Question 1
4.75 out of 5 points
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| Anna, Bea, and Cal were partners of Aniston Associates LLP, an accounting firm. The term of the partnership was 25 years, but Anna withdrew after only 10 years, complaining that Bea and Cal always opposed her on matters in the ordinary course of business. Anna wants the business to be wound up, but once again Bea and Cal disagree with her; they want to continue the business. Assume their partnership agreement is silent on the matters below. Answer the following 3 questions in a maximum of 3 sentences each. Be sure to label your answers, A, B, and C. A. Has there been a dissociation of Aniston Associates? Explain. (1 point) B. Will Aniston Associates now be wound up? Explain. (2 points) C. Assuming Bea and Cal continue the business of the LLP, what would they have to pay Anna, if anything? (2 points) | | | |
| | Selected Answer: | A. Yes, with the withdrawal of Anna from the partnership, she will become dissociated from the partnership. B. With three partners is a partnership, the dissociation of one partner does not trigger the dissolution of a partnership. The partnership can only be dissolved if all the partners agree to do so. C. Since the partnership agreement does not specify the terms of a partner withdrawal, then Anna will have to be paid her fair share of the business. | | Correct Answer: | A. Yes, there was a dissociation caused by Anna’s quitting. B. No. Because Anna’s dissociation was wrongful, she cannot demand a winding up, and the remaining partners may continue the partnership without her. C. The remaining partners must pay Anna the fair value of her interest minus any losses caused by her wrongful dissociation. |
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0.25 out of 0.25 points
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| Which of the following is the best situation for an individual who wants to go into the ice cream business but wants to avoid being liable for debts of the business? | | | |
| | Selected Answer: | c. The individual goes into business with three others, and they file with the state as an LLC. The individual invests capital in the business and will be the sole manager of the business. | | Answers: | a. The individual and her son rent space in the mall, start selling ice cream, and agree to split the profits 70/30. | | b. The individual gets a vendor’s license and sets up a stand on the sidewalk and begins selling ice cream. | | c. The individual goes into business with three others, and they file with the state as an LLC. The individual invests capital in the business and will be the sole manager of the business. | | d. The individual goes into business with three others, and they file with the state as a Limited Partnership. The individual invests capital in the business and will be the sole manager of the business. |
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0 out of 0.25 points
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| Nina, Pinta, and Maria are forming a business entity but do not want to be taxed personally on the business income; they prefer that the taxes be paid by the entity itself. With this in mind, which type of entity should they choose? | | | |
| | Selected Answer: | d. A limited liability company. | | Answers: | a. A partnership. | | b. A corporation. | | c. A limited partnership. | | d. A limited liability company. |
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0 out of 0.25 points
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| Who dominates in most franchise relationships? | | | |
| | Selected Answer: | a. Franchisee. | | Answers: | a. Franchisee. | | b. Franchisor. | | c. They tend to have equal bargaining positions. | | d. Franchisee’s investors. |
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0 out of 0.25 points
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| Which of the following is not an element of the definition of partnership? | | | |
| | Selected Answer: | d. Carrying on of a business. | | Answers: | a. Co-ownership of the assets used by the business. | | b. An association of two or more persons. | | c. Intent to make a profit. | | d. Carrying on of a business. |
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0 out of 0.25 points
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| A and B created the AB Partnership. A contributed 80% and B 20% of the capital of the partnership. A did 95% of the work of the partnership, and B did 5%. Their agreement stated that A would manage the partnership and B would be a silent partner only. The agreement said nothing about the sharing of profits and losses. How will A and B share losses? | | | |
| | Selected Answer: | b. A gets 80% and B gets 20%. | | Answers: | a. Equally. | | b. A gets 80% and B gets 20%. | | c. A gets 95% and B gets 5%. | | d. A gets 100% and B gets 0%. |
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0.25 out of 0.25 points
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| Unless partners in a limited liability partnership (LLP) agree otherwise, | | | |
| | Selected Answer: | c. Admitting a new partner requires unanimous consent of all the partners. | | Answers: | a. A simple majority is enough to admit a new partner. | | b. Partners share authority in accordance with their capital contributions. | | c. Admitting a new partner requires unanimous consent of all the partners. | | d. All partners are fully liable for the debts of the LLP. |
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0 out of 0.25 points
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| Axel is a creditor of Eddie, a partner in the Mercx Partnership. If Eddie does not pay this valid debt, | | | |
| | Selected Answer: | c. Both of the above. | | Answers: | a. Axel can get a charging order. | | b. Axel can seize Mercx’s assets after Eddie’s assets are exhausted. | | c. Both of the above. | | d. None of the above. |
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0.25 out of 0.25 points
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| In which business entities do all the owners have joint and several liability for the entity’s debt? | | | |
| | Selected Answer: | b. Partnership. | | Answers: | a. LLC. | | b. Partnership. | | c. LLP and partnership. | | d. Sole proprietorship. |
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0.25 out of 0.25 points
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| When a partner in an LLP commits a tort, the injured third party | | | |
| | Selected Answer: | d. Can sue both the partner who committed the tort and the LLP. | | Answers: | a. Can only sue the partner who committed the tort. | | b. Can only sue the LLP. | | c. Can sue all the partners, as they are jointly and severally liable. | | d. Can sue both the partner who committed the tort and the LLP. |
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0 out of 0.25 points
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| Cinco LLP applied to borrow $100,000 from Burke Bank. Jane Burke is the officer in charge of the loan for the bank. She wants to be sure that the Cinco partner she is dealing with has authority to bind the LLP to the loan. In order to ensure that Cinco will be liable, she should demand that an opinion letter be received from Cinco’s | | | |
| | Selected Answer: | a. Managing partner. | | Answers: | a. Managing partner. | | b. Accountants. | | c. Lawyers. | | d. Treasurer. |
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0 out of 0.25 points
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| A, B, and C are partners in the ABC Partnership. The partnership engages in the business of restoring and reselling old single-engine airplanes. From time to time they considered restoring jet airplanes as well, but have never done so. One day, B found an old jet and purchased it for himself without telling A or C. B restored it on his own time and at his own expense and sold it for a net profit of $30,000. When A and C discovered this, they sued B. Assume their partnership agreement is silent about B’s right to do this. | | | |
| | Selected Answer: | a. B is not liable to A and C because the partnership does not restore jets. | | Answers: | a. B is not liable to A and C because the partnership does not restore jets. | | b. B is not liable to A and C to the partnership because he did this on his own time and at his own expense. | | c. Both of the above are true. | | d. B is liable to the partnership for the $30,000 profit he made from this activity. |
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0 out of 0.25 points
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| John and Jane start a partnership, but their written partnership agreement does not address profit sharing. John invests 80% of the start-up capital for the partnership. Jane brings in 90% of the revenues for the first year. At the end of the first year, who is entitled to what percentage of profits? | | | |
| | Selected Answer: | c. John is entitled to 80% of the profits. | | Answers: | a. Jane is entitled to 90% of the profits. | | b. Jane and John are each entitled to 50% of the profits. | | c. John is entitled to 80% of the profits. | | d. Neither is entitled to any share of the profits until they agree on profit-sharing. |
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0 out of 0.25 points
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| Jasmin was a partner in the JPL Partnership. Jasmin quit JPL in early 2019, and the other 99 partners continued the business after paying Jasmin the fair value of her interest. No notice was given to third parties concerning Jasmin’s departure. During late 2019, the partnership incurred some new debt it was not able to pay, and the creditor sued the 99 partners and Jasmin to recover the money. Can the creditors recover the debt from Jasmin? | | | |
| | Selected Answer: | c. No, because she was not a partner when the debt was created. | | Answers: | a. Yes, because the partners paid her the fair value of her interest. | | b. Yes, if the creditors can show they reasonably believed she was still a partner. | | c. No, because she was not a partner when the debt was created. | | d. No, because the partners paid her the fair value of her interest. |
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0.25 out of 0.25 points
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| Which of the following is a consequence of a wrongful dissociation? | | | |
| | Selected Answer: | c. The wrongfully dissociated partner is entitled to the value of his partnership interest, minus the damages he caused the partnership. | | Answers: | a. The wrongfully dissociated partner may perform the winding up. | | b. The wrongfully dissociated partner may demand the partnership be dissolved. | | c. The wrongfully dissociated partner is entitled to the value of his partnership interest, minus the damages he caused the partnership. | | d. The wrongfully dissociated partner is not entitled to the value of any of his partnership interest. |
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0.25 out of 0.25 points
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| Which of the following is not within the implied authority of a partner winding up the business of an accounting partnership? | | | |
| | Selected Answer: | c. Make a contract to audit the financial records of a new client. | | Answers: | a. Sell the partnership’s executive building. | | b. Dispose of the partnership’s excess supplies. | | c. Make a contract to audit the financial records of a new client. | | d. Hire a staff accountant to assist in the completion of an audit of an existing client. |
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0 out of 0.25 points
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| Doug transferred his interest in the Boise LLP to Devon. What is the effect of this transfer? | | | |
| | Selected Answer: | a. Doug has dissociated. | | Answers: | a. Doug has dissociated. | | b. Devon is now a partner. | | c. Boise LLP is dissolved. | | d. None of the above. |
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0 out of 0.25 points
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| Who are the fiduciaries in a manager-managed LLC? | | | |
| | Selected Answer: | a. All of the members. | | Answers: | a. All of the members. | | b. Just the members who manage. | | c. The managing members and managing non-members only. | | d. No one, because they all have limited liability. |
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0 out of 0.25 points
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| Which of the following is not a difference between a partnership and a limited partnership? | | | |
| | Selected Answer: | b. The way the entity is managed. | | Answers: | a. The personal liability of all the partners. | | b. The way the entity is managed. | | c. The method of formation of the entity. | | d. The taxation of the profits of the entity. |
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0 out of 0.25 points
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| Which of the following is an advantage of doing business as an LLC? | | | |
| | Selected Answer: | d. The rules that govern LLCs are well settled | | Answers: | a. LLCs are taxed as corporations. | | b. LLCs are flexible regarding their management structure. | | c. LLCs have two classes of partners: general partners and limited partners. | | d. The rules that govern LLCs are well settled |
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0.25 out of 0.25 points
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| A limited liability company (LLC) is managed by: | | | |
| | Selected Answer: | c. Either of the above. | | Answers: | a. All of its members. | | b. Member or non-member managers. | | c. Either of the above. | | d. Its general partners. |
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Last Updated on June 16, 2020
