Partnerships And LLCs PDF

PARTNERSHIPS AND LLCS 13. b. A, B, and C are each entitled to equal shares of the profit. c. A is entitled to $600, and B and C are each entitled to $200. d. A is entitled to $600, and C and...

PARTNERSHIPS AND LLCS 13. b. A, B, and C are each entitled to equal shares of the profit. c. A is entitled to $600, and B and C are each entitled to $200. d. A is entitled to $600, and C and D are each entitled to $200. 39. Which of the following are appropriate methods of contribution by a limited partner? a. Cash. b. A promise to contribute cash or property. c. Property. t be d. All of the above. a 24 l l no 40. Which of the following is not a correct statement concerning 1 s ha to give 8a the reasons sufficient 6 a court power in equity to dissolve a partnership? 6f7 r se and 4 ou ws f-fis likelylltocbe a. The economic purpose of the partnership 6 la t frustrated. - ab a h to reasonably b. A partner has engaged in conduct 6 26 makingsitt not y rig practicable to carry on business. -4 r e op d 3a i nte by c c. The business cannot-5practicably ndbetcarried d on in conformity with the partnership agreement. 9 3 I a e 4 8c BR title, otec d. A partner9 B pr se. partnership duties. AR ts, ofeperforming cais incapable ie r: 21 righ ar rpo 41. Puff and n tif Blow2 0 form a ll ahlimited i pu ch y partnership to market and sell cigars through a mail-order catalog. e Puff © will s bewthe general n partner, do all the work, and contribute $5,000. Blow will r Id a limited be h t wpartner a n of andr contribute $10,000. While conducting partnership business, Puff s e ri g I o l l fo y defrauds U op BR ls, old a several wholesalers who bring suit and win judgments in excess of $40,000. The C Apartnership s R ia isr insolvent. Which of the following statements is correct? B ater ed o a. m h aBoth r Puff and Blow are personally liable to the judgment creditors. b. s Neither Puff nor Blow is personally liable to the judgment creditors because Puff and Blow formed a limited partnership. c. Puff is personally liable to the judgment creditors, but Blow is not. d. Puff and Blow are jointly and severally liable to the judgment creditors as partners. 42. A, B, and C form a partnership. The partnership continues for many years. After 10 years, A dissociates from the partnership. If, at the time of dissociation, there were debts owed by the partnership, which of the following statements is false?  14. PRACTICE MULTIPLE CHOICE QUESTIONS a. A may be released from the existing partnership obligations only by agreement with the creditor and the partners continuing the business. b. A is liable for the debt. c. A may file a statement of dissociation in order to be released from the existing obligations. d. A is released from liability if the creditor knows of A’s dissociation and materially alters the nature of the obligation without A’s consent. 43. Which of the following provisions may be waived in a partnership agreement? t be a. A partner’s right of access to books and records. a24 l l no 8a a b. A partner’s duty of loyalty and care. 1 sh 6 f76 r se and c. A partner’s right to dissociate. f-f 4 c ou ws 6 l t la l d. None of the above provisions is waivable. - ab a to righ 2 6 t Questions 44-45 are based on the following 6 -4 facts: r es opy 3 a n e t yc A, B, and C have been partners-5 d i d d bbusiness since 2006. In 2013, D joined the in a house painting partnership. C retired from 9 3 n I , a inc2014. the partnership te c R 8 B titl ot e e a4 AR spurchased 44. Assuming the cpartnership , pr paint s e. and brushes on credit in 2008, which of the 9 B t : 1 iisghcorrect? following rstatements re rpo ie 2 r a tif 20 notalbe l ich pu a. enD would © ns wliable h nfor y payment of the obligation because it was incurred prior to I d hhert joining f the a partnership. s er yrig I ow all o for U opb. BRD would d s, sbeolpersonally liable for payment of the obligation despite the fact that it C AR was a l i incurred r r prior to her joining the partnership. B ate ed o mc. aDr would be liable for payment of the obligation with partnership property despite sh the fact that it was incurred prior to her joining the partnership. d. D would not be liable for payment of the obligation unless she expressly agreed to become liable for the debt. 45. Assuming the partnership purchased paint and brushes on credit in 2013, which of the following statements is correct? a. C is not liable for payment of the obligation after his retirement in 2014. b. C is liable for payment of the obligation despite the fact that he retired in 2014.  PARTNERSHIPS AND LLCS 15. c. C is liable for payment of the obligation after he retired only if he and the remaining partners enter into a novation. d. None of the above. 46. LP is a limited partner in Modern Partnership, Ltd. LP wishes to withdraw from the partnership but the partnership agreement does not specifically provide for withdrawal. Which of the following statements is correct? a. LP may not withdraw from the partnership without the approval of the general partners. b. LP may withdraw from the partnership at any time. be c. LP may withdraw from the partnership after giving the general partners three 24 not months’ written notice. a l l 1 8a s ha d. LP may withdraw from the partnership after giving written notice. 6 f76 the general r se and partners six months’ f-f 4 c ou ws 47. Riff and Raff form a partnership. Riff contributes - ab 6 l l Raff $5,000; a h t lapays no money but provides services. After dissolution, 2 6 6 partnership the s t tohas y riagbalance of $3,000 after paying outside creditors. What is the share a re cop -4 of eachtepartner? a. Riff gets $1,500, and5Raff d3 gets $1,500. d in by - c 9 3 I R , a cted n b. Riff gets $3,000, and Raff gets nothing. a 48 RB , title rote. c. Riff gets c BA and ts Raff p sRiff e $1,000. r : 9 $3,000, 1 h r e owes a ur p o i fie gets02$3,000, l rigand h Raff d. e n © s a h ny p owes Riff $2,000. Riff t 2 l i c Id h48-49 Questions r g t ware o f w onr athe following facts: n based se pyr RI , al ld fo URiff i o l C oandRRaff B aformed i ls r soa partnership to operate a bakery, appropriately named “Riff Raff Baked Goods.” BA For r te three years, Riff bought flour from Acme Wheat, Inc. Raff decided Acme’s prices were tooahigh, e dsoohe called the president of Acme and told him not to sell any more flour to Riff m awouldr and thatshe h no longer be responsible for payment. Despite Raff’s call, Riff continued buying flour from Acme. When Acme’s bill came due, Raff refused to pay. Acme plans to sue for payment. 48. The complaint may properly name which of the following as defendants? a. Acme must name only the partnership, Riff Raff Baked Goods. b. Acme must name Riff and Raff as individuals. c. Acme must name both Riff Raff Baked Goods, and Riff and Raff as individuals. d. Acme may name either the partnership or Riff and Raff individually.  16. PRACTICE MULTIPLE CHOICE QUESTIONS 49. Is Acme entitled to payment? a. Yes, because Raff had no power to limit Riff’s authority to buy flour since it is in the usual course of partnership business. b. Yes, but Acme can collect only from Riff since Raff was no longer responsible for payment. c. No, because Acme was on notice that it was not to sell to Riff. d. No, because partnership decisions must be unanimous. 50. Dick and Jane orally form a partnership to sell lemonade at the beach during the summer. t be Dick charges $25 worth of lemons at the corner store, and they 4 set up shop at the beach. Unfortunately, a shark scare keeps all the tourists away from a 2 beach that summer. the l l no Dick skips town, leaving Jane to hold the bag (of rotting lemons). 1 hagrocery 8a The owner of sthe f76 is liablesfor store files suit against the partnership for the $25. Who e the d an$25? -f46 our s a. f Jane is not liable since the partnership 6agreement lwas b a c l not t lainw writing, thus failing to satisfy the Statute of Frauds. a to righ 2 6- t b. Jane is liable only for her pro 6 -4 rata share rof o py and the grocer must sue Dick to es$12.50, a e c get the rest. 5 d3 d int by - d c. The grocer canccollect 93 RIthe $25 , anonly c tefrom partnership assets, and since the partner- ship is broke, 8 B tl e te 4 the groceri is outothe $25. 9 ca BAR ts, t e pr se. d. The rgrocer ie 2 r r $25 gh h athe : 1can icollect r pofrom Jane’s personal assets, and Jane’s only remedy f 20Dickll for icontribution u e nisti to©sue s a h c ny p of his pro rata share. Id partnership h t wn off XYZ w a 51. r The is an accounting firm founded by senior partner Harry Hansom. s e XYZ y i g r has I oa l o for for integrity and accuracy in all their accounting endeavors l d record spotless a U op BR ls, ol C Awith R one r i a exception: o r s five years ago, a mistake in arithmetic caused their biggest client, B Metro te Industries, d to incur a $500,000 tax liability. Metro sued XYZ for negligence, but mthea case a r ehas dragged on without resolution. Harry turned 80 last month and retired from shfirm, joking that he was glad to retire so he would not be stuck in the event XYZ the loses the lawsuit. The firm published notice of Harry’s retirement in the local paper. Last week, the firm brought in a new partner, Frieda Fresh, to help fill the void left by Harry’s departure. Shortly before Frieda joined the firm, the Supreme Court of Florida issued its opinion in Metro Industries v. XYZ and ruled in favor of Metro. Is Frieda liable for this obligation? a. Frieda is not liable since the negligence occurred prior to her becoming a partner. b. Frieda became personally liable for all partnership debts when she joined the firm.  PARTNERSHIPS AND LLCS 17. c. Frieda is liable, but her liability can be satisfied only out of partnership property. d. Frieda is liable only if she joined the firm with full knowledge of the obligation. Questions 52-53 are based on the following facts: John, Paul, and George form a partnership. They hire Ringo as an employee. Ringo is a hard worker and eventually, John, Paul, and George add his name to both the company letterhead and the nameplate on their door, although they never actually make Ringo a partner. Ringo never contributes assets to the company or participates in management decisions. Ringo continues to receive a salary, rather than sharing in the profits of the partnership. 52. b John decides to remodel his office and obtains a loan in the name of the partnership tfrom e Mick, who is unaware of the letterhead or nameplate. No payments4 on the loan areoever made, and now Mick sues. Who is liable? a a2 all n 8 1 h s I. John, Paul, and George are personally liable since 76 e n d f they arersall partners in the business. - f 46 o u sa II. Ringo is not liable because Mick did not b 6f rely on athe t law ll crepresentation that Ringo was a partner when he extended credit to-a the partnership. h 6 26 s t to yrig III. Ringo is personally liable since a -4 he allowed te re John, c op Paul, and George to hold him out to the public as a partner. 3 in by - 5d d IV. John, Paul, andcGeorge n 93 RI are ,liable, a cbut tedrecovery can be satisfied only out of partner- ship assetsasince 48 RtheBloan ti tlwas te. for business purposes. e oobtained c BA ts, e p se r a. I. and r :II.9 only. 1 righ ar rpo ie 2 n tif 20 all hich y pu b. e I. and III. only. r Id ht ©wns of w r an e c. rig II. and o IV.ll only.fo Us opy BRI ls, a old C Ad.R III. ia and r s IV. only. B ate ed r o 53. m r and George decide to dissolve the partnership and pay off all their debts. After John,aPaul, s h paying off their creditors, there is a balance of $4 million. Ringo sues for an accounting, claiming he is entitled to his share of the assets. Is Ringo entitled to share in the assets? a. Yes. Ringo was held out to the public as a partner; therefore, he is entitled to share in the assets, as well as the liabilities, of the partnership. b. Yes. Ringo has become a partner by estoppel. c. No. Ringo is not a partner. d. No. Merely putting Ringo’s name on the door and letterhead has no legal effect on Ringo’s rights or responsibilities regarding the partnership.  18. PRACTICE MULTIPLE CHOICE QUESTIONS Questions 54-55 are based on the following facts: Frank and Joe form a partnership to operate a detective agency. Joe obtains a personal loan from Fenton, and assigns his interest in the partnership to Fenton in lieu of cash repayment. 54. Which of the following are true regarding Fenton’s rights in the event of a dissolution of the partnership? I. Fenton may receive Joe’s share of the assets that remain after all creditors have been paid. II. Fenton has the right to participate in the winding up of the partnership. t be III. Fenton has the right to require an accounting spanning the4period from the date the last accounting to the dissolution. a2 l l no of 1 8a s ha IV. Fenton has the right to continue the business. 76 6 f r se and a. I. only. f-f 4 c ou ws b 6 al t la l b. I. and III. only. - a to righ 2 6 t -4 6 r es opy c. I., II., and III. 3 a e nt by c 5 d i d. I., II., III., and IV. 9 3- I a nd ted 4 8c BR title, otec 9 c a AR s,telescope 55. Frank buys a high-powered B t p r for s e.the detective agency to use on surveillance. The telescope is: very usefulhto there agency, to buy iafie r 2to1 support tripod r i po but g hthea telescope r on it is very heavy, so Joe uses partnership funds long stakeouts. Because Frank suspects his t having20 analaffair, l ic p u wife nof e t © ns w an h he y plans to use the telescope to spy on her. Joe objects, claiming I d thatgthe h telescope f er business. ri I oWhichw ll ois partnership f orfollowingproperty and that Frank cannot use it for personal s y U op BR ls, old a of the factors would a court find dispositive in determining whether C AR ria or the telescope s is partnership property? B a. ateThere d m athe re is a close relationship between the telescope and the surveillance activities of sh detective agency. b. The detective agency has used the telescope on numerous occasions in the course of its business. c. The telescope was titled in the partnership name. d. The telescope has been improved by acquisition of the tripod. Questions 56-57 are based on the following facts: Huey, Dewey, and Lewey are all limited partners in a limited partnership formed for the purpose of investing in real estate. Huey’s contribution to the limited partnership was $5,000 in