QUESTION 1: Betty, Anne and Carla want to add Dana as a new limited partner. Can they do so even if Jean objects?
a. Yes, they can add a limited partner with a majority vote of all of the partners.
b. Yes, they can add a limited partner with a unanimous vote of the general partners.
c. No, adding a limited partner is outside the ordinary course of business and requires a unanimous vote, including a vote by limited partners.
d. No, limited partners cannot be added after the formation of the partnership.
QUESTION 2: Can the general partners hire Dana as a new full-time employee over Jean's objection?
a. Yes, hiring employees is outside the ordinary course of business and requires a two-thirds majority vote of all of the partners.
b. No, hiring employees is in the ordinary course of business and requires a unanimous vote of all of the partners.
c. Yes, hiring employees is in the ordinary course of business and requires a simple majority vote of the general partners. Limited partners are not involved in the management of the business.
d. No, hiring employees is outside the ordinary course of business and requires a unanimous vote of all of the partners.
QUESTION 3: Jean decides to open her own hair salon. She keeps the proceeds from these customers for her personal use and does not share them with her partners.
a. As a limited partner, Jean is an agent of the partnership. She has breached her fiduciary duty to not compete against the partnership and to account for profits received from partnership business.
b. Jean is an agent of the partnership but because she is not using partnership resources to generate the income from the services at her business she is not breaching her fiduciary duty of loyalty and accounting.
c. Jean is a limited partner, not an agent, and does not owe a fiduciary duty to not compete or of accounting to the partnership so she has done nothing wrong.
d. Jean may compete against the partnership only if she obtains the unanimous consent of the other partners.
QUESTION 4: Betty wants to purchase supplies and a new workstation ($1,700), which can be used by Dana during the week and Mary on the weekends. Such purchases must be approved by how many partners?
a. simple majority of all of the partners
b. unanimous vote of all of the partners
c. simple majority of the general partners
d. unanimous vote of the general partners
QUESTION 5: On a particularly busy day when Mary is working alone, Mary negligently applies a dye that turns Mrs. Black's hair pink. Mrs. Black is very upset so she brings a case in Missouri small claims court for $2,800 against the partnership and Mary. Is the partnership liable?
a. Yes, the partnership is strictly liable for the employee's actions.
b. No, only the general partners are liable for Mary's negligence.
c. Yes, the partnership is vicariously liable for the employee's actions.
d. No, the partnership is not liable for the employee's actions.
QUESTION 6: In question #5, are any partners personally liable for Mary's negligence?
a. Yes, all of the partners (general and limited) have joint and several personal liability if the partnership can't or won't pay the claim.
b. Only Jean is liable as the limited partner.
c. No, partners in a limited partnership are not personally liable for partnership debts.
d. Yes, all of the general partners have joint and several personal liability if the partnership can't or won't pay the claim.
QUESTION 7: In question #5, who would be liable for Mary's negligence if this were a limited liability limited partnership and not a limited partnership?
a. Only Mary.
b. Only Mary and the general partners.
c. Mary and Hair Expressions, LP (the partnership).
d. Mary, Hair Expressions, LP (the partnership) and the individual general partners.
QUESTION 8: If Hair Expressions makes a profit, how are the profits shared and taxed?
a. Profits are divided based on the number of partners and the partnership must pay income tax on the profits.
b. Profits are divided based on the number of partners and each partner only pays tax on the profits distributed to them.
c. Profits are shared based on each partner's capital contribution and they may elect to be taxed as a partnership or a corporation.
d. Profits are shared based on each partner's capital contribution but the partnership must be taxed as a partnership. They do not have the ability to elect corporate taxation.
QUESTION 9: What are the unique characteristics of a limited liability company that would encourage adoption of this form of business?
a. No filing required to create an LLC
b. Unlike a sole proprietorship, an individual can own the business and have limited liability.
c. Default entity when one person begins doing business without additional formalities.
d. Always taxed as a corporation
e. Both a and b
QUESTION 10: A managing member of an LLC is not personally liable for authorized contracts entered into in the name of the business.
True
False
QUESTION 11: Members in a limited liability company without an operating agreement share profits and losses based on their ratio of capital contribution.
True
False.