Unit 13- Direct Participation Programs

Question 1

Limited Partnership

Answer 1

investment vehicle that permits economic consequences of business to flow to investor

Question 2

Which type of LP can be traded on OTC or exchanges?

Answer 2

MLPs

Question 3

What is another name for an LP?

Answer 3

Subchapter S corporations

Question 4

Do LPs pay taxes?

Answer 4

No- they report income and losses to the IRS and then investors (partners) have the responsibility of paying taxes due

Question 5

Which corporate characteristic is teh most difficult to avoid?

Answer 5

centralized management

Question 6

Which corporate characteristic is the easiest to avoid?

Answer 6

continuity of life

Question 7

Which two corporate characteristics are most likely to be avoided by a DPP?

Answer 7

Continuity of Life and Freely Transferable Interest

Question 8

What is the max syndication fee?

Answer 8

10% of gross dollar amount of securities sold

Question 9

What are the three documents required for an LP?

Answer 9

• Certificate of LP
• Partnership Agreement
• Subscription Agreement

Question 10

Certificate of LP

Answer 10

filed in the home state

-any changes must be reported in 30 days

Question 11

Partnership Agreement

Answer 11

All partners receive this agreement

-describes arrangement btwn GP and LPs

Question 12

Can a GP charge a management fee?

Answer 12

Yes

Question 13

Does the GP or LP by vote determine whether cash distributions should be made?

Answer 13

GP

Question 14

Subscription Agreement

Answer 14

all investors interested in becoming partners must complete this

• net worth
• annual income
• understands related risks
• power of attorney appointing GP as agent of partnership

Question 15

Who has responsibility of repayment to nonrecource loans?

Answer 15

GPs (no liability to LPs unless real estate partnership)

Question 16

Who is the person who organizes and registers a partnership?

Answer 16

The syndicator

Question 17

The rights and liabilities of GPs and LPs are listed in?

Answer 17

The agreement of limited partnership

Question 18

When is the subscription for limited partnership accepted?

Answer 18

When GP signs the subscription agreement

Question 19

What is the most speculative real estate partnership?

Answer 19

Raw Land

Question 20

Which sharing arrangement is the most common? 
Net Operating Profits Interest
Carried Interest
Functional Allocation
OVerriding royalty INterest

Answer 20

Functional Allocation