Question 1

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char 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) complete access.

Accepted Answer

Limited partners are entitled to complete access to the firm's books and information regarding partnership business, regardless of their level of participation in management. This ensures transparency and allows them to monitor their investment.

Question 2

Cal, Dex, and Erin agree to be partners in Fajitas, splitting the profits equally. Cal contributes 65 percent of the capital. When Fajitas 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) Cal because he contributed most of the capital.
D) Dex and Erin because they contributed the least of the capital.

Accepted Answer

In a partnership, unless otherwise agreed, losses are shared in the same proportion as profits. Since Cal, Dex, and Erin agreed to split profits equally, they will also share losses equally.

Question 3

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

Accepted Answer

The answer of Nell is considering forms of business organization...

Question 4

Fresco and Garcia form a partnership-HVAC Pros. Garcia's capital contribution is $10,000, and Fresco's is $15,000. The partnership agreement provides that profits are to be shared, with 40 percent for Garcia and 60 percent for Fresco. Later, Garcia makes a $10,000 loan to the partnership when it needs working capital. When the partnership is dissolved, its assets are $50,000, and its debts are $8,000. How should the assets be distributed?

Accepted Answer

The answer of Fresco and Garcia form a partnership-HVAC Pros....

Question 5

Development LP is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals, including Ethan. Ethan loses his limited liability if he
A) participates in the firm's management.
B) does not participate in the firm's management.
C) invests in a project that the firm has declined.
D) votes to sell or dissolve the firm.

Accepted Answer

According to limited partnership law, limited partners maintain their limited liability status as long as they do not participate in the management of the firm. If Ethan decides to participate in the management, then he would lose his limited liability protection.

Question 6

Jana and Kwan are partners in Lawyers LLP, a limited liability partnership. Jana supervises the firm's associate Milo, who negligently fails to appear in court on behalf of Norm, a client. Liability to Norm rests only with
A) Jana and Milo.
B) Jana.
C) Milo.
D) Jana and Kwan.

Accepted Answer

In a limited liability partnership (LLP), partners are not personally liable for the negligent acts of other partners or employees not under their direct supervision. However, a partner who directly supervises an employee who commits a negligent act can be held personally liable alongside the employee. Therefore, Jana (who supervised Milo) and Milo (who committed the negligent act) can be held liable for the failure to appear in court on behalf of Norm.

Question 7

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

Accepted Answer

An LLP allows the partnership to continue as a pass-through tax entity, which means that profits and losses are passed through to the individual partners' tax returns, avoiding double taxation. The personal liability of the partners is limited, which means that their personal assets cannot be used to satisfy the partnership's debts or liabilities, except in certain circumstances such as fraud or illegal acts. LLP statutes vary from state to state, and an LLP can do business in any state where it is authorized to do so.

Question 8

Otto is a limited partner in Port Exports, a limited partnership. By participating in the firm's management, Otto is liable for its obligations
A) in proportion to the number of partners in the firm.
B) to no extent.
C) to the extent of his capital contribution to the firm.
D) to the full extent.

Accepted Answer

The answer of Otto is a limited partner in Port...

Question 9

Del and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Del and Efron
A) file a certificate of limited partnership.
B) execute a partnership agreement.
C) accept their first client.
D) make their capital contributions.

Accepted Answer

In most states, a limited partnership is created when the partners file a certificate of limited partnership with the state. This is a necessary step to formally register the partnership and establish the limited liability protections for the limited partners. While executing a partnership agreement and making capital contributions are important steps in forming a limited partnership, they alone do not create the legal entity. Accepting their first client is not relevant to the process of forming a limited partnership.

Question 10

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L
A) can continue its business for one twelve-month period.
B) can continue its business indefinitely.
C) dissolves immediately unless the partners change its business.
D) is immediately subject to criminal prosecution and penalties.

Accepted Answer

If Congress declares that the equipment can no longer be exported, it means that K&L Sales will not be able to carry out its primary business purpose of exporting technical equipment. Therefore, the partnership will have to be dissolved immediately unless the partners change its business.

Question 11

Sebastian was the manager of Thai Bistro, a restaurant specializing in Southeast Asian foods. Sebastian opened a bank account in Thai Bistro's name, signing the account signature card as "owner." Umeko, who was often at Thai Bistro and had free access to its office, told others that she was "an owner" and "a partner." She also opened a bank account in Thai Bistro's name, and signed the account signature card as "owner." Sebastian told Vijay, the owner of Wong Noodles, Inc., that Umeko was a member of a partnership that owned Thai Bistro. On this basis, Wong Noodles delivered its goods to Thai Bistro on credit. In fact, Thai Bistro was owned by a corporation. When the unpaid account totaled more than $10,000, Wong Noodles filed a suit against Umeko to collect. On what basis might Umeko be liable for the debt?

Accepted Answer

The answer of Sebastian was the manager of Thai Bistro,...

Question 12

Dain is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Dain is liable 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 to the firm.
D) to the full extent.

Accepted Answer

Limited partners, such as Dain, are liable for the debts of the partnership only to the extent of their capital contribution. This means Dain's financial responsibility for the debts of Eco Baits is limited to the amount of money or property he has invested in the firm.

Quiz 31: All Forms of Partnership

Brent and Char are limited partners in Dental Center, a limited partnership. In terms of the firm's books and information regarding partnership business, Brent and Char are entitled to

Cal, Dex, and Erin agree to be partners in Fajitas, splitting the profits equally. Cal contributes 65 percent of the capital. When Fajitas is dissolved, its liabilities are greater than its assets. The losses are paid by

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

Development LP is a limited partnership that invests in residential real estate projects. Its limited partners include more than 150 sophisticated investors and investment professionals, including Ethan. Ethan loses his limited liability if he

Jana and Kwan are partners in Lawyers LLP, a limited liability partnership. Jana supervises the firm's associate Milo, who negligently fails to appear in court on behalf of Norm, a client. Liability to Norm rests only with

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

Otto is a limited partner in Port Exports, a limited partnership. By participating in the firm's management, Otto is liable for its obligations

Del and Efron want to form a limited partnership to do general business bookkeeping with an emphasis on tax accounting. In most states, a limited partnership will be created when Del and Efron

Kim and Lyle are partners in K&L Sales, which exports technical equipment. If Congress declares that the equipment can no longer be exported, K&L

Dain is a limited partner in Eco Baits, a pest control service organized as a limited partnership, which cannot pay its debts. Dain is liable for the debts