Question 1

A partner has a duty to devote time, skill and energy on behalf of the partnership business.

Accepted Answer

According to the Partnership Act 1890, a partner has a fiduciary duty to act in good faith and with utmost loyalty towards the partnership business. This includes devoting time, skill and energy towards the growth and success of the business. Failure to do so can lead to a breach of this duty and potential legal consequences.

Question 2

A partner's profit from a partnership is taxed as income to the firm.

Accepted Answer

A partner's profit from a partnership is taxed as personal income to the individual partner, not as income to the firm. Partnerships are "pass-through" entities for tax purposes, meaning the profits pass through the business to the partners, who then report their share of the profits on their personal tax returns.

Question 3

A third party can sue one of the partners of a partnership without suing all members of the partnership.

Accepted Answer

This is true, as individual partners can be held liable for the actions of the partnership and can be sued without involving all members of the partnership.

Question 4

A partnership is a pass-through entity and a taxpaying entity.

Accepted Answer

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Question 5

The intent to associate is a key element of a partnership.

Accepted Answer

The intent to associate, or form a partnership, is a necessary and fundamental element of any partnership agreement. Without a mutual agreement to work together toward a common goal, there can be no partnership.

Question 6

A partner is liable for honest errors in judgment in conducting partnership business.

Accepted Answer

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Question 7

A partner may pursue his or her own interests without automatically violating the partner's fiduciary duties to the partnership and the other partners.

Accepted Answer

A partner can pursue their own interests as long as it does not interfere with their duties and responsibilities to the partnership and other partners. This is known as the duty of loyalty and care, which requires partners to act in the best interest of the partnership and use their skills and knowledge for the benefit of the partnership. However, a partner must still disclose any potential conflicts of interest and not use partnership resources for personal gain without the consent of the other partners.

Question 8

In a general partnership, the senior partner controls decisions on ordinary matters connected with partnership business.

Accepted Answer

In a general partnership, all partners have an equal say in decisions related to partnership business unless otherwise specified in the partnership agreement.

Question 9

Under some circumstances a non-partner can be regarded as an agent whose acts are binding on the partnership.

Accepted Answer

When a non-partner is given authority to act on behalf of the partnership or is holding out as an agent of the partnership, their acts can be considered binding on the partnership. This is known as the concept of apparent authority.

Question 10

A sharing of profits from a business creates a presumption that a partnership exists.

Accepted Answer

Sharing profits is a key aspect of a partnership, and therefore, there is a presumption that a partnership exists when profits are shared. However, other factors such as intent, control, and sharing of losses must also be considered to determine the existence of a partnership.

Question 11

The Uniform Partnership Act governs the operation of partnerships.

Accepted Answer

The Uniform Partnership Act (UPA) is a model act that governs the formation, operation, and dissolution of partnerships in the United States.

Question 12

A majority of the states treat a partnership as an entity for most purposes.

Accepted Answer

Most states treat partnerships as entities for legal and taxation purposes, which means they have the ability to enter contracts, own property, and be held liable for debts and obligations. However, some states may have different laws regarding partnerships.

Question 13

A partner always has the power but he or she may not have the right to dissociate from the partnership.

Accepted Answer

According to partnership laws, a partner always has the power to dissociate from the partnership, but in certain circumstances, such as in a partnership agreement, they may not have the right to dissociate.

Question 14

Limits on a partner's authority normally are effective only with respect to third parties who are notified of the limitation.

Accepted Answer

This is because third parties are not deemed to have knowledge of the limitations on a partner's authority unless they are specifically notified of them. Therefore, if a partner exceeds their authority but the third party was not made aware of any limitations, the actions of the partner may still be binding on the partnership.

Question 15

In a general partnership, the acts of one partner in the ordinary course of business do not subject the other partners to personal liability.

Accepted Answer

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Question 16

Most states treat a partnership as an aggregate for most purposes.

Accepted Answer

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Question 17

If no fixed duration of the partnership is specified, the partnership is a partnership at will, which means that it cannot be dissolved.

Accepted Answer

A partnership at will can be dissolved at any time by any partner giving notice to the others.

Question 18

In a general partnership, the senior partner manages the partnership.

Accepted Answer

There is no designated senior partner in a general partnership. The partners typically share management responsibilities and decision-making equally.

Question 19

Unlike most agents, each partner in a partnership has an ownership interest in the business.

Accepted Answer

Each partner in a partnership has a share of ownership in the business, which is why they are also called "owners" or "co-owners." Unlike agents, partners have a legal and financial stake in the success, profits, and liabilities of the partnership. This means that they share the profits and losses of the business, as well as the decision-making authority and the risks associated with it.

Question 20

A partner's devoting time, energy, and skill to partnership business is a compensable service.

Accepted Answer

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Quiz 27: All Forms of Partnership