Question 1

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.E) C) and D)
F) A) and B)

Question 2

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.E) None of the above
F) A) and D)

Question 3

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.E) A) and B)
F) None of the above

Question 4

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.E) A) and C)
F) A) and B)

Question 5

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.E) C) and D)
F) All of the above

Question 6

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.E) A) and B)
F) All of the above D

Question 7

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.E) B) and C)
F) None of the above A

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

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.E) None of the above
F) All of the above

Question 10

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.E) A) and D)
F) B) and C)

Question 11

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.E) All of the above
F) A) and B)

Question 12

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.E) A) and B)
F) A) and C) B

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.E) A) and C)
F) C) and D)

Question 14

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 15

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.E) A) and D)
F) A) and C)

Question 16

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.E) A) and C)
F) B) and D)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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.E) A) and D)
F) A) and C)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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.E) B) and C)
F) B) and D)

Exam 35: All Forms of Partnerships

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

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

Correct AnswerverifiedA

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The essential elements of a partnership do not include

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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