Question 1

Assume that you and your best friend have decided to form a partnership after graduation. You have both studied business law, so you both know the importance of having a written partnership agreement. Summarize the clauses that you would include in your partnership agreement.

Accepted Answer

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Question 2

Ed, Vivian, and Pablo enter a partnership. Identify the source of the duties among the partners and whether these can be waived or varied. Name the principal duties Ed, Vivian, and Pablo have to each other and to the partnership.

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Question 3

Luke typically spends 50-55 hours per week working in the real estate partnership he co-owns with Spencer. Spencer only spends about 30 hours a week on partnership business. Under the RUPA:
A) Luke would be entitled to payment from the partnership for the extra 20-25 hours per week he spends on partnership business unless a partnership agreement denies this right.
B) the partners cannot agree to deny extra payment for extra work by a partner.
C) unless the partners have otherwise agreed, Luke is not entitled to payment for his work for the partnership, even if it is disproportionate to his partner's work.
D) Luke would be entitled to payment from the partnership only if the amount of time and effort he expends on partnership business is grossly disproportionate to that spent by his partner.

Accepted Answer

Under the Revised Uniform Partnership Act (RUPA), partners are not entitled to extra payment for services rendered to the partnership beyond their share of the profits, unless there is an agreement to the contrary. This means that without a specific agreement, Luke would not be entitled to additional compensation for the extra hours he works compared to Spencer.

Question 4

Compare "partnership property" with a "partner's interest." Consider such factors as the definition, the possession, the assignability, how attachment occurs, and the inheritability of each.

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Question 5

Which of the following would be the most convincing evidence of a partnership?
A) An agreement to share in the management of a business.
B) Agreements to share gross returns.
C) An agreement to share profits and losses.
D) An agreement to pay a firm manager a percentage of the profits for his salary.

Accepted Answer

An agreement to share profits and losses is a fundamental characteristic of a partnership, indicating a mutual interest in the success and risks of the business. Sharing in management or gross returns, or paying a manager from profits, does not necessarily establish a partnership.

Question 6

A business form devised to avoid the burdens of corporate regulation, particularly the formerly widespread prohibition denying corporations the power to own and deal in real estate, and used primarily for asset securitization ventures is the:
A) limited liability limited partnership.
B) limited partnership.
C) limited liability company.
D) business trust.

Accepted Answer

The correct answer is D) business trust. Business trusts are often used to avoid the burdens of corporate regulation, including restrictions that historically prevented corporations from owning and dealing in real estate. They are particularly useful for asset securitization ventures, allowing for the pooling of assets to be managed and for investors to benefit from the trust's operations without the regulatory constraints faced by corporations.

Question 7

In choosing the form in which to conduct business, if ease of formation is the primary concern, the owners would choose a:
A) corporation.
B) limited liability partnership.
C) limited partnership.
D) general partnership.

Accepted Answer

A general partnership is the easiest form of business to form as it does not require formal paperwork or fees that entities like corporations, limited liability partnerships, and limited partnerships typically require.

Question 8

Montana Mountain Guides does not have sufficient funds to pay damages for a tort that arose out of the operation of the business. Jess, a business owner, is not personally liable if:
A) she is a sole proprietor of the business.
B) the business is a corporation and she is a shareholder.
C) she committed the tort.
D) she is a general partner of the business.

Accepted Answer

In a corporation, shareholders (like Jess, if she is one) are not personally liable for the debts or torts of the corporation beyond their investment in the company. This limited liability is a key feature of the corporate structure, distinguishing it from sole proprietorships and general partnerships where owners can be held personally liable.

Question 9

Anita is hired as head of the sales team of an unincorporated dress boutique solely owned by Betty. The two agree that Anita will receive one-third of the net profits, which amount is to be paid to her on a monthly basis. Is Anita a partner? If the boutique has a loss instead of a profit, would Anita have to share the loss? Explain.

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Question 10

What are the ways the RUPA recognizes a partnership as an entity?

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Question 11

Bert and Philip have decided to form a partnership to operate a lawn care service. Discuss whether they should name the business and, if so, what considerations affect the name they might choose.

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Quiz 30: Formation and Internal Relations of General Partnerships

Assume that you and your best friend have decided to form a partnership after graduation. You have both studied business law, so you both know the importance of having a written partnership agreement. Summarize the clauses that you would include in your partnership agreement.

Ed, Vivian, and Pablo enter a partnership. Identify the source of the duties among the partners and whether these can be waived or varied. Name the principal duties Ed, Vivian, and Pablo have to each other and to the partnership.

Luke typically spends 50-55 hours per week working in the real estate partnership he co-owns with Spencer. Spencer only spends about 30 hours a week on partnership business. Under the RUPA:

Compare "partnership property" with a "partner's interest." Consider such factors as the definition, the possession, the assignability, how attachment occurs, and the inheritability of each.

Which of the following would be the most convincing evidence of a partnership?

A business form devised to avoid the burdens of corporate regulation, particularly the formerly widespread prohibition denying corporations the power to own and deal in real estate, and used primarily for asset securitization ventures is the:

In choosing the form in which to conduct business, if ease of formation is the primary concern, the owners would choose a:

Montana Mountain Guides does not have sufficient funds to pay damages for a tort that arose out of the operation of the business. Jess, a business owner, is not personally liable if:

What are the ways the RUPA recognizes a partnership as an entity?

Bert and Philip have decided to form a partnership to operate a lawn care service. Discuss whether they should name the business and, if so, what considerations affect the name they might choose.