Question 1

Which of the following is true under the Uniform Partnership Act, regarding profit and partnerships?

Accepted Answer

A)   There is no requirement that a partnership be formed with a profit-making motive, and all states recognize the status of non-profit partnerships.
B)   A partnership must have a profit-making motive only if the partnership has five or more members.
C)   There is a requirement that a partnership have a profit-making motive only if the partnership has been in existence for over one year.
D)   The partners must operate the business for a profit, and the partnership must be dissolved if no profit is made for three consecutive years.
E)   The partners must operate the business for a profit which is construed to mean that the partners must intend to make some kind of profit from the business.F) B) and D)
G) A) and B)

Question 2

Which of the following represents a partner's right to an interest in the partnership?

Accepted Answer

A)   A partner has no right to an interest in the partnership.
B)   The right is composed only of the partner's share of profits.
C)   The right is composed only of the partner's right to return of capital contributed by the partner.
D)   The right is composed only of the partner's right to return of capital contributed by the partner and any wages due.
E)   The right is composed of a combination of the partner's share of the profits and a return of capital contributed by the partner.F) C) and E)
G) A) and B) E

Question 3

Joint and several liability means that partners must be sued jointly.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is an association of two or more persons to carry on as co-owners a business for profit?

Accepted Answer

A)   A joint operation
B)   A combined partnership
C)   A partnership
D)   A joint business arrangement
E)   A primary partnershipF) B) and E)
G) None of the above C

Question 5

"Grooming Losses." Wally, Beverly, and Matthew formed a partnership to groom dogs. Because they were good friends and anticipated making a profit sufficient to compensate all partners well, the articles of partnership did not allocate profit or losses. Beverly was appointed managing partner. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to review a listing of all partnership assets and profit statements listing distributions to partners. Beverly and Matthew denied that they had been hiding the books and claimed complete innocence of any wrongdoing.
-Which of the following is correct regarding Matthew's claim to additional compensation based upon the amount of work he was doing?

Accepted Answer

A)   He is correct.
B)   Based upon equitable principles he may be correct, but only if he can establish that the other partners wrongfully refused to do their share of the work.
C)   He is incorrect.
D)   He is incorrect unless he can establish that he honestly did not know the law in regard to partnerships and did the extra work believing that he would be compensated.
E)   He is incorrect unless he can establish that he did at least 30% more work than any other partner.F) B) and E)
G) None of the above

Question 6

As set forth in the text, list the types of information that articles of partnership usually include.

Accepted Answer

Articles of partnership usually include ...

Question 7

If no partnership agreement exists, which of the following generally establishes the rules for the partnership?

Accepted Answer

A)   The Federal Partnership Act
B)   The Uniform Partnership Act
C)   The Statutory Joint Act
D)   The Partnership Unification Act
E)   The Partnership Governance ActF) A) and D)
G) B) and D)

Question 8

A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true under the Uniform Partnership Act regarding personal liability of partners for obligations of the partnership when the partnership itself is liable?

Accepted Answer

A)   If a partnership is liable, each partner has unlimited personal liability.
B)   If a partnership is liable, each partner only has personal liability in proportion to the number of partnership members.
C)   If a partnership is liable, each partner only has personal liability in proportion to the way in which profits are allocated.
D)   If a partnership is liable, each partner only has personal liability in proportion to the way in which losses are allocated.
E)   Partners do not have personal liability for obligations of a partnership when the partnership itself is liable.F) A) and D)
G) C) and D)

Question 10

For which of the following is false regarding when a partner may demand an accounting?

Accepted Answer

A)   A partner may demand an accounting whenever the copartners wrongfully exclude a partner from the partnership or from access to the books.
B)   A partner may demand an accounting whenever any partner fails to disclose a profit or benefit from the partnership.
C)   A partner may demand an accounting whenever circumstances render an accounting as "just and reasonable."
D)   A partner may demand an accounting for any time for any reason.
E)   A partner may demand an accounting whenever the partnership agreement provides for an accounting.F) A) and D)
G) A) and B)

Question 11

"Partnership Disruption." Bruce, Sandra, and Minnie want to form a partnership to assist students with resume preparation and employment searches. Bruce asks Sandra and Minnie if they should draw up some sort of agreement. Sandra replies that a written agreement is not legally required and that an oral agreement will set up a partnership. Upon the urging of Bruce and Minnie, however, Sandra agreed to a written document which they all signed setting up the partnership. It was a simple agreement listing the partners that did not specifically address the right to management or allocation of profits and losses. Sandra has an opportunity to assist some students with resumes and does so without revealing her employment to the partnership. She keeps the funds she receives for herself. When Bruce and Minnie found out, Sandra replied that she was doing two-thirds of the partnership work, particularly in regard to management; that she, therefore, had two-thirds of the voting rights; and that she voted that her actions were appropriate. The articles of partnership did not address the right to share in management, but Bruce and Minnie strongly disagreed with Sandra.
-What is the written agreement creating the partnership entered into by Bruce, Sandra, and Minnie called?

Accepted Answer

A)   Contract of partnership
B)   Contract of agreement
C)   Partnership articles
D)   Articles of partnership
E)   Clauses of the articles of partnershipF) B) and C)
G) A) and C)

Question 12

"Partnership Disruption." Bruce, Sandra, and Minnie want to form a partnership to assist students with resume preparation and employment searches. Bruce asks Sandra and Minnie if they should draw up some sort of agreement. Sandra replies that a written agreement is not legally required and that an oral agreement will set up a partnership. Upon the urging of Bruce and Minnie, however, Sandra agreed to a written document which they all signed setting up the partnership. It was a simple agreement listing the partners that did not specifically address the right to management or allocation of profits and losses. Sandra has an opportunity to assist some students with resumes and does so without revealing her employment to the partnership. She keeps the funds she receives for herself. When Bruce and Minnie found out, Sandra replied that she was doing two-thirds of the partnership work, particularly in regard to management; that she, therefore, had two-thirds of the voting rights; and that she voted that her actions were appropriate. The articles of partnership did not address the right to share in management, but Bruce and Minnie strongly disagreed with Sandra.
-Which of the following is correct regarding Sandra's statement to the effect that she had greater management rights because she was doing a greater percentage of work for the partnership?

Accepted Answer

A)   Sandra is incorrect because unless otherwise stated in the articles of partnership, all partners share equally in the management of the partnership.
B)   Sandra is incorrect because unless otherwise stated in the articles of partnership, partners share in management rights in proportion to their rights to profits.
C)   Sandra is incorrect because unless otherwise stated in the articles of partnership, partners share in management rights in proportion to their obligation for losses.
D)   Sandra is correct only if the proportion of work she was doing was inequitable.
E)   Sandra is correct only if she can establish that the other partners are guilty of mismanagement in such a significant manner that a breach of fiduciary duty has occurred.F) A) and B)
G) B) and E)

Question 13

Unless otherwise agreed in the articles of partnership, which of the following is true regarding rights partners have in regard to their interactions with other partners?

Accepted Answer

A)   Partners have the right to participate equally in management, the right to share equally in profits, the obligation to share equally in losses, and the right to additional compensation for devoting time to the business.
B)   The right to participate in management according to the level of capital contribution, the right to share in profits according to the level of capital contribution, the obligation to share in losses according to the level of capital contribution, and the right to additional compensation for devoting time to the business.
C)   The right to participate in management according to the level of capital contribution, the right to share equally in profits, the obligation to share equally in losses, and the right to additional compensation for devoting time to the business.
D)   The right to participate equally in management, the right to share in profits according to the level of capital contribution, the obligation to share in losses according to the level of capital contribution, but no right to additional compensation for devoting time to the business.
E)   The right to participate equally in management, the right to share equally in profits, the right to share equally in losses, but no right to additional compensation for devoting time to the business.F) A) and B)
G) C) and E)

Question 14

In regard to developing countries which of the following is not true regarding offshore partnerships?

Accepted Answer

A)   They combine the strengths of firms that operate in developing countries and firms that operate in countries that are foreign to the developing countries.
B)   Firms in developing countries use offshore partnerships to gain international exposure.
C)   Firms in developing countries use offshore partnerships to gain technological competence.
D)   Foreign firms use offshore partnerships to gain the opportunity to enter developing markets.
E)   Offshore partnerships are rarely used for workers because workers from offshore partnerships tend to be highly priced.F) A) and D)
G) A) and E)

Question 15

Which of the following is true regarding the right of a personal creditor of a partner to seize specific items of partnership property?

Accepted Answer

A)   A creditor may do so only after giving all partners at least 90 days advance notice.
B)   A creditor may do so only after giving all partners at least 60 days advance notice.
C)   A creditor may do so only after giving all partners at least 30 days advance notice.
D)   A creditor may seize specific items of partnership property only if the items are located in the office of the creditor involved.
E)   A creditor may not seize specific items of partnership property.F) A) and C)
G) B) and E)

Question 16

Which of the following is a way that a person may be held liable as a partner without actually being named as a partner in a partnership agreement?

Accepted Answer

A)   Partnership by common
B)   Partnership by assumption
C)   Partnership by estoppel
D)   Partnership by equity
E)   Partnership by arrangementF) B) and C)
G) A) and B)

Question 17

What is a written agreement that creates a partnership called?

Accepted Answer

A)   Contract of partnership
B)   Contract of agreement
C)   Partnership articles
D)   Articles of partnership
E)   Clauses of partnership agreementF) A) and B)
G) B) and E)

Question 18

"Partnership Disruption." Bruce, Sandra, and Minnie want to form a partnership to assist students with resume preparation and employment searches. Bruce asks Sandra and Minnie if they should draw up some sort of agreement. Sandra replies that a written agreement is not legally required and that an oral agreement will set up a partnership. Upon the urging of Bruce and Minnie, however, Sandra agreed to a written document which they all signed setting up the partnership. It was a simple agreement listing the partners that did not specifically address the right to management or allocation of profits and losses. Sandra has an opportunity to assist some students with resumes and does so without revealing her employment to the partnership. She keeps the funds she receives for herself. When Bruce and Minnie found out, Sandra replied that she was doing two-thirds of the partnership work, particularly in regard to management; that she, therefore, had two-thirds of the voting rights; and that she voted that her actions were appropriate. The articles of partnership did not address the right to share in management, but Bruce and Minnie strongly disagreed with Sandra.
-Which of the following is true regarding Sandra's statement that a written agreement is not necessary to set up a partnership?

Accepted Answer

A)   She is correct.
B)   She is correct but only because three or fewer members are involved.
C)   She is incorrect but only because fewer than five members are involved.
D)   She is correct only if all partners are considered sophisticated investors.
E)   She is incorrect only if none of the partners have experience with the partnership form of business.F) B) and C)
G) C) and E) A

Question 19

Unless otherwise agreed by the partners, where are records of the partnership to be kept?

Accepted Answer

A)   In a safety deposit box at the bank used by the partnership.
B)   At the home of the managing partner.
C)   At the location of the partnership's principal business office.
D)   At the location of the partnership's first business office.
E)   At the location of the partnership's latest business office.F) C) and E)
G) A) and B)

Question 20

Which of the following is true regarding a partner's right to copy partnership records?

Accepted Answer

A)   A partner has a right to copy partnership records.
B)   A partner does not have a right to copy any partnership records.
C)   A partner only has a right to copy partnership records that are not marked "confidential."
D)   A partner only has a right to copy partnership records that are not marked "confidential" and that are not being used in litigation.
E)   A partner only has a right to copy partnership records that directly impact that partner's right to profits.F) A) and C)
G) C) and D)

Exam 36: Partnerships: Nature, Formation, and Operation

Which of the following is true under the Uniform Partnership Act, regarding profit and partnerships?

Correct Answer
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Which of the following represents a partner's right to an interest in the partnership?

Correct Answer
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E

Joint and several liability means that partners must be sued jointly.

Correct Answer
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Which of the following is an association of two or more persons to carry on as co-owners a business for profit?

Correct Answer
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C

Correct Answer
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As set forth in the text, list the types of information that articles of partnership usually include.

Correct Answer
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Articles of partnership usually include ...
View Answer

If no partnership agreement exists, which of the following generally establishes the rules for the partnership?

Correct Answer
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A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs.

Correct Answer
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Which of the following is true under the Uniform Partnership Act regarding personal liability of partners for obligations of the partnership when the partnership itself is liable?

Correct Answer
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For which of the following is false regarding when a partner may demand an accounting?

Correct Answer
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Correct Answer
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Correct Answer
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Unless otherwise agreed in the articles of partnership, which of the following is true regarding rights partners have in regard to their interactions with other partners?

Correct Answer
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In regard to developing countries which of the following is not true regarding offshore partnerships?

Correct Answer
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Which of the following is true regarding the right of a personal creditor of a partner to seize specific items of partnership property?

Correct Answer
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Which of the following is a way that a person may be held liable as a partner without actually being named as a partner in a partnership agreement?

Correct Answer
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What is a written agreement that creates a partnership called?

Correct Answer
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Correct Answer
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A

Unless otherwise agreed by the partners, where are records of the partnership to be kept?

Correct Answer
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Which of the following is true regarding a partner's right to copy partnership records?

Correct Answer
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Exam 36: Partnerships: Nature, Formation, and Operation

Which of the following is true under the Uniform Partnership Act, regarding profit and partnerships?

Correct AnswerverifiedShow Answer

Which of the following represents a partner's right to an interest in the partnership?

Correct AnswerverifiedE

Joint and several liability means that partners must be sued jointly.

Correct AnswerverifiedShow Answer

Which of the following is an association of two or more persons to carry on as co-owners a business for profit?

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

As set forth in the text, list the types of information that articles of partnership usually include.

Correct AnswerverifiedArticles of partnership usually include ...View AnswerShow Answer

If no partnership agreement exists, which of the following generally establishes the rules for the partnership?

Correct AnswerverifiedShow Answer

A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs.

Correct AnswerverifiedShow Answer

Which of the following is true under the Uniform Partnership Act regarding personal liability of partners for obligations of the partnership when the partnership itself is liable?

Correct AnswerverifiedShow Answer

For which of the following is false regarding when a partner may demand an accounting?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unless otherwise agreed in the articles of partnership, which of the following is true regarding rights partners have in regard to their interactions with other partners?

Correct AnswerverifiedShow Answer

In regard to developing countries which of the following is not true regarding offshore partnerships?

Correct AnswerverifiedShow Answer

Which of the following is true regarding the right of a personal creditor of a partner to seize specific items of partnership property?

Correct AnswerverifiedShow Answer

Which of the following is a way that a person may be held liable as a partner without actually being named as a partner in a partnership agreement?

Correct AnswerverifiedShow Answer

What is a written agreement that creates a partnership called?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

Unless otherwise agreed by the partners, where are records of the partnership to be kept?

Correct AnswerverifiedShow Answer

Which of the following is true regarding a partner's right to copy partnership records?

Correct AnswerverifiedShow Answer

Correct Answer
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E

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C

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Articles of partnership usually include ...
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A

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