Entity Quiz

Question 1

A general partnership is generally considered a legal entity apart from its owners.

Answer 1

False, it is an entity but not a taxpaying entity

Question 2

Unless the partnership agreement says otherwise, partners share losses in the same ratio as profits and profits are shared equally.

Answer 2

True

Question 3

A partnership dissolves when a partner ceases to be associated with the carrying on of partnership business.

Answer 3

False

Question 4

If a third-party incurs liability due to an individual acting as if they are a partner in a partnership, a partnership by estoppel is present and the partnership is liable to the third-party.

Answer 4

False, the partnership has to act as if… NOT the individual

Question 5

Joe and Clare are in a partnership. Clare had no knowledge of jOe’s actions. Joe’s actions cause the partnership to get sued. In most states Clare can be sued along with Joe or individually and is potentially liable for the actions of Joe.

Answer 5

True

Question 6

LLPs are designed for professionals and in most states the professionals in an LLP are not personally liable for the professional negligence of their partners nor personally liable for partnership debts in torts or contracts.

Answer 6

True

Question 7

In a Limited Partnership, the limited partners are never personally liable for the debts of the partnership

Answer 7

False (not NEVER - if they involve themselves in management they could be personally liable)

Question 8

In an LLLP, the general partner has the same limited liability as a limited partner in an LP.

Answer 8

True

Question 9

In an LLLP, you can get all the tax advantages of a partnership and limited liability of an LLC or a corporation.

Answer 9

True (BIG DOWNSIDE though, only allowed in 25 states)

Question 10

List advantages of LLCs:

Answer 10

1. Allow foreign investors
2. Limited liability
3. Flexible tax
4. Choices on management