Partnerships and Limited Liability Partnerships question bank

TEST BANK UNIT EIGHT: BUSINESS ORGANIZATIONS

Fact Pattern 36-1B (Questions B10¨CB13 apply)

Brad, Carlos, and Dora are general partners in Eastside Physicians, a medical clinic.

B10. Refer to Fact Pattern 36-1B. Carlos¡¯ assignment of his interest in

Eastside to Good Credit Corporation results in

a.

nothing with respect to Eastside¡¯s existence.

b.

the automatic termination of Eastside¡¯s legal existence.

c.

the immediate maturity of all of Eastside¡¯s debts.

d.

the temporary suspension of Eastside¡¯s business.

A11. Fay is admitted to Global Associates, an existing partnership. A partnership debt incurred before the date of her admission comes due. Fay is

a.

not liable for the debt.

b.

only liable for the debt up to the amount of his capital

contribution.

c.

personally liable only to the extent the other partners do not

pay.

d.

personally liable to the full extent of the debt.

Fact Pattern 36-1B (Questions B10¨CB13 apply)

Brad, Carlos, and Dora are general partners in Eastside Physicians, a

medical clinic.

B11. Refer to Fact Pattern 36-1B. Brad, Carlos, and Dora decide to admit Faisal as a new partner in Eastside Physicians. Faisal¡¯s liability for partnership debts incurred before his admission is

a.

limited to his capital contribution to the firm.

b.

limited to his personal assets.

c.

nothing.

d.

unlimited.

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129

A12. Clu, Dolf, and Elton do business as Fertile Valley Farm. Clu¡¯s

relationship to the firm ends, but it continues to do business. This is

a.

dissociation.

b.

dissolution.

c.

winding up.

d.

wrongful.

Fact Pattern 36-1B (Questions B10¨CB13 apply)

Brad, Carlos, and Dora are general partners in Eastside Physicians, a

medical clinic.

B12. Refer to Fact Pattern 36-1B. Brad¡¯s dissociation from the firm results

in

a.

the automatic termination of the firm¡¯s legal existence.

b.

the partnership¡¯s buyout of Brad¡¯s interest in the firm.

c.

the immediate maturity of all partnership debts.

d.

the temporary suspension of the partnership¡¯s business.

A13. Kelly, Lars, and Mona agree to be partners in Neighborhood Delivery Service (NDS), splitting the profits equally. Kelly contributes 67 percent of the capital. When NDS 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.

Kelly because she contributed most of the capital.

d.

Lars and Mona because they contributed the least of the

capital.

Fact Pattern 36-1B (Questions B10¨CB13 apply)

Brad, Carlos, and Dora are general partners in Eastside Physicians, a

medical clinic.

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TEST BANK A¡ªUNIT EIGHT: BUSINESS ORGANIZATIONS

B13. Refer to Fact Pattern 36-1B. The partners decide to dissolve Eastside. Dora 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.

A14. Jim and Kyle are partners in J&K Sales, which exports technical equipment under a three-year partnership agreement. The U.S. gov- ernment declares that the equipment can no longer be exported. J&K

a.

dissolves as soon as the stated term expires.

b.

dissolves as soon as the partners agree to dissolve it.

c.

dissolves immediately unless the partners change its business.

d.

does not dissolve.

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131

B14. Mead, Nero, and Olen do business as Pipe & Plumbing Services. After Mead¡¯s relationship to the firm ends, Nero and Olen agree to discontinue the business. This is

a.

dissociation.

b.

dissolution.

c.

gross negligence.

d.

simple misconduct.

A15. Jay is considering forms of business organization for Jay¡¯s Designs, an architectural firm. An advantage of a limited liability partnership is that partners can avoid personal liability for

a.

any partnership obligation.

b.

only other partners¡¯ wrongdoing.

c.

only partnership obligations that exceed capital contributions.

d.

only partnership obligations that fall within capital

contributions.

B15. Gallop Western Ranch is a family limited liability partnership (FLLP).

In an FLLP, all of the partners must be

a.

natural persons only.

b.

natural persons or persons acting as fiduciaries for natural

persons.

c.

persons acting as fiduciaries for natural persons only.

d.

related.

A16. Jack and Kyra are partners in Law Firm, LLP, a limited liability partnership. Jack supervises Kyra, who negligently fails to appear in court on behalf of Milo, a client. Liability to Milo rests with

a.

Jack and Kyra.

b.

Jack only.

c.

Kyra only.

132

TEST BANK A¡ªUNIT EIGHT: BUSINESS ORGANIZATIONS

d.

neither Jack nor Kyra.

B16. Dunn and Etta are limited partners in Fancee Fashion Stores, a limited partnership. In terms of the firm¡¯s books, Dunn and Etta 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.

total access.

A17. Fern and Gray want to form a limited partnership to manage two restaurants: Caf¨¦ Latte and Delite Deli. In most states, a limited partnership will be created when

a.

a certificate of limited partnership is filed.

b.

a partnership agreement is executed.

c.

the business for which the firm is formed actually begins.

d.

the partners make their capital contributions.

B17. Genetic Innovations, LP, is a limited partnership. The partners sign an agreement purporting to state how the firm¡¯s profits and losses are to be divided. The profits and losses of the firm will be divided

a.

according to the agreement.

b.

equally, despite the agreement.

c.

in proportion to capital contributions, despite the agreement.

d.

in proportion to each partner¡¯s participation in the firm¡¯s

management, despite the agreement.

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133

A18. Lucy is a limited partner in Metro Contractors, a limited partnership,

which cannot pay its debts. Lucy is personally 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.

d.

to the full extent.

B18. Rick and Sandy are limited partners in Total Profit Enterprises, a limited partnership. To avoid personal liability for partnership obligations, they must not

a.

acquire an interest in the firm.

b.

contribute property to the firm.

c.

engage in activities independent of the firm¡¯s business.

d.

participate in the firm¡¯s management.

A19. Venture Capital, LP, is a limited partnership. A Venture limited

partner loses his or her limited liability if he or she

a.

acts as the firm¡¯s manager.

b.

has full awareness of the firm¡¯s business activities.

c.

invests in the firm¡¯s competitor.

d.

votes on the firm¡¯s sale or dissolution.

B19. Connie, Drew, and Ellen are the general partners of Foreign Auto

Repair, a limited partnership. Connie dies. The partnership can

a.

continue only after a distribution of its assets.

b.

continue only as a general partnership.

c.

continue only if Drew and Ellen consent.

d.

not continue because Connie¡¯s death dissolves the firm.

134

TEST BANK A¡ªUNIT EIGHT: BUSINESS ORGANIZATIONS

A20. Energy Unlimited, LP, is a limited partnership to which its partners, including Fink, have contributed capital. Energy¡¯s creditors include Graves Engineering, Inc. On Energy¡¯s dissolution, its assets will be distributed to pay

a.

Fink and Graves proportionately.

b.

Fink first.

c.

Graves first.

d.

neither Fink nor Graves.

B20. Bret is a general partner in Capitol Realty, LLLP, a limited liability limited partnership, which cannot pay its debts. Bret is personally li- able for the debts

a.

in proportion to the number of partners in the firm.

b.

to no extent.

c.

to the extent of his capital contribution.

d.

to the full extent.