Limited Partnerships

Question 1

40 Washburn Law School graduates want to invest money in “Success,” a limited partnership that will engage in investment activities. The graduates are divided into two groups: those with money and those with investment skills. The money group graduates will contribute 95% of the capital to, and receive 80% of the profits and losses from, Success. The investment skills group graduates will contribute 5% of the capital to, and receive 20% of the profits and losses from, Success. The investment skills group graduates will manage Success, including day-to-day investment decisions. The money group graduates are likely __________________; the investment skills group graduates are likely ____________________.

Answer 1

limited partners; general partners

Question 2

A general partner in a limited partnership owes the limited partnership:

1. Duties similar to those owed by a partner in a general partnership
2. Duties of constitution and reimbursement that mirror those owed by limited partners
3. Fiduciary duties of care and loyalty
4. A fiduciary duty of loyalty, but not of care
5. 1 and 3 only

Answer 2

5. 1 and 3 only

Question 3

Which of the following actions automatically constitutes “control” of a limited partnership for purposes of the majority rule for limited partnerships, and therefore causes a limited partner to be deemed a general partner?

1. Being a contractor for or an agent or employee of the limited partnership
2. Consulting with and advising the general partner with respect to the business of the limited partnership
3. Requesting or attending a meeting of the partners
4. Guaranteeing one or more specific obligations of the limited partnership
5. None of the above

Answer 3

5. None of the above

Question 4

Which of the following is always true of a limited partnership?

1. It is formed by filing with the state
2. All partners (general and limited) have equal management rights
3. It protects all partners (general and limited) from liability for the limited partnership’s debts
4. All partners (general and limited) have equal financial rights
5. None of the above

Answer 4

1. It is formed by filing with the state

Question 5

A person ceases to be the general partner of a limited partnership if the person:

1. Withdraws from the limited partnership
2. Is removed as general partner in accordance with the partnership agreement
3. Dies
4. All of the above
5. None of the above

Answer 5

4. All of the above

Question 6

An association of two or more persons to carry on as co-owners a business for profit is a ____________________; a partnership formed by two or more persons and having one or more general partners and one or more limited partners is a ____________________.

Answer 6

General partnership; limited partnership

Question 7

In a limited partnership, distributions are made:

Answer 7

In proportion to the value of each partner’s contribution

Question 8

Which of the following is not a key feature of limited partnerships?

1. Limited liability for limited partners
2. Hierarchical structure among partners
3. Limited liability for general partners
4. Control by general partners
5. Passive role for limited partners

Answer 8

3. Limited liability for general partners

Question 9

Which of the following was the issue in the Holzman v. De Escamilla (Hacienda Farms) case?

Answer 9

Was the control exercised by Russell and Andrews enough to justify declaring them general partners?

Question 10

Which of the following is a prominent difference between states that have adopted the Revised Uniform Limited Partnership Act that was drafted in 1976 and amended in 1985, and states that have adopted the Uniform Limited Partnership Act drafted in 2001?

1. The allowance of LLLPs
2. The term rule
3. The profits rule
4. The control rule
5. The losses rule

Answer 10

4. The control rule