FL Partnerships

Question 1

To impose liability as a purported partner, what 4 elements must be established?

Answer 1

1) There must be a REPRESENTATION—orally, in writing, or implied by conduct—that a person is a partner in an actual or purported partnership;

2) The representation must be made by the PURPORTED PARTNER, OR done W/ HIS CONSENT;

3) A third party must have REASONABLY RELIED on the REPRESENTATION; and

4) The third party must have SUFFERED DAMAGES as a result of that reliance

Question 2

What are the 6 statutorily enumerated circumstances in which the sharing of profits from a business does not create a rebuttable presumption that the arrangement is a partnership and the recipients are partners?

Answer 2

1) DEBT PAYMENTS, including installment payments;

2) INTEREST/LOAN CHARGES even though the payment varies with the profits of the business;

3) RENT;

4) WAGES/COMP paid to an employee or independent contractor;

5) GOODWILL PAYMENTS FROM SALE OF THE BZ including installment payments; and

6) An ANNUITY/RETIREMENT/or HEALTH BENEFIT paid to a beneficiary of a DECEASED/RETIRED partner

Question 3

When there is a conflict between the terms of a partnership agreement and FRUPA, which one generally governs the relations among the partners and the partnership?

Answer 3

The partnership agreement

Question 4

Fill in the Blanks. A general partner is personally liable, __________ and __________ with the limited partnership, to third parties for the obligations of the limited partnership.

Answer 4

jointly; severally

Question 5

Exclusion of activities in a partnership from being considered a breach of a duty of loyalty cannot be

Answer 5

Manifestly UNREASONABLE

Question 6

When can a partnership pursue legal action against a partner?

Answer 6

– breach of partnership agreement
or
– violating a duty owed to the partnership

(that caused partnership harm)

Question 7

Can a partnership agreement eliminate the obligation of good faith and fair dealing?

Answer 7

No; it can just prescribe reasonable standards by which the performance of this obligation will be measured

Question 8

Can a partner demand distributions of partnership profits?

Answer 8

No;

A partner is only entitled to have his partnership account credited w/ his share of the profits

Even if a distribution is made, a partner cannot demand that specific partnership property be distributed to him

Question 9

Under the duty of loyalty, a partner is required to refrain from what three things?

Answer 9

1) COMPETING w/ the partnership bz;
2) advancing an interest ADVERSE TO PARTNERSHIP;
AND
3) usurping a partnership opportunity, or using partnership property/conducting partnership bz to derive a PERSONAL BENEFIT unless the partner accounts to the partnership for such benefit

Question 10

Is a partnership liable for a partner’s tortious acts committed in the ordinary course of the partnership business?

Answer 10

Yes,
including fraud, committed in the ORDINARY COURSE OF PARTNERSHIP BZ,
OR
w/ ACTUAL or APPARENT partnership authority

Question 11

What is an open-ended partnership that does not have fixed termination based on a period of time or particular undertaking?

Answer 11

A partnership at will

Question 12

In Florida, what type of partnership eliminates a partner’s personal liability for obligations of the partnership?

Answer 12

A limited liability partnership

Question 13

In Florida, a wrongfully dissociating partner is prevented from receiving value for the good will of a business. (UPA RULE)

Answer 13

FALSE. The UPA rule does not apply in Florida.

Question 14

What fiduciary duties does a limited partner have to the limited partnership and other partners by reason of being a limited partner?

Answer 14

None.

If LP vested w/ certain mgmt powers or duties under the agreement, then only f/d the LP has w/ respect to those powers/duties are duty of loyalty and care owed by G/P and the duty to discharge all duties w/ GF and FD

Question 15

What happens if a limited liability partnership fails to file an annual report?

Answer 15

it may be transformed to a simple partnership

(The State may revoked the statement of qualification that allows a partnership to be an LLP)

Question 16

Your client, Jack, wants to sue Dynamite Partnership and the partners, but is not sure who to name in the lawsuit.

You tell Jack that:

Answer 16

He has to name the individual partners, and Dynamite Partnership, to have access to both partner and partnership assets

A judgment against a partnership is not a judgment against a partner, and unless a partner is named in a suit, only partnership assets can be used to satisfy the judgment

Therefore, in order to access both the partnership’s and the partners’ assets, Jack will need to name the individual partners as well as the partnership in this lawsuit.

Question 17

When does a limited partnership’s conversion to a partnership become effective?

Answer 17

Upon cancellation of the certificate of limited partnership

Question 18

In a LLP, the partners generally are not personally liable for the liabilities of the partnership.

However, individual partners are still liable for

Answer 18

their own misconduct, even when acting on behalf of the partnership
(e.g. negligence)

Question 19

A limited partner, unlike a general partner, does not have the power to act for or bind the partnership on his own

However, a limited partner may bring a derivative action on behalf of the partnership if:

Answer 19

• the LP tries to get a GP to bring the suit first

OR

• the LP can show that he believes asking a GP would be FUTILE

Question 20

On June 1st, Paul and Inez decided to incorporate their accounting business as Numbers, Inc. They agreed that Inez would file the articles of incorporation on June 5th. On June 3rd, Oscar leased office space to Numbers, Inc., with occupancy to begin on July 1st, based on Paul’s representation that he was acting on behalf of the corporation. On June 5th, Inez filed the articles of incorporation with the Florida Department of State. On June 8th, Numbers, Inc., named Paul and Inez as directors. They issued corporate stock to themselves, but took no further action.

Who is responsible on the lease of the office space from Oscar on June 9th?

Answers:

A) Paul, as a promoter of Numbers, Inc.
B) Inez, as incorporator of Numbers, Inc.
C) Paul and Inez, as shareholders of Numbers, Inc.
D) Numbers, Inc.

Answer 20

A) Paul, as a promoter of Numbers, Inc.

Question 21

Which of the following is not required to be in a Florida corporation’s annual report to the Department of State?

Answers:

A) The name and address of all registered agents.
B) The corporation’s tax ID #
C) The corporation’s annual revenues.
D) The names and addresses of all directors.

Answer 21

C) The corporation’s annual revenues.

Question 22

The Moneymakers Corporation enacted its bylaws, which were properly adopted by the Board of Directors in accordance with Florida law. Within the bylaws, the corporation established a committee comprised of members appointed by the board to perform a variety of tasks associated with running the corporation.

Which of the following provisions are permissible to include in the bylaws?

Answers:
A) The committee may repeal the bylaws.
B) The committee may fix the terms of a distribution.
C) The committee may recommend that the corporation engage in a merger.
D) The committee may fill vacancies on the board

Answer 22

B) The committee may fix the terms of a distribution.

Question 23

A board of directors can delegate tasks to COMMITTEES according to the corporation’s bylaws.

However, there are certain tasks that a committee cannot do, even if authorized to do so by the bylaws:

Answer 23

• authorize the ISSUANCE, SALE, REACQUISITION OF SHARES, unless pursuant to a formula or method, or within limits prescribed by the board
• approve/recommend to S/Hs, or propose to S/Hs actions that statutorily REQUIRE S/H APPROVAL
• fill VACANCIES ON THE BOARD OR COMMITTEES
• ADOPT/AMEND/REPEAL BYLAWs

Question 24

Which of the following statements regarding a controlling shareholder is NOT true?

Answers:

A) A shareholder must own 50 percent of a corporation’s shares, plus one, to be a controlling shareholder.

B) A controlling shareholder may owe fiduciary duties to minority shareholders when selling her interest to an outsider.

C) A corporation that required a two-third supermajority of shares to approve a motion can effectively grant control to a minority shareholder.

D) A controlling shareholder may owe a fiduciary duty to minority shareholders when receiving a distribution denied to other shareholders.

Answer 24

A) A shareholder must own 50 percent of a corporation’s shares, plus one, to be a controlling shareholder.

Question 25

Which of the following is the best argument that the corporation may not issue the additional shares of common stock?

Answers:

A) The directors did not receive notice of the meeting.
B) There was not a quorum at the meeting.
C) director must be physically present at a meeting to cast a vote.
D) A director may not vote by proxy.

Answer 25

D) A director may not vote by proxy.

Directors may be “present” at a meeting by videoconference, but directors are prohibited from voting by proxy

Question 26

Regarding a corporation for which neither the articles of incorporation nor the bylaws vary the default rules of Florida law for corporations, which of the following is an accurate statement regarding the shareholders’ meeting, voting, and quorum requirements for a merger?

Answers:

A) A majority vote is required at a special meeting, but a quorum is not required.

B) A majority vote is required at any meeting, and a quorum is required.

C) A majority vote refers to the majority of all corporate shares.

D) A majority vote is not required, provided all shareholders receive proper notice of the vote.

Answer 26

B) A majority vote is required at any meeting, and a quorum is required.

Question 27

Bit Corp. and Byte Corp. plan to participate in a share exchange. Giga, one of Bit Corp.’s shareholders, would rather not participate. What are Giga’s options?

Answers:

A) Giga may prevent the share exchange.
B) Giga may retain his shares and not participate in the share exchange.
C) Giga may dissent and be given the right of appraisal and paid fair value for his shares.
D) Giga will have to accept the exchange, but may sell his new shares.

Answer 27

C) Giga may dissent and be given the right of appraisal and paid fair value for his shares.

Question 28

When a corporation dissolves, it generally ceases to be an entity, which means it cannot bring lawsuits as the corporation.

But it may continue to act as the corporation for the purpose of

Answer 28

winding up—i.e., it may continue to exist for the purpose of closing out its corporate affairs.

(e.g. suing another corp. in a third-party complaint for indemnification on a suit against them as part of winding up of bz affairs)

Question 29

A corporation would like to reorganize as an S corporation to avoid double taxation. Which of the following would prevent the corporation from qualifying to elect S corporation status?

I. The corporation has 51 shareholders.

II. The corporation has both common and preferred stock.

III. Sixty percent of the shareholders have voted in favor of organizing as an S corporation.

Answers:

A. II only.
B. I and III only.
C. II and III only.
D. I, II, and III.

Answer 29

C. II and III only.

The requirements for filing as an S corporation are:

• the corporation can have no more than 100 shareholders
• the corporation’s shareholders can be only individuals, estates, and certain exempt entities and trusts
• the corporation’s shareholders must all be either U.S. citizens or resident noncitizens
• the corporation may not have more than one class of stock and
• EACH S/H MUST CONSENT to the S corporation election

Question 30

A LLC is governed by its operating agreement.

If the O/A is silent as to the distribution of profts and losses, then profits and losses are allocated based on

Answer 30

each member’s contributions to the LLC

Question 31

When a person represents herself as a partner of a partnership, and a person to whom the representation was made relies on the representation, and enters into a transaction with a partnership, who is liable?

Answer 31

that “Purported Partner” is liable

and

partners of the actual partnership that CONSENT to the REPRESENTATION, they and the purported partner are jointly and severally liable for the transaction

Question 32

A partner is generally not entitled to reimbursement for services performed for the partnership

However, a partner is entitled to reasonable compensation if

Answer 32

he renders services in winding up the business of the partnership

(e.g. real estate commissions for selling partnership property in winding up the BZ)

Question 33

Although goodwill is presumed to be an asset of a partnership, can a partnership overcome this presumption by express or implied agreement?

Answer 33

Yes, can state it in their Partnership Agreement

Question 34

Although the statement of authority will indicate whether or not a person is unauthorized to do certain things, a third party generally has to

Answer 34

have NOTICE of that statement of authority for it to be binding on him

Question 35

Sonia and Jose form a partnership. Sonia contributes $10,000 while Jose contributes his services. After dissolution and payment of all outside creditors, the partnership has $5,000 in assets. How should the assets be distributed?

Answers:

A) Sonia and Jose both get $2,500.
B) Sonia gets $5,000 and Jose gets nothing.
C) Sonia gets $5,000 and Jose owes her $2,500.
D) Sonia gets $5,000 and Jose owes her $5,000.

Answer 35

C) Sonia gets $5,000 and Jose owes her $2,500.

Upon dissolution of a partnership where the assets are insufficient to repay all capital contributions, those partners who made capital contributions will receive the remaining assets, and all partners split the losses equally.

Question 36

A partnership will be dissolved:

Answer 36

• upon judicial decree if the economic purpose of the partnership is likely to be frustrated
• when a partner has engaged in conduct making it not reasonably practicable to carry on the business
• when the business cannot be practicably carried on in conformity with the partnership agreement, and
• upon application of a transferee of a partnership interest that it is equitable to wind up the business

*A partner’s personally declaring bankruptcy is not a sufficient reason to give a judge the power to dissolve a partnership

Question 37

Mae and Joe form a partnership. Mae contributes $3,000 in cash, and Joe contributes his services. Throughout the life of the partnership, Mae also lends the partnership $1,000. Upon dissolution of the partnership, $2,500 is left in the partnership assets after all outside creditors have been paid.

Absent a partnership agreement to the contrary, how should the partnership assets be distributed?

Answers:

A) $1,250 each.
B) $2,000 to Mae, and $500 to Joe.
C) $2,500 to Mae.
D) $2,500 to Mae, and Joe owes Mae $750.

Answer 37

D) $2,500 to Mae, and Joe owes Mae $750.

Each partner’s account, which reflects the partner’s contributions and share of the pre-dissolution partnership profits and losses, must be adjusted to reflect profits and losses that result from the winding-up process.

After the adjustments, any partner with a negative partnership balance must contribute to the partnership an amount necessary to bring the account balance to zero.

Here, $2,500 is left after paying all outside creditors.

$1,000 of that must go to Mae as a creditor of the partnership, leaving $1,500.

Mae gets the remaining $1,500 because Joe contributed no capital.

Further, because the partnership suffered a net loss of $1,500, represented by Mae’s loss of capital, Mae is entitled to a $750 contribution (half of the loss) from Joe.

Partnership assets, including contributions by partners to the partnership, are first applied to discharge partnership obligations to its creditors, including partners who are creditors of the partnership. Each partner’s account must be adjusted to reflect profits and losses that result from the winding-up process.

Question 38

If a LP has failed to file an initial certificate, may it still be able to bring a suit arising from its business dealings as a limited partnership?

Answer 38

Yes.

because one who has recognized an organization in business dealings may not be allowed to deny the organization’s existence in matters before the court and may be estopped from doing so.

Question 39

Is a general partner PERSONALLY liable to third parties for the obligations of the LP?

Is a LP who participates in the mgt and control of the bz?

Answer 39

Yes, a GP is;

No, an LP is not.

Question 40

Fill in the Blank. A foreign limited partnership must apply for a ___________________ to transact business in Florida with the secretary of state.

Answer 40

CERTIFICATE OF AUTHORITY

Question 41

What are the two steps involved in the termination of a partnership?

Answer 41

1) Dissolution
2) winding up

Question 42

What three things must a partner refrain from engaging in pursuant to a partner’s duty of care?

Answer 42

(1) grossly negligent or reckless conduct,
(2) intentional misconduct, or
(3) a knowing violation of the law

Question 43

Does a partnership agreement have to be in writing?

Answer 43

NO

Question 44

What are the two types of actual authority?

Answer 44

Actual authority includes BOTH express authority and implied authority.

i) Express authority if by
– the partnership agreement,
– an authorization of the partners,
– or a statement of authority filed with the state;

ii) Implied authority if
– based on a partner’s reasonable belief that an action is necessary to carry out his express authority

Question 45

Does a co-owner’s subjective intent not to form a partnership prevent the association from being a partnership?

Answer 45

No.

Co-owners’ subjective intent not to form a partnership does not prevent the association from being a partnership as long as TWO PERSONS INTEND to carry on a BUSINESS FOR PROFIT as co-owners

Question 46

May a partnership agreement may eliminate the duty of loyalty?

Answer 46

No, but it may identify specific categories of activities that do not violate this duty.

Question 47

Are partners in a partnership protected from personal liability for the partnership?

Answer 47

NO

Question 48

Does a limited partner, in a limited partnership, have the right or power to act or bind the limited partnership?

Answer 48

NO. Just the GP

A general partner is an agent of the limited partnership and his actions for carrying on in the ordinary course of the partnership’s business bind the limited partnership.

Question 49

What does a partnership account consist of?

Answer 49

– contributions to the partnership reduced by any liabilities (e.g., mortgages) to which the property is subject,
+ the partner’s share of partnership profits,
- minus distributions of money or other property to the partner and the partner’s share of the partnership losses

Question 50

When is property presumed to be partnership property?

Answer 50

– When the property is purchased with partnership assets
OR
– if partnership credit is used to obtain financing

Question 51

For a partnership that is for a DEFINITE term or undertaking, the partner’s dissociation is WRONGFUL when, before the expiration of the term OR completion of the undertaking, the partner: (i)______; (ii) _____; (iii) ______; or (iv) _______.

Answer 51

1) WITHDRAWS (*except when it follows, within 90 days, the withdrawal of another partner’s wrongful dissociation or dissociation due to death, bankruptcy, or other circumstances described below;)
2) is EXPELLED BY COURT ORDER
3) files for/is a debtor in BANKRUPTCY
4) In the case of a partner who is not an individual, trust, or estate, (e.g. another corporation) the partner WILLFULLY DISSOLVED OR TERMINATED (corp dissolved/terminated)

Question 52

Fill in the Blank: A creditor of a partner who has obtained a judgment against the partner may enforce that judgment against the partner’s partnership interest by obtaining a ____________.

Answer 52

JUDICIAL CHARGING ORDER

Question 53

What are the (7) actions that require approval of all general partners in a limited partnership?

Answer 53

Seven actions that require approval of all general partners include:

1) AMENDING the partnership agreement or certificate of limited partnership;
2) ADMITING a general or limited partner;
3) COMPROMISING a partner’s obligation to MAKE OR RETURN DISTRIBUTIONS;
4) EXPELLING a GP;
5) DISSOLVING the partnership;
6) DISPOSING in any way of all/most of PARTNERSHIP PROPERTY;
and
7) APPROVING CONVERSION or MERGER

Question 54

if the agreement doesn’t say, what is the management/vote division between partners?

Answer 54

EQUAL VOTES, EQUAL MANAGEMENT

Question 55

A partner’s act that was NOT authorized may still be binding on the partnership under the principle of apparent authority if:

Answer 55

1) the partner’s unauthorized act was performed in the ORDINARY COURSE OF APPARENTLY CARRYING ON THE PARTNERSHIP BUSINESS

AND

2) the THIRD PARTY dealing w/ the partner CANNOT HAVE KNOWN or received notification that the partner was acting w/o authorization

Question 56

Leon, Rick, and Lydia open batting cages as equal partners. They entered a partnership agreement providing that no one partner can spend more than $5,000 without the consent of the other partners.

Leon, on behalf of the partnership but without running it by the other partners, enters a $10,000 contract with Lula to repair the batting machines. Lula has never worked with the partnership before; she is aware that Leon is a partner, but not of any specific agreements between the partners.

Rick and Lydia, on behalf of the partnership, refuse to pay Lula’s bill when they receive it.

Can Lula enforce the agreement against the partnership?

Answers:

A) Yes, because Leon had implied authority to enter the contract.
B) Yes, because Leon had apparent authority to enter the contract.
C) No, because Leon lacked actual authority to enter the contract.
D) because Leon lacked any authority to enter the contract.

Answer 56

B) Yes, because Leon had apparent authority to enter the contract.

A partner’s act that was NOT authorized may still be binding on the partnership under the principle of apparent authority if:

1) the partner’s unauthorized act was performed in the ORDINARY COURSE OF APPARENTLY CARRYING ON THE PARTNERSHIP BUSINESS

AND

2) the THIRD PARTY dealing w/ the partner CANNOT HAVE KNOWN or received notification that the partner was acting w/o authorization

Question 57

Which of the following people may NOT seek judicial supervision of a partnership’s winding up?

Answers:

A) The executor of a partner’s estate
B) A transferee
C) Trustee of a partner that is a trust
D) All of the above are entitled to seek judicial supervision.

Answer 57

D) All of the above are entitled to seek judicial supervision.

Any partner, partner’s legal representative, or transferee may seek judicial supervision of winding up.

Question 58

May a partner transact business with the limited partnership?

What rights does the partner have?

Answer 58

Yes.

the same rights and obligations with respect to the transaction as a third party would

*still owes Fiduciary Duties to partnership BUT not violated merely because a GP’s action personally benefits the general partner

Question 59

Several partners start Milkshake Ltd., a limited partnership that sells specialty desserts. One of the general partners, Marie, also owns her own separate business that makes gourmet chocolate chips. Marie sold chocolate chips to Milkshake. However, Milkshake refuses to pay Marie for its last shipment of chocolate chips. Can Marie sue Milkshake to collect the unpaid bill?

Answers:

A) No, because doing so would violate Marie’s duty of loyalty to Milkshake.
B) No, because a general partner cannot put herself in a position opposed to the partnership.
C) Yes, because a third party in Marie’s position would be able to sue to recover from Milkshake.
D) Yes, because general partners do not owe fiduciary duties to a limited partnership.

Answer 59

C) Yes, because a third party in Marie’s position would be able to sue to recover from Milkshake.

Question 60

A partner in a limited partnership may hold dual roles (both a GP and LP) and will be liable for partnership obligations based on his

Answer 60

GENERAL PARTNER status

Question 61

Al is a limited partner in a limited partnership. Grant is a creditor of the limited partnership and plans to personally sue Al because the partnership has not made any payments to Grant. In which of the following instances would Al be personally liable to Grant?

Answers:

A) If Al is also a general partner of the limited partnership.
B) If Al participated in the control of the limited partnership
C) If Grant reasonably believed that Al was a general partner, based on Al’s conduct.
D) Al would be liable to Grant in all of the above situations.

Answer 61

A) If Al is also a general partner of the limited partnership.

A partner in a limited partnership may hold dual roles (both a GP and LP) and will be liable for partnership obligations based on his GENERAL PARTNER status

Question 62

To be enforceable, any promise of a future contribution in a PARTNERSHIP must be

Answer 62

WRITTEN

IN WRITING

Question 63

True or False:

If a partner is unable to perform promised services (a contribution via services promised in writing) due to death or disability, then the partner or the partner’s estate must pay the partnership the cash value of those services.

Answer 63

TRUE.

Must be in writing to be enforceable.

Question 64

Unless the partnership agreement states otherwise, how are profits and losses shared?

Answer 64

In proportion to the value of each partner’s contribution to the partnership.

Question 65

A partnership is bound for any act(s):

Answer 65

• of any partner that are appropriate for the winding up of the partnership

OR

• undertaken by a partner that would have bound the partnership before dissolution—no notice to third party of the dissolution is required

Question 66

Partners can always choose to dissociate from the partnership.

Absent a partnership agreement term, can a partner generally be expelled by a vote of the other partners?

Answer 66

No.

Absent partnership agreement term, a partner generally cannot be expelled by a vote of the other partners.

Question 67

A statement of dissociation only relieves the DISSOCIATED partner of obligations that arise 90 days AFTER the statement has been filed… It has no effect on obligations that arose ________

Answer 67

BEFORE dissociation

Question 68

Does the sharing of gross returns (i.e., revenue) create the presumption of a partnership?

Answer 68

NO. Only sharing of profits (i.e. receipts less expenses)
if not deducting expenses –> it’s just gross revenues –> no presumptionn

Question 69

A party may strike a potential juror FOR CAUSE if that juror is related by Blood/or Marriage within the 3rd degree to the DEFENDANT/AN ATTORNEY/THE VICTIM/or the PLAINTIFF in a matter

Is a juror being related to a Witness sufficient “for cause”?

Answer 69

No.