Gillie, Taft, and Dall are partners in an architectural firm. The partnership agreement is silent about the payment of salaries and the division of profits and losses. Gillie works full-time in the firm, and Taft and Dall each work half time. Taft invested $120,000 in the firm, and Gillie and Dall invested $60,000 each. Dall is responsible for bringing in 50% of the business, and Gillie and Taft 25% each.How should profits of $120,000 for the year be divided?
Answer(s): B
Choice "b" is correct. $40,000 - $40,000 - $40,000 (equally). Rule: In the absence of an agreement to the contrary, the profits will be shared equally regardless of investment of money or time.Choices "a", "c", and "d" are incorrect, per the above rule.
With respect to the following matters, which is correct if a general partnership agreement is silent?
Choice "b" is correct. As a general principle of partnership law, as well as under the Revised Uniform Partnership Act, in the absence of an agreement otherwise partnership losses are allocated among partners in the same proportion as partnership profits.Choice "a" is incorrect. A partnership will dissolve on the death, bankruptcy, incapacity, or other withdrawal of a partner, unless the partners vote to continue. Choice "c" is incorrect. A partner may assign his interest in the partnership at any time without consent of the partners since such an assignment does not make the assignee a partner; instead it merely gives the assignee the assignor's rights to distributions from the partnership. Choice "d" is incorrect. A sale of partnership good will is an extraordinary transaction that requires consent of the partners. A single partner has no authority to make such a sale on his own accord.
Which of the following statements is correct concerning liability when a partner in a general partnership commits a tort while engaged in partnership business?
Answer(s): C
Choice "c" is correct. Each partner is jointly and severally liable for torts committed by any partner while in the course of partnership business.Choice "a" is incorrect. All partners may be held liable for a tort committed by a partner in the course of partnership business.Choice "b" is incorrect. Each partner is liable for torts committed by any partner while in the course of partnership business.Choice "d" is incorrect. Each partner is liable for the full amount of damages incurred as a result of a partner's tort; the partners are not liable only for their pro rata share.
Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell Lark's interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission to the partnership, Ward:
Choice "b" is correct. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners. Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full rights to participate in management.Choice "a" is incorrect. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners. Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full partner rights.Choice "c" is incorrect. An incoming partner is not liable for debts that the partnership incurred before admission beyond the incoming partner's contribution, but is fully liable for debts incurred after becoming a partner.Choice "d" is incorrect. A partnership is a consensual relationship; there is no requirement of a contribution to become a partner.
Unless the partnership agreement prohibits it, a partner in a general partnership may validly assign rights to:
Choice "c" is correct.Rules: A partner has no right to assign an interest in partnership property because a partner's rights in partnership property are limited to using the property for partnership purposes. However, a partner does have a right to assign her interest in partnership distributions. The assignee does not become a partner, but merely has a right to receive whatever distributions the assignor would have received.Choices "a", "b", and "d" are incorrect, per the above rules.
Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean asserts the rights to:I). Participate in the management of TLC.II). Cobb's share of TLC's partnership profits.Bean is correct as to which of these rights?
Choice "b" is correct.Rule: The assignee of a partner's interest in the partnership does not thereby become a partner absent the unanimous consent of the other partners. Thus, the assignee has no right to participate in the management of the partnership and has only a right to receive the assignor's share of the partnership profits.Choices "a", "c", and "d" are incorrect, per the above rules.
A partner's interest in specific partnership property is:
Answer(s): D
Choice "d" is correct. No - No.Rule: A partner's interest in specific partnership property is neither assignable to the partner's individual creditors nor is it subject to attachment by the partner's individual creditors. Choices "a", "b", and "c" are incorrect, per the above rule.
If no provisions are made in an agreement, a general partnership allocates profits and losses based on the:
Choice "b" is correct. Absent an agreement to the contrary, all partners have equal rights to share in the profits of the partnership.Choices "a", "c", and "d" are incorrect, per the above Explanation.
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