Question 1

Explain the limitations of the liability of partners for the acts of other partners.

Accepted Answer

The answer of Explain the limitations of the liability of...

Question 2

The unlimited liability of partners means that not only can they lose their entire investment in the business,but their personal assets (such as their homes and cars)are also at risk.

Accepted Answer

Unlimited liability means partners are personally responsible for all the debts and obligations of the business, putting their personal assets at risk.

Question 3

"Partners must make clear in their partnership agreement any limitations on authority they wish to impose on each other when entering into contracts with outsiders." Discuss the accuracy of this statement.

Accepted Answer

The answer of "Partners must make clear in their partnership...

Question 4

Unlimited liability means that an investor can lose everything he or she has invested in a corporation.

Accepted Answer

Unlimited liability means that the owners or investors are personally responsible for all of the debts of the business, potentially beyond the amount they invested in the company. In a corporation, investors typically have limited liability, meaning they can lose their investment in the corporation but are not personally responsible for the corporation's debts.

Question 5

Which of the following is correct with respect to partnership?
A)A partnership can be made up of only limited partners.
B)Partnership is a separate legal entity.
C)Partners are not agents for each other.
D)General partners have unlimited liability.
E)General partners have limited liability.

Accepted Answer

General partners have unlimited liability in a partnership, meaning they are personally responsible for all debts and obligations of the partnership.

Question 6

Recent changes in partnership law allow partnerships to be registered as a "limited liability partnership" or LLP.When carrying on business as a limited liability partnership,non-negligent partners stand to lose:
A)their investment in the firm.
B)all of their personal assets if a successful claim is brought against the partnership on the basis of another partner's mistake.
C)absolutely nothing.
D)all of their personal assets except those protected from seizure under bankruptcy legislation.
E)assets jointly held with a spouse.

Accepted Answer

In a limited liability partnership (LLP), non-negligent partners are protected from losing their personal assets due to the negligence or mistakes of other partners. Their financial risk is limited to their investment in the firm.

Question 7

If three partners set out a term in their partnership agreement that John would only be responsible for 10 percent of any losses,yet he has to pay 100 percent of a claim because the other partners have no funds,John could seek contributions from the other partners according to the partnership agreement.

Accepted Answer

This is because the partnership agreement includes a provision for John to seek contributions from the other partners, even if he is only responsible for 10 percent of the losses.

Question 8

Explain the liability of a partner for another partner's actions.

Accepted Answer

The answer of Explain the liability of a partner for...

Question 9

Fred and Carole were trying to create a list of the pros and cons of sole proprietorship,partnership,and corporation to determine the best structure for carrying on business.Which of the following is true with regard to being a general partner?
A)Each partner is an agent for every other partner and for the firm itself,so a partner may be liable for the contracts made by an incompetent partner.
B)Every general partner faces limited liability for the debts of the partnership.
C)A partner is liable for only the amount that he or she invested in the partnership firm.
D)Retiring from a partnership by giving notice to the partners frees a partner from the liabilities he or she faced while being a partner of the firm.
E)A partner is liable to pay from his or her personal assets only when the partner has committed a criminal act.

Accepted Answer

As a general partner, each partner is an agent for every other partner and for the firm itself. This means that each partner can be held liable for the contracts made by another partner, even if the partner was incompetent or acted without the knowledge of the other partners. This creates unlimited liability for general partners.

Question 10

Joe Smith owns a bookstore as a sole proprietor.He is also a partner in a hotel,which borrowed $100 000 from the bank.Which of the following statements is true?
A)The bank can look to the assets of the bookstore to pay off the debt.
B)Although the bank can go after Smith's personal assets,it cannot go after the assets of the bookstore because the bookstore is a separate legal entity from Smith.
C)The bank can only go after the assets of the bookstore if Smith is the actual person who negotiated the loan with the bank.
D)The bookstore's assets will only be available to the bank if the bookstore is operated by Smith in conjunction with the hotel.
E)Because of the concept of limited liability,Smith can lose only what he has invested in the hotel.

Accepted Answer

As a sole proprietor, Joe Smith and his bookstore are not separate legal entities, so the bank can look to the assets of the bookstore to pay off the debt.

Question 11

Alison told her partners in writing that she would be leaving the law partnership at the current partnership year-end,January 31,2014.At year-end,Alison's partners bought her partnership interest and agreed that she would no longer be liable for any of the prior or subsequent partnership obligations.In February 2014,one of the remaining partners absconded with $2 million held for Mr.Smith,a long-time client,taken in trust in September 2013.Mr.Smith sued the partnership,the partners,and Alison.Based on the facts described,which of the following statements is true?
A)Alison has no right to recover any funds she has to pay from her former partners.
B)Mr.Smith can recover on his judgment out of the partnership assets.
C)Even if Alison gave Mr.Smith actual notice of her leaving the partnership,and he agreed that she would no longer be obligated for the partnership,she can be held liable to Mr.Smith.
D)After the partnership assets are exhausted,Mr.Smith can recover on his judgment from any one of the remaining partners but not from Alison.
E)Only the remaining partners,not Alison,have the right to recover anything they have to pay from the absconding partner.

Accepted Answer

Alison's partners bought her partnership interest and agreed that she would no longer be liable for any of the prior or subsequent partnership obligations. Therefore, Alison cannot be held liable for the actions of the absconding partner. Mr. Smith can recover on his judgment out of the partnership assets, but not from Alison personally.

Question 12

Dave and his sister Chris make unusual kites.They both create the designs and Dave makes the patterns.Friends have always wanted to buy their kites.After Chris completes a post-secondary marketing program,she begins to talk to Dave about going into business selling kites.Ed,a friend of Chris,wants to be involved.He says he could buy the supplies and do other odd chores.They decide to try to make a go of it and to share the profits as follows: Dave,35%; Chris,35%; and Ed,30%.Things go well for seven months.They even hire George to deliver kites to the increased number of stores buying them.Unfortunately for the business,Chris and Ed become romantically involved.This is followed by a heated dispute.Ed disappears with $1300 collected from customers and $600 worth of supplies,which he had bought on behalf of the business from its regular supplier.At about the same time,George negligently breaks a customer's $200 lamp while delivering a kite.On these facts,which of the following is true?
A)If the partnership funds are not sufficient to pay the partnership debts,the creditors can look to the individual partners for payment.
B)Although George broke the lamp while delivering a kite,the partners are not liable because it was George's own fault.
C)When Ed buys supplies for the business on credit,he is acting as an agent for the business and he alone is liable for those debts.
D)Only Chris would be responsible for Ed's misapplication of the customers' money.
E)Since Dave,Chris,and Ed did not sign a partnership agreement,they are not considered a general partnership.

Accepted Answer

In a general partnership, each partner is jointly and severally liable for the debts of the partnership. This means that if the partnership funds are not sufficient to pay the debts, the creditors can go after the individual partners for payment.

B is incorrect because even though George broke the lamp, the partnership could still be held liable for his actions as he was acting as an agent for the business at the time.

C is incorrect because although Ed may have been acting as an agent for the business when he bought supplies on credit, the partnership as a whole would still be liable for those debts.

D is incorrect because all partners would be responsible for Ed's misapplication of the customers' money as they share in the profits and losses of the partnership.

E is incorrect because a partnership can still exist without a written partnership agreement. Their actions and sharing of profits indicate that a partnership was formed.

Question 13

Joe entered into partnership with two others in the establishment of a real estate sales agency.The other two,Sam and Harry,had considerable experience in the real estate business but no money.Joe,on the other hand,had his own home and several significant assets,and although he didn't have any experience in the real estate business,his monetary contribution made him an equal partner with Sam and Harry.Unfortunately,Harry misused some trust funds that had come into his care as a result of business,investing them in the business of one of his sons rather than in an interest-bearing account.The business of the son went sour and the money was lost.The client sued Harry,Sam,and Joe.Explain the legal position of Joe here.

Accepted Answer

The answer of Joe entered into partnership with two others...

Question 14

Which one of the following statements about general partnerships is false?
A)A general partner can limit his liability for the firm's obligations by using the term "limited" after his name on stationery.
B)Each partner has unlimited personal liability for the debts of the partnership.
C)The Partnership Act can imply contractual terms into a partnership where the partners did not expressly agree on some detail of the relationship.
D)Partnership is the relationship that exists between persons carrying on business together with a view to making a profit.
E)A partnership can exist even without a written partnership agreement.

Accepted Answer

A general partner cannot limit his liability for the firm's obligations by simply putting the term "limited" after his name on stationery. In order to limit his liability, he would need to register as a limited partner under applicable state laws.

Question 15

Partners can agree among themselves as to what portion of liability they each will bear,and their losses will be limited to that portion when being sued by outsiders.

Accepted Answer

In a partnership, liability is joint and several, meaning each partner can be held responsible for the full amount of the partnership's debts and liabilities, regardless of any internal agreement on the division of liability.

Question 16

Which one of the following statements is correct with respect to the liability of partners?
A)A general partner is responsible,independent of what she has invested,for any losses caused to outsiders through the partnership business if the assets of the partnership are not enough to cover the claim.
B)If a third party is injured because of an activity carried on by the partnership,that third party can only go after the personal assets of a partner if the assets of the partnership are not enough to provide compensation and the damage was actually caused by the conduct of that partner.
C)When a partner enters into a partnership arrangement,she can only lose what she has invested in that partnership.
D)If there are three equal partners in a partnership,an injured third party can only collect one-third of the claim from any one partner.
E)A partner can protect herself from any liability beyond her investment if one of the other partners specifically agrees in the partnership agreement to be responsible for all such liability.

Accepted Answer

A general partner is personally liable for any losses caused to outsiders through the partnership business, regardless of her investment, if the assets of the partnership are not sufficient to cover the claim. This is known as unlimited liability.

Question 17

The partners can change the terms of their responsibilities to each other in the partnership agreement,but not in relationship to their obligations to third parties.

Accepted Answer

The terms of partnership responsibilities between partners can be changed in the partnership agreement, but they cannot change their obligations to third parties as those are legally binding.

Question 18

Partners are vicariously liable for the wrongful acts of employees committed on partnership business.

Accepted Answer

Under the principles of agency law, partners are responsible for the actions taken by their employees during partnership business. This means that if an employee commits a wrongful act, such as negligence or intentional harm, the partners can be held liable for any resulting damages.

Question 19

Partners are responsible for the debts and obligations of the partnership.With respect to contracts,each partner is considered to be:
A)the primarily liable party if the partner takes on the role of agent.
B)a principal of any contract entered into by an employee of the partnership.
C)an agent of the other partners so that any contract entered into by one partner with respect to the partnership business is binding on them all.
D)an agent of the partnership only so that any contract entered into by one partner only binds the partnership entity itself and not the other partners.
E)liable only for his or her capital investment should a breach of contract occur.

Accepted Answer

Each partner is considered to be an agent of the other partners, which means any contract entered into by one partner with respect to the partnership business is binding on them all. This is known as joint and several liability, where each partner is jointly responsible for the obligations of the partnership as a whole. Therefore, options A, B, D, and E are incorrect.

Question 20

Which one of the following statements is correct with respect to the law of partnership?
A)Partners are responsible for any contracts entered into by the partners related to the partnership business.
B)Partners are only responsible for contracts entered into by the partnership if the third party knew that the person it was dealing with was a partner in the partnership.
C)A partner is responsible for contracts with third parties entered into by the partners only where it has been clearly stated by the partner to the third parties that he is entering the contract on behalf of the partnership.
D)Partners cannot bind their partners in contract without specific written authority.
E)Every partner is responsible for every contract entered into by the partnership.

Accepted Answer

According to the law of partnership, partners are responsible for any contracts entered into by the partners related to the partnership business. This means that any partner can enter into contracts that bind the partnership, and all partners are responsible for fulfilling the obligations of the contract. There is no requirement for the third party to know that the person they are dealing with is a partner in the partnership. Therefore, option A is the correct statement.

Quiz 7: Methods of Carrying on Business

Explain the limitations of the liability of partners for the acts of other partners.

The unlimited liability of partners means that not only can they lose their entire investment in the business,but their personal assets (such as their homes and cars)are also at risk.

"Partners must make clear in their partnership agreement any limitations on authority they wish to impose on each other when entering into contracts with outsiders." Discuss the accuracy of this statement.

Unlimited liability means that an investor can lose everything he or she has invested in a corporation.

Which of the following is correct with respect to partnership?

Recent changes in partnership law allow partnerships to be registered as a "limited liability partnership" or LLP.When carrying on business as a limited liability partnership,non-negligent partners stand to lose:

Explain the liability of a partner for another partner's actions.

Fred and Carole were trying to create a list of the pros and cons of sole proprietorship,partnership,and corporation to determine the best structure for carrying on business.Which of the following is true with regard to being a general partner?

Joe Smith owns a bookstore as a sole proprietor.He is also a partner in a hotel,which borrowed $100 000 from the bank.Which of the following statements is true?

Which one of the following statements about general partnerships is false?

Partners can agree among themselves as to what portion of liability they each will bear,and their losses will be limited to that portion when being sued by outsiders.

Which one of the following statements is correct with respect to the liability of partners?

The partners can change the terms of their responsibilities to each other in the partnership agreement,but not in relationship to their obligations to third parties.

Partners are vicariously liable for the wrongful acts of employees committed on partnership business.

Partners are responsible for the debts and obligations of the partnership.With respect to contracts,each partner is considered to be:

Which one of the following statements is correct with respect to the law of partnership?