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LEB 320F Final Exam Prep Questions Solved 100% Correct | Verified
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LEB 320F Final Exam Prep Questions Solved 100% Correct | Verified
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LEB 320F Final Exam Prep Questions Solved100% Correct | Verified
Why do you need all this in the agreement? - ✔✔Designates the law that will govern the
agreement
What does this mean? - ✔✔All partners must sign the agreement because an agreement is
like a contract & signing will show the legal bond.
General Partnership: Partner-to-partner - ✔✔Fiduciary (loyal) duty
Partners have right to records/books
Equal share in profits
Partners have right to help manage business
Decisions made by majority of partners
Does not matter how ownership is proportioned
Partners-to-partnership - ✔✔Duty of loyalty and due care
Contribute to partnership
Partners are agents of partnership
Unanimous consent
Partners have right to "wind up" business
Partners-to-others - ✔✔"Others"- People outside partnership, ie. stockholders
Partners act in good faith and fair dealings
No fraud or deception for benefit of partnership
Benefits of General Partnership - ✔✔Easy to create
Few formal requirements
,No minimum capital requirements
More partners= more capital & diversity of capital
More partners= more skills & knowledge
Advantages Over Soul Partnership - ✔✔Partners make loans to the partnership
Easy to transfer financial rights
Partners have right to first refusal
No double taxation
Partner does not have to report income to IRS
(Partners can make loans to partnership)
Risks of General Partnership - ✔✔Every partner is personably reliable
Partnership can purchase insurance
Legal fees can be higher
Partners must pay income tax
# of partners can cause problems
General partner can bind other partnership
Difficult to transfer ownership
Default rule- partner leaves the business, partnership dissolves (can be changed in the
agreement)
Termination of a General Partnership - ✔✔Dissolution happens when: partner leaves
business, all partners agree to dissolve, business becomes illegal, court orders it
Dissociation happens when: partner volunteers to leave, partner is voted out by other partners,
partner dies or becomes incompetent
If dissociation is wrongful - ✔✔The wronged partner can sue the other partners, partners
who did not participate in the wrongful act can also sue
, What is the legal claim? - ✔✔Sue in breach of contract
Winding Up a General Partnership - ✔✔Fulfill contract obligations
Notify 3rd parties
Profits/losses shared based on contributions
Takes losses against other income
Profits are reinvested or distributed to other partners (into the "red"?)
Benefits of Limited Partnership - ✔✔Limited liability
No double taxation
Fairly easy to assign interest
Partners have right to first refusal
More people contribute to capital
More money? Take on more LPs
Risks of Limited Partnerships - ✔✔General partners have unlimited liability
Legal costs can be expensive
A lot of reporting requirements (IRS & state agencies)
More statutory requirements
Partners must pay taxes on undistributed profits
Termination of a Limited Partnership - ✔✔Dissolution date arrives
Partners agree to dissolve
A court orders dissolution
Termination does not happen until "winding up" is complete and certificate is cancelled with
secretary of state
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