Free CPA-Business Exam Braindumps (page: 5)

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Which of the following is not necessary to create an express partnership?

  1. Execution of a written partnership agreement.
  2. Agreement to share ownership of the partnership.
  3. Intention to conduct a business for profit.
  4. Intention to create a relationship recognized as a partnership.

Answer(s): A

Explanation:

Choice "a" is correct. A written partnership agreement, while certainly desirable, is not usually necessary to form a valid partnership; partnership agreements are not normally subject to the statute of frauds.
Choice "b" is incorrect. A partnership is an association of two or more persons who agree to carry on as co- owners of a business for profit. Thus, an agreement to share ownership of the partnership is a requirement for creating an express partnership.
Choice "c" is incorrect. A partnership is an association of two or more persons who agree to carry on as co- owners of a business for profit. Thus, an intent to carry on a business for a profit is a requirement for creating an express partnership.
Choice "d" is incorrect. A partnership is an association of two or more persons who agree to carry on as co- owners of a business for profit. The intent to create a business relationship recognized as a partnership is a requirement for creating an express partnership.



Eller, Fort, and Owens do business as Venture Associates, a general partnership. ABC Corp. brought a breach of contract suit against Venture and Eller individually. ABC won the suit and filed a judgment against both Venture and Eller. ABC will generally be able to collect the judgment from:

  1. Partnership assets only.
  2. The personal assets of Eller, Fort, and Owens only.
  3. Eller's personal assets only after partnership assets are exhausted.
  4. Eller's personal assets only.

Answer(s): C

Explanation:

Choice "c" is correct. When a judgment is obtained against both a partnership and an individual general partner, the plaintiff must proceed against the partnership assets first and then the assets of any individual general partner. The partnership assets must be exhausted before any general partner's individual assets can be attached.
Choices "a", "b", and "d" are incorrect, per the above rule.



Heather, Erika, and Shelby are members in ABC LLC. Heather works 40 hours per week and Erika and Shelby work 20 hours per week. Heather contributed $30,000 to the LLC and Erika and Shelby contributed $60,000 each. Erika and Shelby have each originated 45% of the LLC's business and Heather has originated the other 10%.
If ABC were a general partnership, who controls management?

  1. Heather, because she works the most.
  2. Erika and Shelby equally because they contributed the most.
  3. Heather, Erika, and Shelby equally because of state law.
  4. Erika and Shelby, because they originate most of the work.

Answer(s): C

Explanation:

Choice "c" is correct.
Rule: Absent an agreement to the contrary, partners have equal management authority. Choices "a", "b", and "d" are incorrect, per the above rule.



Rivers and Lee want to form a partnership. For the partnership agreement to be enforceable, it must be in writing if:

  1. Rivers and Lee reside in different states.
  2. The agreement cannot be completed within one year from the date on which it will be entered into.
  3. Either Rivers or Lee is to contribute more than $500 in capital.
  4. The partnership intends to buy and sell real estate.

Answer(s): B

Explanation:

Choice "b" is correct. A transaction which cannot be completed within a year must be in writing to be enforceable.
Choice "a" is incorrect. Residence of the prospective partners is not relevant.
Choice "c" is incorrect. The statute of frauds $500 threshold applies to the sale of goods only.
Choice "d" is incorrect. Transactions in land are within the statute of frauds, but the possibility that a partnership may engage in a real estate transaction is not a transaction in land.



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