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Exam 37: Partnerships: Termination and Limited Partnerships

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Question 51

Multiple Choice

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The term ________ is associated with the change in the relationship of the partners caused by any partner's ceasing to be associated with the carrying on of the business.

A) resolution
B) dissolution
C) winding up
D) removal
E) transforming

F) B) and D)
G) B) and E)

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Question 52

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Creton is a limited partner in Dunham & Waldo. Under which of the following circumstances would Creton surrender his limited liability?

A) Creton signed a certificate of limited partnership.
B) Creton's surname is Dunham.
C) Creton reviews e-mails from the general partners regarding the profitability of the business.
D) Creton has lunch each month with the general partners.
E) Creton receives copies of profit and loss statements.

F) A) and C)
G) All of the above

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Question 53

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Which of the following is false regarding the winding-up process?

Byron is a partner in C&M, a limited partnership. What effect does Byron's death have on C&M, if the partnership agreement is silent about death of a partner?

[Drone Debacle] Bruno and Martin run Skyview, LLC, a drone company that takes aerial photographs. After an accident with the drone, Bruno tells Martin that he does not want to be involved in management any longer. Martin tells Bruno that if he stops participating in management, they will no longer be protected by the limited liability of an LLC. Bruno says that if there is a lawsuit, they are both equally liable. Martin replies that if Bruno wants, he could be a limited LLC member and then he won't have a say in the company. -Is Martin correct that they will lost the protection of limited liability if Bruno ceases participating in management decisions?

When a partnership is winding up, which of the following generally does not occur during this period?

[Software Dispute] Cole, Kyra, and Morton are partners in a startup company that designs software for the biotechnology industry. Their partnership agreement contained a provision that the partnership would be dissolved when Morton retires, or if any partner commits any act that violates the trust of the other partners. The partnership agreement also provided that all intellectual property related to the business of the partnership, including any patents, be owned by the partnership. Cole decides to open another company, ColeCompany, that would design gaming software. He sets up the company secretively, transfers a patent owned by the partnership to ColeCompany, and does not tell his partners until he is ready to do business at ColeCompany. When Kyra and Morton find out that Cole went behind their backs and opened another business, they tell Cole they can no longer trust him and are dissolving the partnership because of his actions. Cole, who is the software designer for the partnership, tells them if they want to dissolve the partnership, then he will also design software for the biotech industry at ColeCompany. -Which of the partners can demand that the winding up process begin?

During the winding-up process, the partners must still fulfill their fiduciary duty to one another by disclosing all information about the partnership assets.

Describe the three ways that partnership may be dissolved.

Explain how a limited partnership is created and describe the consequence if proper procedures are not followed.