LAW531 Week 1 – Quiz

LAW 531 Week 1 Quiz1. The Black Squirrel limited partnership has been in operation for many years, but has recently fallen on hard times. The partners have decided to dissolve, although there are few assets remaining in the partnership. Shortly after the partnership filed its certificate of limited partnership, the partners had foresight to incorporate into their partnership agreement a provision that, in the event of dissolution, the assets would be distributed in payment of claims first to limited partners, then to general partners, then to creditors. Hilda is a limited partner and feels relieved that she will receive at least a portion of her capital. Henry, one of the general partners, said that this provision is void and unenforceable. Which of the following best describes the situation?The provision placing limited partners ahead of general partners is unenforceable, thus all partners would be on equal footing and ahead of creditors.The distribution of assets in the event of dissolution is one of the few provisions where the Revised Uniform Limited Partnership Act does not allow modification.The distribution, as called for in the agreement, would be enforceable if it had been included in any filings related to the limited partnership.The provision placing partners ahead of the creditors is not enforceable, but the priority of limited partners over general partners is enforceable.2. Which of the following is true of the Federal Arbitration Act?It provides that arbitration agreements are valid, irrevocable and enforceable.It permits an appeal for all arbitration awards.It applies only to breach of contract disputes.It governs all types of alternative dispute resolution. 3. Which of the following is true regarding mediation?A mediator does not make a decision or an award.If a settlement agreement is not reached in mediation, then the parties hire a new mediator.A settlement agreement is never reached with a mediator.Was created by the Federal Mediation Act of 1925. 4. Which of the following is true of a corporation?A corporation is a separate legal entity.Corporation shareholders are subject to unlimited personal liability.A corporation terminates upon the death of an owner.Corporation owners are only taxed once on earnings.5. Which form of alternative dispute resolution occurs when the parties choose an impartial third party to hear and decide their dispute?ArbitrationMini-trialMediationConciliation6. Which of the following of one of the major purposes of a settlement conference?To contest the local court rulesTo facilitate the settlement of a caseTo conduct discovery for a caseTo structure a settlement payment schedule.7. When parties agree in advance to adhere to an arbitrator’s decision and award, it is known asAppealableMediationArbitrator discretionBinding arbitration8. George has served Mary with a complaint alleging breach of contract. Mary has never been sued before and as such, she seeks your advice on what to do with the complaint. You advise that sheshould not respond to George’s complaint as an answer implies an admissionanswer George’s complaint by admitting or denying the allegations George has asserted against herwrite a letter to the judge saying that George is mistakenanswer George’s complaint but do not provide any affirmative defenses that George can use against her9. Martha started a flower shop as a sole proprietor. After 1 year, she was forced to close the shop because business was so bad. At that time, the business assets totaled $50,000, but the business liabilities totaled &125,000. Which of the following statements is true?Once Martha terminates the sole proprietorship, she is no longer liable for the $50,000.Martha’s business creditors can collect only the $50,000 now. But if Martha ever goes into business again, they can get the assets of the new businessMartha’s business creditors can collect only the $50,000 of business assets.Martha is personally liable for the additional $75,000 owed to business creditors.10.Which of the following is true in the creation of a general partnership?The business must have the names of all the partnersThe name selected cannot indicate that it is a corporationThe business name cannot be a fictitious nameThe business cannot operate under a trade name.11. Which of the following is true about the choice of business entity for an entrepreneur?The choice is determined by the Internal Revenue Service based on all the facts and circumstancesThe choice is determined solely by whether the primary business is services or goods.The choice takes into account many factors; including finding an option that has all the characteristics desired.The choice is determined solely by the amount of capital invested.12.Fred and Ginger are general partners in a business. They decide to purchase a building for the partnership. Ginger will put up the money for the building, and Fred will complete the remodeling. While inspecting the building, Fred is informed that the building is packed full of asbestos. He fails to tell Ginger of the presence of the substance. The buy the building and go into the business. During the remodeling of the building, people from the neighborhood begin complaining about the dust from the building. Some of them even threaten to sue. Who is liable?Neither Ginger nor Fred are liable personally, nr is the partnership, as they did not put the substance in the building.Both Ginger and Fred are liable, regardless of the circumstances, by virtue of the fact that they are partners.Ginger is liable because she is the one who purchased the building. Fred is not liable, even though he had actual knowledge, because he did not purchase the building.Fred is liable because he was put on notice of the presence of the substance. Ginger is not liable because she did not have actual knowledge.13. There are two general partners, each of whom contributes $5,000 in capital to a limited partnership. There are two limited partners each of whom contributes $20,000. The total amount of capital contributed is $50,000. The limited partnership agreement does not stipulate how profits and losses are to be allocated. Assume that the limited partnership makes $300,000 in profits. Under the Revised Uniform Limited Partnership Act (RULPA), how much would each partner receive?Each general partner would receive $50,000, and each limited partner would receive $100,000.All partners would receive $75,000, regardless of whether he or she is a general or a limited partner.Each general partner would receive $30,000, and each limited partner would receive $120,000.Each general partner would receive $120,000, and each limited partner would receive $30,000.14.Which of the following is true of arbitration?A resolution may or may not be reachedOne party usually drops the caseA judicial referee makes recommendations to the partiesParties can introduce evidence to support their case.15.Which type of business formation is typically reserved for professionals such as accountants, lawyers, and doctors?FranchiseLimited Liability Partnership (LLP)Limited Liability Company (LLC)S-Corporation16.What us the effect of having a corporation as the general partner of a limited partnership?Each shareholder of the corporation will be treated as a limited partner of the limited partnershipThe liability of the corporate general partner will be limited to the amount of its assetsEach shareholder of the corporation will be treated as a general partner of the limited partnershipThe limited liability of the corporation will result in the limited partners having greater liability that they would otherwise.