BUL 3310 Exam 4- Bailey
Absent an agreement otherwise, each partner is entitled to compensation for his or her
services in managing the business
T/F - ✔️✔️False
A buy and sell agreement normally specifies the terms under which a withdrawing or
deceased partner's interest will be bought out
T/F - ✔️✔️True
Subchapter S corporation will avoid double taxation if which of the following applies?
A. All the shareholders agree to be taxed as in a partnership
B. The corporation files Articles of Partnership in the state where it has its principal
place of business
C. The corporation has no retained earnings
D. All of the above - ✔️✔️A. All of the shareholders agree to be taxed as in a
partnership
Which of the following statements about the rights and duties of doctors who practice
medicine in a professional corporation is true?
A. Doctors have no personal liability for medical malpractice suits.
B. Because they are also owners of the corporation, doctors have no protection from
discrimination based on age.
C. The professional corporation can have no more than ten owner-employee doctors.
D. They are eligible to participate in tax advantaged pension plans. - ✔️✔️D. They are
eligible to participate in tax advantaged pension plans
What is the limit of shareholders in subchapter S corporations?
A. 10
B. 35
C. 100
D. There is no limit - ✔️✔️B. 35
Which of the following statements about LLC's is false?
A. LLC's are a relatively new form of business organization.
B. There is an extensive body of law based on court decisions governing LLC's.
C. Shareholders have no personal liability for the debts of the LLC.
D. The LLC is not a taxable entity - ✔️✔️B. There is an extensive body of law based on
court decisions governing LLC's
,States give corporations many rights, among them is the right to sue and the right to
own property in the corporation's name. What do such legal rights collectively constitute
for a corporation?
A. Goodwill
B. Legal capacity
C. Business identity
D. Competitive advantage - ✔️✔️B. Legal capacity
The owner of a limited liability company (LLC) has unlimited personal liability for the
debts of the LLC
T/F - ✔️✔️False
The provisions of the law AND the partnership agreement govern the operations of the
partnership
T/F - ✔️✔️True
Sharing in net profits is not prima facie evidence that a partnership exists if the profits
were paid by the partnership ...
A. As rent
B. For wages
C. As an annuity to the spouse of a deceased partner
D. All of the above - ✔️✔️D. All of the above
Partnerships typically buy life insurance policies on each partner in order to fund the
required purchase of the partner's interest in the partnership when the partner dies
T/F - ✔️✔️True
Frank is a seller of imported pottery. To induce a new wholesaler to sell him goods on
credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the
business. In fact, Ed had no partnership interest and Frank was a sole ___
A. The complicity theory
B. Vicarious liability
C. Estoppel
D. Respondeat superior - ✔️✔️C. Estoppel
Which of the following statements is true about a partnership name?
A. The name is an asset of the partnership that may be sold or assigned
B. The name must include the word "company" in it.
C. The partnership must comply with the state's assume name provisions.
D. Both a and c - ✔️✔️D. Both A and C
,The capital contribution of each partner is a liability to the partnership and must be
returned to the partner when the partnership ends
T/F - ✔️✔️True
Under RUPA, a partnership may take title to real life property as a tendency in
partnership
T/F - ✔️✔️True
AMJ Partnership has 3 partners: Amy made a 60,000 capital contribution; May made a
20,000 capital contribution; and June made a 10,000 capital contribution. The
partnership agreement is silent about how profits will be divided. If the partnership
makes 90,000 in profits, how will it be distributed?
A. 60,000 to Amy; 20,000 to May; 10,00 to June
B. 30,000 each to Amy, May and June
C. 45,000 to Amy; 30,000 to May; 15,000 to June
The partners will have to determine the distribution by a D. 23 partnership vote -
✔️✔️B. 30,000 each to Amy, May and June
If a partnership agreement does not say how losses will be shared, they will be shared
...
A. Equally among the partners
B. Proportionately according to the capital contribution of each partner
C. In whatever way the profits are shared.
D. Equally among those partners who have not made loans to the partnership - ✔️✔️C.
In whatever way the profits are shared
A partner who does not participate in the management of the business is a ___ partner;
a partner who participates in decisions and advises management, but whose
partnership interest is not known to third parties is a ___ partner - ✔️✔️Silent---Secret
Which of the following is not a right of a partner?
A. The right to participate in the management of the business.
B. The right to draw yearly interest on his or her capital contribution
C. The right to inspect the partnership books and records
D. The right to sue for an accounting if another partner has taken a secret profit. -
✔️✔️B. The right to draw yearly interest on his or her capital contribution
Phil has a partnership interest in Best Bike. He has been denied access to the books
and records and he suspects that one of the partners is engaging in secret business
, transactions using partnership funds. Phil wants to know the status of the business. Phil
should request an ___
A. Charging order
B. Marshalling order
C. Accounting
D. Decree of insolvency - ✔️✔️C. Accounting
The court order directing that the share of profits due a partner be given to his or her
creditor to satisfy a judgement is a ___ order
A. Charging
B. Marshaling
C. Accounting
D. Collection - ✔️✔️A. Charging
Partner A defrauded a client of the partnership. Partners B and C are jointly and
severally liable with A to the client, even though they were unaware of the fraud
T/F - ✔️✔️True
A partner in a trading partnership has the implied power to make warranties on goods
sold by the partnership
T/F - ✔️✔️True
The bankruptcy of a partner will cause the dissolution of the partnership by operation of
law
T/F - ✔️✔️True
Which of the following would bring about the dissolution of the partnership?
A. The time the partnership is to last, as stated in the partnership agreement, has
expired
B. All of the partners agree to end the partnership
C. One of the partners dies
D. All of the above - ✔️✔️D. All of the above
A partnership cannot have a provision for the continuation of a partnership upon the
death of one of the of the partners
T/F - ✔️✔️False
In a partnership for a term of years, each partner has both the power and the right to
withdraw from the partnership at any time
T/F - ✔️✔️False
Absent an agreement otherwise, each partner is entitled to compensation for his or her
services in managing the business
T/F - ✔️✔️False
A buy and sell agreement normally specifies the terms under which a withdrawing or
deceased partner's interest will be bought out
T/F - ✔️✔️True
Subchapter S corporation will avoid double taxation if which of the following applies?
A. All the shareholders agree to be taxed as in a partnership
B. The corporation files Articles of Partnership in the state where it has its principal
place of business
C. The corporation has no retained earnings
D. All of the above - ✔️✔️A. All of the shareholders agree to be taxed as in a
partnership
Which of the following statements about the rights and duties of doctors who practice
medicine in a professional corporation is true?
A. Doctors have no personal liability for medical malpractice suits.
B. Because they are also owners of the corporation, doctors have no protection from
discrimination based on age.
C. The professional corporation can have no more than ten owner-employee doctors.
D. They are eligible to participate in tax advantaged pension plans. - ✔️✔️D. They are
eligible to participate in tax advantaged pension plans
What is the limit of shareholders in subchapter S corporations?
A. 10
B. 35
C. 100
D. There is no limit - ✔️✔️B. 35
Which of the following statements about LLC's is false?
A. LLC's are a relatively new form of business organization.
B. There is an extensive body of law based on court decisions governing LLC's.
C. Shareholders have no personal liability for the debts of the LLC.
D. The LLC is not a taxable entity - ✔️✔️B. There is an extensive body of law based on
court decisions governing LLC's
,States give corporations many rights, among them is the right to sue and the right to
own property in the corporation's name. What do such legal rights collectively constitute
for a corporation?
A. Goodwill
B. Legal capacity
C. Business identity
D. Competitive advantage - ✔️✔️B. Legal capacity
The owner of a limited liability company (LLC) has unlimited personal liability for the
debts of the LLC
T/F - ✔️✔️False
The provisions of the law AND the partnership agreement govern the operations of the
partnership
T/F - ✔️✔️True
Sharing in net profits is not prima facie evidence that a partnership exists if the profits
were paid by the partnership ...
A. As rent
B. For wages
C. As an annuity to the spouse of a deceased partner
D. All of the above - ✔️✔️D. All of the above
Partnerships typically buy life insurance policies on each partner in order to fund the
required purchase of the partner's interest in the partnership when the partner dies
T/F - ✔️✔️True
Frank is a seller of imported pottery. To induce a new wholesaler to sell him goods on
credit, Frank and his brother Ed told the wholesaler that Ed was a partner in the
business. In fact, Ed had no partnership interest and Frank was a sole ___
A. The complicity theory
B. Vicarious liability
C. Estoppel
D. Respondeat superior - ✔️✔️C. Estoppel
Which of the following statements is true about a partnership name?
A. The name is an asset of the partnership that may be sold or assigned
B. The name must include the word "company" in it.
C. The partnership must comply with the state's assume name provisions.
D. Both a and c - ✔️✔️D. Both A and C
,The capital contribution of each partner is a liability to the partnership and must be
returned to the partner when the partnership ends
T/F - ✔️✔️True
Under RUPA, a partnership may take title to real life property as a tendency in
partnership
T/F - ✔️✔️True
AMJ Partnership has 3 partners: Amy made a 60,000 capital contribution; May made a
20,000 capital contribution; and June made a 10,000 capital contribution. The
partnership agreement is silent about how profits will be divided. If the partnership
makes 90,000 in profits, how will it be distributed?
A. 60,000 to Amy; 20,000 to May; 10,00 to June
B. 30,000 each to Amy, May and June
C. 45,000 to Amy; 30,000 to May; 15,000 to June
The partners will have to determine the distribution by a D. 23 partnership vote -
✔️✔️B. 30,000 each to Amy, May and June
If a partnership agreement does not say how losses will be shared, they will be shared
...
A. Equally among the partners
B. Proportionately according to the capital contribution of each partner
C. In whatever way the profits are shared.
D. Equally among those partners who have not made loans to the partnership - ✔️✔️C.
In whatever way the profits are shared
A partner who does not participate in the management of the business is a ___ partner;
a partner who participates in decisions and advises management, but whose
partnership interest is not known to third parties is a ___ partner - ✔️✔️Silent---Secret
Which of the following is not a right of a partner?
A. The right to participate in the management of the business.
B. The right to draw yearly interest on his or her capital contribution
C. The right to inspect the partnership books and records
D. The right to sue for an accounting if another partner has taken a secret profit. -
✔️✔️B. The right to draw yearly interest on his or her capital contribution
Phil has a partnership interest in Best Bike. He has been denied access to the books
and records and he suspects that one of the partners is engaging in secret business
, transactions using partnership funds. Phil wants to know the status of the business. Phil
should request an ___
A. Charging order
B. Marshalling order
C. Accounting
D. Decree of insolvency - ✔️✔️C. Accounting
The court order directing that the share of profits due a partner be given to his or her
creditor to satisfy a judgement is a ___ order
A. Charging
B. Marshaling
C. Accounting
D. Collection - ✔️✔️A. Charging
Partner A defrauded a client of the partnership. Partners B and C are jointly and
severally liable with A to the client, even though they were unaware of the fraud
T/F - ✔️✔️True
A partner in a trading partnership has the implied power to make warranties on goods
sold by the partnership
T/F - ✔️✔️True
The bankruptcy of a partner will cause the dissolution of the partnership by operation of
law
T/F - ✔️✔️True
Which of the following would bring about the dissolution of the partnership?
A. The time the partnership is to last, as stated in the partnership agreement, has
expired
B. All of the partners agree to end the partnership
C. One of the partners dies
D. All of the above - ✔️✔️D. All of the above
A partnership cannot have a provision for the continuation of a partnership upon the
death of one of the of the partners
T/F - ✔️✔️False
In a partnership for a term of years, each partner has both the power and the right to
withdraw from the partnership at any time
T/F - ✔️✔️False
