Drills 25-50

Question 1

What types of events can trigger a partnership’s dissolution?

Answer 1

The main causes of partnership dissolution are:

• By actions of partners
• By operation of law
• By judicial determination

Question 2

How may a general partner withdraw from a limited partnership?

Answer 2

At any time, a general partner may withdraw from a limited partnership by giving written notice to the other partners.

Question 3

How may a person become a limited partner after the limited partnership is formed?

Answer 3

Once a limited partnership is created, a person may become a limited partner upon written consent of all partners, unless the partnership agreement provides otherwise.

Question 4

In a limited partnership, a general or limited partner may contribute a promise to pay cash, to provide property, or to perform services. What happens when a partner is unable to perform on his promise?

Answer 4

Generally, a partner is obligated to the limited partnership with respect to any written, enforceable promise of a future contribution. When a partner is unable to perform the promise due to death or disability, the partner or his estate must pay the cash value of the promise.

Question 5

Upon dissolution of a limited partnership, who may wind up the partnership’s business?

Answer 5

The general partners who have not wrongfully dissolved the limited partnership may wind up.

When there are not any such general partners, the limited partners may wind up the partnership’s affairs.

Question 6

Which partners may participate in winding up a partnership’s business once it has dissolved?

Answer 6

Any partner who has not wrongfully dissociated from the partnership may participate in winding up the partnership’s business.

Question 7

Does a partnership have to repay a loan that a partner makes in furtherance of the ordinary course of partnership business?

Answer 7

A partnership is required to repay a loan or reimburse a partner for advances, including interest from the date of the loan or advance.

Question 8

What are the standing requirements for a limited partner to bring a derivative action on behalf of the limited partnership?

Answer 8

To bring the action, the limited partner must be a partner at the time of bringing the action as well as at the time of the wrongful transaction, unless the status of partner devolved on him by operation of law or pursuant to the terms of the operating agreement.

Question 9

Upon dissolution, how are partnership assets distributed?

Answer 9

Partnership assets are first applied to discharge partnership obligations to creditors, including partners who are creditors, and then to partners.

Question 10

What must the name of a limited liability partnership contain at the end?

Answer 10

A limited liability partnership’s name must include one of the following at the end:

Registered Limited Liability Partnership; Limited Liability Partnership; R.L.L.P; L.L.P.; RLLP; or LLP

Question 11

What powers does a person winding up the partnership business have?

Answer 11

• Dispose of and transfer partnership property
• Discharge partnership liabilities
• Preserve the business or property to maximize value
• Distribute assets to settle partners’ accounts

Question 12

What are the exceptions to first satisfying a judgment from partnership assets over a partner’s personal assets?

Answer 12

While generally a judgment against a partnership must first be satisfied by partnership assets, exceptions exist when:

(i) The partnership is a debtor in bankruptcy;
(ii) The partner consented;
(iii) The partner is liable independently of the partnership (ex. partner was primary tortfeasor);
(iv) The partnership’s assets are clearly insufficient,
(v) Exhaustion of partnership assets would be excessively burdensome, or
(vi) It is otherwise equitable to do so

Question 13

How is the partnership affected by the criminal act of one of the partners?

Answer 13

A partnership may be convicted of a crime for which the penalty is a fine levied on partnership assets. Merely being a partner, however, is not sufficient to make a partner criminally liable for the acts of another partner.

Question 14

What is the exception to the general rule that a partner’s knowledge or notice of fact is immediately imputed to the partnership?

Answer 14

An exception to the general rule that a partner’s knowledge or notice of fact is immediately imputed to the partnership exists when a fraud on the partnership is committed by or with the consent of the partner.

Question 15

What are the procedures for converting a partnership into a limited partnership?

Answer 15

To convert a partnership into a limited partnership, all of the partners must approve the conversion, and then articles of conversion must be filed with the state. The conversion takes effect upon the filing of the articles of conversion, unless a later date is specified.

Question 16

What is a partner’s liability for a tort committed by the limited liability partnership?

Answer 16

A partner in an LLP is not personally liable for an obligation of an LLP, including tortious obligations, unless the partner also engaged in the conduct that caused the obligation.

Question 17

What partnership roles are required in a limited partnership?

Answer 17

A limited partnership is required to have at least one general partner and at least one limited partner.

Question 18

What is the procedure for a limited partner to withdraw from a limited partnership?

Answer 18

Unless the written partnership agreement provides otherwise, a limited partner must give six months’ prior written notice to each general partner before withdrawing.

Question 19

A general partner in a limited partnership is personally liable to third parties and is typically liable to the partnership, as well. What kind of partner would take on this kind of liability?

Answer 19

Although the general partner in a limited partnership has unlimited liability, the typical general partner is an entity such as a corporation that has its own liability shield.

Question 20

What is a general partner’s accountability if he withdraws from a limited partnership in violation of the partnership agreement?

Answer 20

If a general partner withdraws from a limited partnership in violation of the partnership agreement, the general partner will be liable for damages caused by the breach of his agreement.

Question 21

What rights to distribution does a partner have in a limited partnership if those rights are not specified in the partnership agreement?

Answer 21

If a partner’s rights to distribution are not specified in a limited partnership’s agreement, then a partner does not have a right to receive a distribution before withdrawal or dissolution of the partnership. [Upon withdrawal or dissolution, the partner has the right to receive a distribution of the fair value of his interest, as measured on the date of withdrawal.]

Question 22

Can a partnership continue doing business after dissolution but prior to winding up?

Answer 22

Yes, the partnership may resume carrying on its business as if dissolution had not occurred if all partners, including any properly dissociated partners, agree to waive rights to terminate the partnership.

Question 23

What must a certificate of limited partnership contain?

Answer 23

A certificate of limited partnership must contain the following:

• Name of the limited partnership
• In-state address
• Name and address of in-state agent for service of process
• Name and business address of each general partner
• Statement about the duration of the limited partnership
• Signatures of all general partners

Question 24

When might a limited partner be personally liable for partnership obligations?

Answer 24

A limited partner is generally not personally liable for the obligations of a limited partnership unless the limited partner:

(i) also serves as a general partner;
(ii) participates in the control of the business; or
(iii) allows their name to be used in the name of the limited partnership (liable then to a creditor who extends credit, unless the creditor had actual knowledge that the limited partner was not a general partner)

Question 25

What happens when there is only one general partner in a limited partnership and that general partner withdraws?

Answer 25

The withdrawal of a general partner or other occurrence in which the general partner ceases to be a general partner terminates the partnership, unless all partners agree in writing to carry on the business and appoint a general partner within 90 days.