FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 21: Forms of Business Organization

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Reference - Parent Involvement. Marcy and George, both artists, discussed forming a partnership to paint portraits. George's parents were interested in investing in the partnership, but they wanted to avoid any liability. George suggested forming a limited partnership. He told Marcy and his parents that they could do it very informally, that an oral agreement was sufficient, and that the parents would be protected from liability. Although George protested strongly on the basis that it was a waste of money, Marcy insisted that a certificate of limited partnership be filed with the secretary of state. After a few months, Marcy and George decided that they wanted to add a new partner, Betty, to the partnership as a general partner. Betty had some expertise in the portrait field but, unfortunately, she had also had some scrapes with local law enforcement. George's parents objected strenuously to the admission of Betty. Marcy and George took the position that the parents, as limited parents, had no say in the admission of a new partner. George's father, who had an interest in painting and was concerned that the partnership was not making very much money, decided to start coming to the partnership studio to manage the business and attempt to bring it into profitability. Was George correct that a limited partnership may be created informally through an oral agreement?

A) Yes, an oral agreement will suffice.
B) George was partially correct. A written agreement is required, but only the general partners are required to sign it. Limited partners may agree orally.
C) George was partially correct. A written agreement is required, but only the limited partners are required to sign it. General partners may agree orally.
D) George was incorrect, and both general and limited partners must sign a certificate of limited partnership and file the certificate with the secretary of state.
E) George was incorrect, and both general and limited partners must sign a document of partnership limitation that is kept on file in the primary business office of the limited liability partnership.

F) None of the above
G) A) and D)

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Reference - Grooming Losses. Wally, Beverly, and Matthew formed a partnership to groom dogs. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. The articles of partnership did not allocate profits or losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to a review and listing of all partnership assets and profit. Beverly and Matthew denied that Wally was entitled to a review of the books and stored them in a safe deposit to which only Beverly had a key. They claimed complete innocence of any wrongdoing. Which of the following is correct regarding how the partnership losses should be allocated?

A) In proportion to the sharing of profits.
B) In proportion to the amount of work done in the business, with a partner who contributed more work being allocated less in the way of losses.
C) In proportion to the right to share in management.
D) In proportion to the capital contribution, with partners who contributed more capital being allocated less in the way of losses.
E) The court will allocate losses based upon the amount of fault of each partner resulting in said losses.

F) All of the above
G) A) and B)

Correct Answer

verified

Show Answer

Question 53

Multiple Choice

Review LaterAdd Note

Which of the following is true regarding the liability of incoming partners?

When a partnership is dissolved based upon the withdrawal of a partner, that partner no longer has actual authority to bind the partnership.

Reference - Grooming Losses. Wally, Beverly, and Matthew formed a partnership to groom dogs. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. The articles of partnership did not allocate profits or losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to a review and listing of all partnership assets and profit. Beverly and Matthew denied that Wally was entitled to a review of the books and stored them in a safe deposit to which only Beverly had a key. They claimed complete innocence of any wrongdoing. Which of the following is the proper reference for Wally's request for a review and listing of all partnership assets and profit?

Reference - New Associate. Rick was a newly hired associate in a small law firm in his town which was operated as a partnership. The partners were Paula, Sam, Susie, and Jason. Bob, who ran an exotic pet store, had a complex legal problem involving the importation of venomous snakes from South America and came to the office to see Paula. Rick was walking by Paula's office at the time and was pleased and excited when Paula introduced him to Bob as her newest partner. Based on Paula's advice that it was perfectly legal for him to import the snakes and that he had no legal liability for snake bites, Bob imported some particularly dangerous snakes. One bit a customer resulting in a significant judgment against Bob in favor of the customer. Bob also had significant problems with the federal government for illegal importation activity. On the basis that Paula had told him that he had no legal liability for snake bites and that importing the snakes was perfectly legal, Bob sued the law firm partnership along with Paula, Sam, Jason, and Rick. Paula admits that she gave poor advice but says that she had no prior experience with venomous snakes. Rick tells you that he was a lowly associate, had never done work for Bob, and only met him briefly. Which of the following is true regarding whether Rick can be held liable to Bob?

Which of the following dissolve a partnership by operation of law?

Every partner is considered to be an agent of the partnership.

Which of the following is false regarding the winding-up process?

Reference - New Associate. Rick was a newly hired associate in a small law firm in his town which was operated as a partnership. The partners were Paula, Sam, Susie, and Jason. Bob, who ran an exotic pet store, had a complex legal problem involving the importation of venomous snakes from South America and came to the office to see Paula. Rick was walking by Paula's office at the time and was pleased and excited when Paula introduced him to Bob as her newest partner. Based on Paula's advice that it was perfectly legal for him to import the snakes and that he had no legal liability for snake bites, Bob imported some particularly dangerous snakes. One bit a customer resulting in a significant judgment against Bob in favor of the customer. Bob also had significant problems with the federal government for illegal importation activity. On the basis that Paula had told him that he had no legal liability for snake bites and that importing the snakes was perfectly legal, Bob sued the law firm partnership along with Paula, Sam, Jason, and Rick. Paula admits that she gave poor advice but says that she had no prior experience with venomous snakes. Rick tells you that he was a lowly associate, had never done work for Bob, and only met him briefly. Which of the following is a theory on which Jason can be held liable to Bob, if any?

Which of the following is a type of partnership that does not specify the objective or duration of the partnership?

Reference - Fish Fiasco. Matt agreed to be a limited partner in Susie and Bill's business of importing tropical fish. Matt contributed $10,000 to the partnership as his capital contribution. The partnership made a profit of $30,000 the first year. Matt was paid nothing. When he inquired, Susie told him that a limited partner was only entitled to a share of profits as approved by the general partners and that perhaps things would be better the next year. The next year, however, importation was banned because of a fish disease, and the partnership lost money and owed debts of $60,000. At the end of the year, Susie and Bill asked Matt to contribute $20,000 to cover the debts. When Matt complained about the amount, Bill told him that he and Susie were being overly reasonable and that he was legally liable for an even larger percentage. In an attempt to keep the business afloat, Matt told Susie and Bill that they should consider suing a customer who had not paid a large account. Susie and Bill replied, however, that they were morally opposed to lawsuits and that they had the final say on litigation. Assume that legally Matt has the rights and liabilities of a limited partner. Which of the following is true regarding Matt's entitlement to sue on behalf of the partnership?

Which of the following is false regarding the rights and obligations of partners?

Which of the following is true regarding the origination of limited partnerships?

Which of the following is a reason for a provisional dissolution of a partnership in Spain?

Reference - Grooming Losses. Wally, Beverly, and Matthew formed a partnership to groom dogs. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. The articles of partnership did not allocate profits or losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to a review and listing of all partnership assets and profit. Beverly and Matthew denied that Wally was entitled to a review of the books and stored them in a safe deposit to which only Beverly had a key. They claimed complete innocence of any wrongdoing. Is Wally entitled to a review and listing of all partnership assets and profit?

Which of the following is true regarding a partner's actual authority to bind a partnership once a partnership is dissolved?

Unless it is otherwise agreed in the articles of partnership, which of the following is true regarding the rights of partners to share in profits?

Reference - Mortuary Blues. Barry and Elaine had a partnership running a mortuary. Elaine died, and Barry continued to run the mortuary for a short time. He then decided to shut down the mortuary because it was too depressing without Elaine, who was a very vivacious person. Barry incurred expenses in closing the business affairs of the mortuary. He sought compensation for that, but the executor of Elaine's estate objected. The executor also claimed that Barry had no rights in Elaine's share of the specific partnership property. Barry, however, took the position that all interests of Elaine passed to him and that he owed her estate nothing. The articles of partnership do not address dissolution of the partnership or death of a partner. Which of the following is true regarding Barry's claim that he is entitled to compensation for closing down the mortuary?

Payment for which of the following fails to establish a partnership?