon the purchaser.
B. Sell or pledge her entire partnership interest without causing a dissolution.
Hancock, LLP, is an organization of professionals who have not incorporated. It is required to file which document with the secretary of state? A. Certificate of limited partnership. B. Statement of qualification. C. Foreign limited partnership registration. D. Partnership by estoppel.
B. Statement of qualification.
When the Revised Uniform Partnership Act applies and there is no general partnership agreement, which of the following events, if any, occur(s) when a partner dies? A. The Partner is Dissociated: Yes The Deceased Partner's Estate is Free from Any Partnership Liability: Yes B. The Partner is Dissociated: Yes The Deceased Partner's Estate is Free from Any Partnership Liability: No C. The Partner is Dissociated: No The Deceased Partner's Estate is Free from Any Partnership Liability Yes D. The Partner is Dissociated: No The Deceased Partner's Estate is Free from Any Partnership Liability: No
B. The Partner is Dissociated: Yes The Deceased Partner's Estate is Free from Any Partnership Liability: No
Rivers and Lee want to form a partnership. For the partnership agreement to be enforceable, it must be in writing if A. Rivers and Lee reside in different states. B. The agreement cannot be completed within 1 year from the date of its formation. C. Either Rivers or Lee is to contribute $500 or more in capital. D. The partnership intends to buy and sell real estate.
B. The agreement cannot be completed within 1 year from the date of its formation.
Three independent sole proprietors decided to pool their resources and form a partnership. The business assets and liabilities of each were transferred to the partnership. The partnership commenced business on September 1, but the parties did not execute a formal partnership agreement until October 15. Which of the following is true? A. The existing creditors must consent to the transfer of the individual business assets to the partnership. B. The partnership began its existence on September 1. C. If the partnership's duration is indefinite, the partnership agreement must be in writing and signed. D. In the absence of a partnership agreement specifically covering division of losses among the partners, they will be deemed to share them in accordance with their capital contributions.
B. The partnership began its existence on September 1.
A parent and children currently own and operate a farm as equal partners. Under the Revised Uniform Partnership Act, what effect would the death of the parent have on the partnership? A. The estate of the deceased partner automatically becomes a partner. B. The surviving partners could continue the partnership. C. The partnership would be dissolved and wound up. D. A partnership agreement could not have governed the continuation of the partnership.
B. The surviving partners could continue the partnership.
B approached L and proposed they form a partnership to exploit a profitable idea of B's. L declined, citing the risk of unlimited liability. B then proposed that L lend B $50,000 and that B go into the business as a sole proprietor. L would receive half the profits and the right to veto any of B's decisions. The debt would have a long-term maturity date to facilitate operation of the business during its development stage. If L accepts the above proposition, the likely result is that A. A debtor-creditor relationship exists between B and L. B. B and L are not partners as to each other, or third parties. C. B and L have formed a partnership even if they did not intend to. D. If L promises orally to become a partner of B and to transfer real property to the business, the statute of frauds would prohibit enforcement of the promise.
C. B and L have formed a partnership even if they did not intend to.
Under the Revised Uniform Partnership Act (RUPA), which of the following statements concerning the powers and duties of partners in a general partnership is(are) true? I. Each partner is an agent of every other partner and acts as both a principal and an agent in any business transaction within the scope of the partnership agreement. II. Each partner is subject to joint and several liability on partnership debts and contracts. A. I only. B. II only. C. Both I and II. D. Neither I nor II.
C. Both I and II. I. Each partner is an agent of every other partner and acts as both a principal and an agent in any business transaction within the scope of the partnership agreement. II. Each partner is subject to joint and several liability on partnership debts and contracts.
The partners of College Assoc., a general partnership, decided to dissolve the partnership and agreed that none of the partners would continue to use the partnership name. Which of the following events will occur on dissolution of the partnership? A. Each Partner's Existing Liability Would Be Discharged: Yes Each Partner's Apparent Authority Would Continue: Yes B. Each Partner's Existing Liability Would Be Discharged: Yes Each Partner's Apparent Authority Would Continue: No C. Each Partner's Existing Liability Would Be Discharged: No Each Partner's Apparent Authority Would Continue: Yes D. Each Partner's Existing Liability Would Be Discharged: No Each Partner's Apparent Authority Would Continue: No
C. Each Partner's Existing Liability Would Be Discharged: No Each Partner's Apparent Authority Would Continue: Yes
Which of the following statements is true concerning liability when a partner in a general partnership commits a tort while engaged in partnership business? A. The partner committing the tort is the only party liable. B. The partnership is the only party liable. C. Each partner is jointly and severally liable. D. Each partner is liable to pay an equal share of any judgment.
C. Each partner is jointly and severally liable.
Which of the following statements is true regarding the division of profits in a general partnership when the written partnership agreement only provides that losses be divided equally among the partners? Profits are to be divided A. Based on the partners' ratio of contribution to the partnership. B. Based on the partners' participation in day-to-day management. C. Equally among the partners. D. Proportionately among the partners.
C. Equally among the partners.
James Fine is doing business as Fine's Apparels, a sole proprietorship. In the past year Fine had regularly joined with Charles Walters in the marketing of bathing suits and beach accessories. Which of the following factors is the most important in ascertaining whether Fine and Walters have created a partnership relationship? A. A partnership agreement is not in existence. B. Each has a separate business of his own that he operates independently. C. Fine and Walters divide the net profits equally on a quarterly basis. D. Fine and Walters did not intend to be partners.
C. Fine and Walters divide the net profits equally on a quarterly basis.
Major Supply, Inc., is seeking a judgment against Les Danforth on the basis of a representation made by Dirk Coleman, in Danforth's presence, that they were in partnership together doing business as the D & C Trading Partnership. Major Supply received an order from Coleman on behalf of D & C and shipped $800 worth of goods to Coleman. Coleman has defaulted on payment of the bill and is insolvent. Danforth denies he is Coleman's partner and that he has any liability for the goods. Insofar as Danforth's liability is concerned, which of the following is true? A. Danforth is not liable if he is not in fact Coleman's partner. B. Because Danforth did not make the statement about being Coleman's partner, he is not liable. C. If Major Supply gave credit in reliance upon the misrepresentation by Coleman, Danforth is a partner by estoppel. D. Because the "partnership" is operating under a fictitious name (the D & C Trading Partnership), a filing is required and Major Supply's failure to ascertain whether there was in fact such a partnership precludes it from recovering.
C. If Major Supply gave credit in reliance upon the misrepresentation by Coleman, Danforth is a partner by estoppel.
Under the Revised Uniform Partnership Act, which of the following have the right to inspect partnership books and records? A. Employees. B. Former partners. C. Inactive partners. D. Transferees of partners' interests.
C. Inactive partners.
Wichita Properties is a limited partnership created in accordance with the provisions of the Uniform Limited Partnership Act. The partners have voted to dissolve and settle the partnership's accounts. Which of the following will be the last to be paid? A. General partners for unpaid distributions. B. Limited partners in respect to capital. C. Limited and general partners in respect to their undistributed profits. D. General partners in respect to capital.
C. Limited and general partners in respect to their undistributed profits.
Which of the following statements is true regarding the apparent authority of a partner to bind the partnership in dealings with third parties? Under the RUPA, the apparent authority A. Must be derived from the express powers and purposes contained in the partnership agreement. B. Will be effectively limited by a formal resolution of the partners of which third parties are unaware. C. May allow a partner to bind the partnership to representations made in connection with the sale of goods. D. Would permit a partner to submit a claim against the partnership to arbitration.
C. May allow a partner to bind the partnership to representations made in connection with the sale of goods.
Fact Pattern: Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Ian Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. The agreement to hold Fein harmless for all past, present, and future liabilities of ABC will A. Prevent partnership creditors from holding Fein personally liable only as to those liabilities of ABC existing at the time of Fein's withdrawal. B. Prevent partnership creditors from holding Fein personally liable for the past, present, and future liabilities of ABC. C. Not affect the rights of partnership creditors to hold Fein personally liable for those liabilities of ABC existing at the time of his withdrawal. D. Permit Fein to recover from the other partners only amounts he has paid in excess of his proportionate share.
C. Not affect the rights of partnership creditors to hold Fein personally liable for those liabilities of ABC existing at the time of his withdrawal.
Which of the following will result in a dissolution of a partnership under the RUPA? A. The bankruptcy of a partner as long as the partnership itself remains solvent. B. The death of a partner as long as his or her will provides that his executor shall become a partner in his or her place. C. Notice to a partnership at will of a partner's express will to withdraw. D. The assignment by a partner of his or her entire partnership interest.
C. Notice to a partnership at will of a partner's express will to withdraw.
Which of the following is an advantage of forming an LLP instead of a general partnership? A. The creation and continuation of an LLP requires compliance with statutory provisions. B. LLPs are pass-through entities. C. Partners are subject to a broad personal liability shield. D. The termination procedures of an LLP.
C. Partners are subject to a broad personal liability shield.
Unless the partnership agreement prohibits it, a partner in a general partnership may validly assign rights to A. Partnership Property: Yes Partnership Distributions: Yes B. Partnership Property: Yes Partnership Distributions: No C. Partnership Property: No Partnership Distributions: Yes D. Partnership Property: No Partnership Distributions: No
C. Partnership Property: No Partnership Distributions: Yes
X, Y, and Z have capital balances of $30,000, $15,000, and $5,000, respectively, in the XYZ Partnership. The general partnership agreement is silent as to the manner in which partnership losses are to be allocated but does provide that partnership profits are to be allocated as follows: 40% to X, 25% to Y, and 35% to Z. The partners have decided to dissolve and liquidate the partnership. After paying all creditors, the amount available for distribution will be $20,000. X, Y, and Z are individually solvent. Z will A. Receive $7,000. B. Receive $12,000. C. Personally have to contribute an additional $5,500. D. Personally have to contribute an additional $5,000.
C. Personally have to contribute an additional $5,500.
To raise capital, a general partnership can do all of the following except A. Borrow money from a family member. B. Receive personal capital of the partners. C. Sell shares of the business. D. Secure a business loan from a bank.
C. Sell shares of the business.
Under the RUPA, in which of the following situations will a partner in a limited liability partnership (LLP) most likely be personally liable? A. The managing partner in the Texas office when individuals in the New York office engaged in fraudulent activities. B. The managing partner in the New York office when an employee in the office who was supervised by another partner engaged in fraudulent activities. C. The partner who personally incurs an obligation in the conduct of partnership business. D. A nonmanaging partner in an office where another partner committed negligence.
C. The partner who personally incurs an obligation in the conduct of partnership business.
The partnership of Joe Baker, Art Green, and Guy Madison is insolvent. The partnership's liabilities exceed its assets by $123,000. The liabilities include a $25,000 loan from Madison. Green is personally insolvent. His personal liabilities exceed his personal assets by $13,500. Green has filed a voluntary petition in bankruptcy. Under these circumstances, partnership creditors A. Must proceed against the partnership and all the general partners in one lawsuit so that losses may be shared equitably among the partners. B. Rank first in payment and all (including Madison) will share proportionately in the partnership assets to be distributed. C. Will have the first claim to partnership property to the exclusion of the personal creditors of Green. D. Do not have the right to share pro rata with Green's personal creditors in Green's personal assets.
C. Will have the first claim to partnership property to the exclusion of the personal creditors of Green.
Stanley and Martin formed a partnership to engage in the trucking business. Stanley contributed the capital and Martin was to contribute the labor. However, Stanley did not want his name associated with the partnership due to interests in other trucking businesses. Martin was involved in an accident while carrying goods on behalf of the partnership. Which of the following would Stanley not be liable for as a result of the accident? A. Damages caused by the accident. B. Illegal drug activities when the police discovered their business was transporting illegal drugs. C. Rental of the truck when the lessor thought it was dealing with Martin individually. D. Illegal drug activities when Martin was also carrying illegal drugs in the truck unknown to Stanley.
D. Illegal drug activities when Martin was also carrying illegal drugs in the truck unknown to Stanley.
General partnerships and LLPs vary in terms of A. Termination. B. Capitalization. C. Taxation. D. Liability.
D. Liability.
Jones, Smith, and Bay wanted to form a company called JSB Co. but were unsure about which type of entity would be most beneficial based on their concerns. They all desired the opportunity to make tax-free contributions and distributions when appropriate. They wanted earnings to accumulate tax-free. They did not want to be subject to personal holding company tax and did not want double taxation of income. Bay was going to be the only individual giving management advice to the company and wanted to be a member of JSB through his current company, Channel, Inc. Which of the following would be the most appropriate business structure to meet all of their concerns? A. Proprietorship. B. S corporation. C. C corporation. D. Limited liability partnership.
D. Limited liability partnership.
General partners have a fiduciary relationship with each other. Accordingly, a general partner A. May engage in a business that competes with the partnership if it is operated with his or her own resources. B. May take advantage of a business opportunity within the scope of the partnership enterprise if the partnership agreement will terminate before the benefit will be received. C. Must exercise a degree of care and skill as a professional. D. May not earn a secret profit in dealings with the partnership or partners.
D. May not earn a secret profit in dealings with the partnership or partners.
James Quick was a partner in the Fast, Sure, and Quick Factors partnership. He subsequently died. His will left everything to his wife including a one-third interest in the land and building owned by Fast, Sure, and Quick. Which of the following statements is true? A. Mrs. Quick is a one-third owner of Fast, Sure, and Quick's land and building. B. The real property in question was held by the partnership as a tenancy in common. C. Mrs. Quick automatically becomes the partner of Fast and Sure upon her husband's death. D. Mrs. Quick has the right to receive a settlement for her husband's interest in the partnership.
D. Mrs. Quick has the right to receive a settlement for her husband's interest in the partnership.
Which of the following statements regarding a limited partner is(are) usually true? I. The limited partner is subject to personal liability for partnership debts. II. The limited partner has the right to take part in the control of the partnership. A. I and II. B. I only. C. II only. D. Neither I nor II.
D. Neither I nor II. I. The limited partner is subject to personal liability for partnership debts. II. The limited partner has the right to take part in the control of the partnership.
Under the RUPA, unless otherwise provided in a general partnership agreement, which of the following statements is true when a partner dies? A. The Deceased Partner's Executor Would Automatically Become a Partner: Yes The Deceased Partner's Estate Would be Free from Any Partnership Liabilities: Yes The Partnership Would be Dissolved Automatically: Yes B. The Deceased Partner's Executor Would Automatically Become a Partner: Yes The Deceased Partner's Estate Would be Free from Any Partnership Liabilities: No The Partnership Would be Dissolved Automatically: No C. The Deceased Partner's Executor Would Automatically Become a Partner: No The Deceased Partner's Estate Would be Free from Any Partnership Liabilities: Yes The Partnership Would be Dissolved Automatically: No D. The Deceased Partner's Executor Would Automatically Become a Partner: No The Deceased Partner's Estate Would be Free from Any Partnership Liabilities: No The Partnership Would be Dissolved Automatically: No
D. The Deceased Partner's Executor Would Automatically Become a Partner: No The Deceased Partner's Estate Would be Free from Any Partnership Liabilities: No The Partnership Would be Dissolved Automatically: No
Which of the following statements best describes the effect of the assignment of an interest in a general partnership? A. The assignee becomes a partner. B. The assignee is responsible for a proportionate share of past and future partnership debts. C. The assignment automatically dissolves the partnership. D. The assignment transfers the assignor's interest in partnership profits and losses and the right to distributions.
D. The assignment transfers the assignor's interest in partnership profits and losses and the right to distributions.
Berry, Drake, and Flanigan are partners in a general partnership. The partners made capital contributions as follows: Berry, $150,000; Drake, $100,000; and Flanigan, $50,000. Drake made a loan of $50,000 to the partnership. The partnership agreement specifies that Flanigan will receive a 50% share of profits and that Drake and Berry each will receive a 25% share of profits. Under the Revised Uniform Partnership Act and in the absence of any partnership agreement to the contrary, which of the following statements is correct regarding the sharing of losses? A. The partners will share equally in any partnership losses. B. The partners will share in losses on a pro rata basis according to the capital contributions. C. The partners will share in losses on a pro rata basis according to the capital contributions and loans made to the partnership. D. The partners will share in losses according to the allocation of profits specified in the partnership agreement.
D. The partners will share in losses according to the allocation of profits specified in the partnership agreement.
Buster and Rover formed a partnership to invest in real estate. However, Buster also decided to sell TVs on the side. Buster went to Harold, a wholesaler, and purchased 20 TVs on credit in the name of the partnership. Harold knew the partnership was formed for the purpose of investing in real estate because he had been solicited to be one of the partners. If Buster does not pay for the TVs, A. The partnership is liable because Buster had apparent authority to sign for the TVs as a partner. B. As a partner, Rover is personally liable to Harold. C. Harold can seize Buster's partnership interest and collect his or her profits. D. The partnership is not liable because it is not a trading partnership.
D. The partnership is not liable because it is not a trading partnership.
Wind, who has been a partner in the PLW general partnership for 4 years, decides to withdraw from the partnership despite a written partnership agreement that states, "No partner may withdraw for a period of 5 years." Under the Revised Uniform Partnership Act (RUPA), what is the result of Wind's withdrawal? A. Wind's withdrawal causes a dissolution of the partnership by operation of law. B. Wind's withdrawal has no bearing on the continued operation of the partnership by the remaining partners. C. Wind's withdrawal is not effective until Wind obtains a court-ordered decree of dissolution. D. Wind's withdrawal causes dissociation from the partnership despite being in violation of the partnership agreement.
D. Wind's withdrawal causes dissociation from the partnership despite being in violation of the partnership agreement.
