TEST 4: CH 35

Question 1

What are the two types of partners?

Answer 1

• General

- Limited

Question 2

General Partners

Answer 2

• invest capital, manage business, and are personally liable for partnership debts
• manages business and works it day to day
• has unlimited liability

Question 3

Limited Partners

Answer 3

• invest capital but do not participate in management and are not personally liable for partnership debts beyond their capital contributions
• investor
• provides all money to run the business
• only liable for their investment

Question 4

True or False: Limited Partnership requires permission from state.

Answer 4

• true, you must have permission from your state to establish a limited partnership

Question 5

True or False: You must have at least two general partners and one limited partner.

Answer 5

• false, at least one general partner and one limited partner

Question 6

True or False: There are no restrictions on maximum number of general or limited partners.

Answer 6

• true

Question 7

Certificate of Limited Partnership

Answer 7

• document executed and signed by two or more persons that makes a limited partnership legal and binding
• written agreement with the state

Question 8

Name of Limited Partnership

Answer 8

• should not be name of other corporations
• must state it is a limited partnership
• may not include surname of limited partner unless it is also the surname of general partner

Question 9

Capital Contributions

Answer 9

• contribution may be in cash, property, services rendered, or promissory notes or other obligations to contribute cash, property, or to perform services
• partner or creditor may bring lawsuit to enforce promise to make contribution

Question 10

Defective Formation

Answer 10

• occurs when:
  1. certificate not properly filed
  2. defects in certificate that is filed
  3. other statutory requirement for creation of limited partnership is not met

Question 11

Limited Partnership Agreement

Answer 11

• document that sets forth the rights and duties of general and limited partners
• terms and conditions regarding operation, termination, and dissolution of partnership

Question 12

Share of Profit and Losses

Answer 12

• agreement may specify how profits and losses are to be allocated among the general and limited partners

Question 13

Right to Information

Answer 13

• each limited partner has right to obtain full information regarding state of business, finances, etc.

Question 14

New Limited Partner

Answer 14

• can be added only upon the written consent of all partners

- agreement can provide otherwise

Question 15

New General Partner

Answer 15

• can be admitted only upon written consent of each partner

- agreement cannot vary this requirement

Question 16

Liability of General Partners

Answer 16

• unlimited liability for debts and obligations of the partnership

Question 17

Liability of Limited Partners

Answer 17

• liable only up to their capital contributions

- creditor may enforce personal guarantee and recover payment from limited partner who guaranteed repayment of loan

Question 18

True or False: Limited partners have management rights.

Answer 18

• false, general partners have management rights

Question 19

Causes of Dissolution in a Limited Partnership

Answer 19

• end of life of limited partnership
• written consent of both partners
• withdrawal of general partner
• entry of decree of judicial dissolution

Question 20

Winding Up (Limited Partnership)

Answer 20

• partnership must wind up its affairs upon dissolution

- affairs may be wound up by general or limited partners

Question 21

LLLP

Answer 21

• Limited Liability Limited Partnership
• organized under state law by filing with the secretary of state’s office
• both partners have limited liability

Question 22

Why do states grant LLLP?

Answer 22

• to attract a critical business to the state

- turn down if it is not