Question 1

Glen is a partner in Home Builders, a construction firm. Glen's assignment of his interest in the partnership to Investment Consultants results in

Accepted Answer

A)  nothing with respect to Home Builders.
B)  the automatic termination of Home Builders' legal existence.
C)  Glen's liability for all of Home Builders' debts.
D)  Glen's wrongful dissociation and liability for any damages. D

Question 2

Obie operates Pizza Palace. Obie hires Qua to take and fill customers' orders at an hourly wage of $15.00, plus tips. Obie and Qua are

Accepted Answer

A)  not partners, because Qua does not have an ownership interest or management rights in Pizza Palace.
B)  not partners, because the pay includes an hourly wage.
C)  not partners, because the pay includes tips.
D)  partners in a partnership. A

Question 3

Olivia is a partner in Pacific Trade. 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

Accepted Answer

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

Question 4

Dean, a partner in Equipment Sales, applies for a loan with Farmers Bank allegedly on Equipment's behalf but without the authorization of the other partners. The bank knows that Dean is not authorized to take out the loan. Liability in the event of default will be imposed on

Accepted Answer

A)  none of the choices.
B)  Dean.
C)  Equipment.
D)  Farmers Bank.

Question 5

Cornell and Duke are partners in Equity Lending. They decide to admit Fran to the firm as a new partner. Fran's liability for partnership debts incurred before her admission is

Accepted Answer

A)  limited to her capital contribution to the firm.
B)  limited to her personal assets.
C)  nothing.
D)  unlimited.

Question 6

The major features of an LLP are that it limits the personal liability of the partners and

Accepted Answer

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.

Question 7

The articles of partnership can include any terms that the partners wish, including terms that might be illegal or against public policy in other situations.

Accepted Answer

A) True 
 B)False

Question 8

When a person who is not a partner holds himself or herself out as a partner, a court may impose liability-and partnership rights-on the alleged partner.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  their own wrongful acts.
B)  any partnership obligation.
C)  their own and other partners' wrongful acts.
D)  none of the choices.

Question 10

The essential elements of a partnership do not include

Accepted Answer

A)  a sharing of profits and losses.
B)  a joint ownership of the business.
C)  an equal right in the management of the business.
D)  an intent to act in good faith.

Question 11

In some states, limited partners cannot withdraw from a limited partnership.

Accepted Answer

A) True 
 B)False

Question 12

Olin is a partner in Precision Plumbing. When the partners decide to dissolve the firm, Olin collects and distributes the assets. This results in

Accepted Answer

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.

Question 13

Bhat and Cho do business as Data Security, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as

Accepted Answer

A)  a combination of individuals.
B)  a proprietorship.
C)  an independent entity.
D)  an aggregate.

Question 14

Beth and Connie do business as Dig Excavators. In acting on the firm's behalf, Beth makes an honest error in underestimating the cost of a certain project. In this situation, to her firm, Beth is liable for a breach of the duty of

Accepted Answer

A)  care.
B)  accounting.
C)  loyalty.
D)  none of the choices.

Question 15

Nora and Owen do business as Property & Profit, a real estate investment partnership. In acting on the firm's behalf, Nora takes advantage of an opportunity to make a secret profit. To her firm, Nora is liable for a breach of

Accepted Answer

A)  the duty of care.
B)  contract.
C)  the duty of loyalty.
D)  none of the choices.

Question 16

Vern is one of three partners in Waffles Food Truck. Concerning all aspects of the partnership business, Vern is entitled to information

Accepted Answer

A)  on a complete basis.
B)  only on an "as needed" basis.
C)  only for a reasonable purpose.
D)  only related to the partner's capital contribution.

Question 17

Kris and Linda are partners in Mobile Devise, an online marketing firm. Kris signs a contract with Nature's Best Chocolate, a candy maker, apparently on Mobile's behalf. The contract is binding on

Accepted Answer

A)  Kris, Linda, and Mobile.
B)  Kris only.
C)  Mobile only.
D)  Nature's Best only.

Question 18

In many instances, agency law governs the relationships among partners.

Accepted Answer

A) True 
 B)False

Question 19

Vaughn starts Wind Systems to make and sell turbines. Later, Vaughn contracts with Xi to invest additional capital in the firm in exchange for 25 percent of the profits. Vaughn and Xi are not partners in Wind Systems because

Accepted Answer

A)  they do not share the profits equally.
B)  their agreement does not provide for the sharing of losses.
C)  Vaughn started the firm before Xi agreed to invest additional capital.
D)  they do not have joint control over the business.

Question 20

Quint and Reba are partners in Sofas Plus, a furniture store. Quint dissociates from the business. This ends Quint's

Accepted Answer

A)  right to participate in the partnership business.
B)  right to have his interest in the partnership purchased by the firm.
C)  duty of care with respect to events that occurred before dissociation.
D)  all of the choices.

Exam 35: All Forms of Partnerships

Glen is a partner in Home Builders, a construction firm. Glen's assignment of his interest in the partnership to Investment Consultants results in

Obie operates Pizza Palace. Obie hires Qua to take and fill customers' orders at an hourly wage of $15.00, plus tips. Obie and Qua are

Olivia is a partner in Pacific Trade. 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

Dean, a partner in Equipment Sales, applies for a loan with Farmers Bank allegedly on Equipment's behalf but without the authorization of the other partners. The bank knows that Dean is not authorized to take out the loan. Liability in the event of default will be imposed on

Cornell and Duke are partners in Equity Lending. They decide to admit Fran to the firm as a new partner. Fran's liability for partnership debts incurred before her admission is

The major features of an LLP are that it limits the personal liability of the partners and

The articles of partnership can include any terms that the partners wish, including terms that might be illegal or against public policy in other situations.

When a person who is not a partner holds himself or herself out as a partner, a court may impose liability-and partnership rights-on the alleged partner.

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

The essential elements of a partnership do not include

In some states, limited partners cannot withdraw from a limited partnership.

Olin is a partner in Precision Plumbing. When the partners decide to dissolve the firm, Olin collects and distributes the assets. This results in

Bhat and Cho do business as Data Security, a partnership. In most states, for the purposes of collecting judgments and having accounting performed, this firm would be treated as

Beth and Connie do business as Dig Excavators. In acting on the firm's behalf, Beth makes an honest error in underestimating the cost of a certain project. In this situation, to her firm, Beth is liable for a breach of the duty of

Nora and Owen do business as Property & Profit, a real estate investment partnership. In acting on the firm's behalf, Nora takes advantage of an opportunity to make a secret profit. To her firm, Nora is liable for a breach of

Vern is one of three partners in Waffles Food Truck. Concerning all aspects of the partnership business, Vern is entitled to information

Kris and Linda are partners in Mobile Devise, an online marketing firm. Kris signs a contract with Nature's Best Chocolate, a candy maker, apparently on Mobile's behalf. The contract is binding on

In many instances, agency law governs the relationships among partners.

Vaughn starts Wind Systems to make and sell turbines. Later, Vaughn contracts with Xi to invest additional capital in the firm in exchange for 25 percent of the profits. Vaughn and Xi are not partners in Wind Systems because

Quint and Reba are partners in Sofas Plus, a furniture store. Quint dissociates from the business. This ends Quint's