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1 What is the effect of having a corporation as the general
partner of a limited partnership?
Each shareholder of the corporation will be treated as a general
partner of the limited partnership.
The liability of the corporate general partner will be limited
to the amount of its assets.
The limited liability of the corporation will result in the
limited partners having greater
liability than
they would otherwise.
Each shareholder of the corporation will be treated as a limited
partner of the limited partnership.
2 There are two general partners, each of whom contributes
$5,000 in capital to a limited partnership. There are two limited partners,
each of whom contributes $20,000. The total amount of capital contributed is
$50,000. The limited partnership agreement does not stipulate how profits and
losses are to be allocated. Assume that the limited partnership makes $300,000
in profits. Under the Revised Uniform Limited Partnership Act (RULPA), how much
would each partner receive?
Each general partner would receive $30,000, and each limited
partner would receive $120,000.
Each general partner would receive $120,000, and each limited
partner would receive $30,000.
All partners would receive $75,000, regardless of whether he or
she is a general or limited partner.
Each general partner would receive $50,000, and each limited
partner would receive $100,000.
3 Which of the following is true of arbitration?
A judicial referee makes recommendations to the parties.
A resolution may or may not be reached.
One party usually drops the case.
Parties can introduce evidence to support their case.
Correct
4 Which type of business formation is typically reserved for
professionals such as accountants, lawyers, and doctors?
Limited Liability Partnership (LLP)
S-Corporation
Franchise
Limited Liability Company (LLC)
5 Which of the following is true about the choice of business
entity for an entrepreneur?
The choice is determined solely by the amount of capital
invested.
The choice takes into account many factors, including finding an
option that has all the characteristics desired.
The choice is determined solely by whether the primary business
is services or goods.
The choice is determined by the Internal Revenue Service based
on all the facts and circumstances.
Correct
6 Which of the following is true of a corporation?
A corporation is a separate legal entity.
7 George has served Mary with a complaint alleging breach of
contract. Mary has never been sued before and as such, she seeks your advice on
what to do with the complaint. You advise that she
should not respond to George’s complaint as an answer implies an
admission
answer George’s complaint by admitting or denying the
allegations George has asserted against her
write a letter to the judge saying that George is mistaken
answer George’s complaint but do not provide any affirmative
defenses that George can use against her
Correct
8 When parties agree in advance to adhere to an arbitrator’s
decision and award, it is known as
binding arbitration
mediation
appealable
arbitrator discretion
Correct
9 Which of the following is true of The Federal Arbitration Act?
It applies only to breach of contract disputes.
It governs all types of alternative dispute resolution.
It permits an appeal for all arbitration awards.
It provides that arbitration agreements are valid, irrevocable,
and enforceable.
Correct
10 Which of the following is true in the creation of a general
partnership?
The business cannot operate under a trade name.
The name selected cannot indicate that it is a corporation.
The business name cannot be a fictitious name.
The business name must have the names of all the partners.
Correct
11 Which form of alternative dispute resolution occurs when the
parties choose an impartial third party to hear and decide their dispute?
Mediation
Arbitration
Minitrial
Conciliation
Correct
12 Which of the following is true regarding mediation?
A settlement agreement is never reached with a mediator.
Was created by the Federal Mediation Act of 1925.
If a settlement agreement is not reached in mediation, then the
parties hire a new mediator.
A mediator does not make a decision or an award.
Correct
13 Fred and Ginger are general partners in a business. They
decide to purchase a building for the partnership. Ginger will put up the money
for the building, and Fred will complete the remodeling. While inspecting the
building, Fred is informed that the building is packed full of asbestos. He
fails to tell Ginger of the presence of the substance. They buy the building
and go into business. During the remodeling of the building, people from the neighborhood
begin complaining about the dust from the building. Some of them even threaten
to sue. Who is liable?
Both Ginger and Fred are liable, regardless of the
circumstances, by virtue of the fact that they are partners.
Ginger is liable because she is the one who purchased the
building. Fred is not liable, even though he had actual knowledge, because he
did not purchase the building.
Neither Ginger nor Fred are liable personally, nor is the
partnership, as they did not put the substance in the building.
Fred is liable because he was put on notice of the presence of
the substance. Ginger is not liable because she did not have actual knowledge.
Correct
14 The Black Squirrel limited partnership has been in operation
for many years, but has recently fallen on hard times. The partners have
decided to dissolve, although there are few assets remaining in the
partnership. Shortly after the partnership filed its certificate of limited
partnership, the partners had the foresight to incorporate into their
partnership agreement a provision that, in the event of dissolution, the assets
would be distributed in payment of claims first to limited partners, then to
general partners, then to creditors. Hilda is a limited partner and feels
relieved that she will receive at least a portion of her capital. Henry, one of
the general partners, said that this provision is void and unenforceable. Which
of the following best describes this situation?
The distribution of assets in the event of dissolution is one of
the few provisions where the Revised Uniform Limited Partnership Act does not
allow modification.
The provision placing the partners ahead of creditors is not
enforceable, but the priority of limited partners over general partners is
enforceable.
The distribution, as called for in the agreement, would be
enforceable if it had been included in any filings related to the limited
partnership.
The provision placing limited partners ahead of general partners
is unenforceable, thus all partners would be on an equal footing and ahead of
creditors.
Correct
15 Martha started a flower shop as a sole proprietor. After 1
year, she was forced to close the shop because business was so bad. At that
time, the business assets totaled $50,000, but the business liabilities totaled
$125,000. Which of the following statements is true?
nce Martha terminates the sole proprietorship, she is no longer
liable for the $50,000.
Martha’s business creditors can collect only the $50,000 now,
but if Martha ever goes into business again, they can get the assets of the new
business.
Martha’s business creditors can collect only the $50,000 of
business assets.
Martha is personally liable for the additional $75,000 owed to
business creditors.
16 Which of the following is one of the major purposes of a
settlement conference?
To contest the local court rules
To conduct discovery for a case
To facilitate the settlement of a case
To structure a settlement payment schedule
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