Business Quiz: Partnership Dissolution

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    On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.

    • True
    • False
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About This Quiz

A partnership is a business entity formed by two or more people. The dissolution of a partnership, on the other hand, is the termination of the business. The quiz below tests your knowledge of the processes and requirements of partnership dissolution.

Business Quiz: Partnership Dissolution - Quiz

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  • 2. 

    Part of winding up includes providing notice of the impending termination to creditors.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Part of winding up a business involves notifying creditors about the impending termination. This is important because it allows creditors to make necessary arrangements and claim any outstanding debts before the business is completely terminated. By providing notice, the business ensures transparency and gives creditors an opportunity to take appropriate actions. Therefore, the statement is true.

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  • 3. 

    A limited partnership is an agreement between two limited partners.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    It is an agreement between at least one general partner and at least one limited partner

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  • 4. 

    An LP allows investor (limited partner) to share in profits of partnership without having unlimited _____________.

    Correct Answer
    liability
    Explanation
    An LP allows an investor (limited partner) to share in the profits of a partnership without having unlimited liability. This means that the limited partner's liability is limited to the amount of their investment in the partnership. They are not personally responsible for the debts and obligations of the partnership beyond their initial investment. This provides a level of protection for the limited partner's personal assets in case the partnership faces financial difficulties or legal issues.

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  • 5. 

    Limited partnerships must register with the sec of state.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Limited partnerships must register with the secretary of state because they are a type of business entity that consists of at least one general partner and one limited partner. Registering with the secretary of state is necessary to establish the legal existence of the limited partnership and to comply with state laws regarding business registration and regulation. This registration process typically involves submitting the necessary documents and paying the required fees to the secretary of state's office. Failure to register may result in legal consequences and the limited partnership may not have the same legal protections and benefits as a properly registered entity.

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  • 6. 

    What act generally includes completing unfinished partnership business, collecting and paying debts, collecting partnership assets to be turned into cash, and taking inventory?

    • Formation

    • Dissolution

    • Winding up

    • Termination

    Correct Answer
    A. Winding up
    Explanation
    Winding up is the correct answer because it refers to the process of completing unfinished partnership business, collecting and paying debts, collecting partnership assets to be turned into cash, and taking inventory. This typically occurs when a partnership is being dissolved or terminated, and all remaining tasks and obligations need to be finalized before the partnership can be officially closed.

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  • 7. 

    Check which applies to a general partner:

    • Has all rights associated with controlling business

    • Has unlimited personal liability for all partnership debts

    • Acts as agent of partnership

    • Has no right to participate in management and control of business

    • Liability limited to amount of capital partner has contributed to business

    • Is not an agent of the partnership

    Correct Answer(s)
    A. Has all rights associated with controlling business
    A. Has unlimited personal liability for all partnership debts
    A. Acts as agent of partnership
    Explanation
    A general partner has all rights associated with controlling the business, meaning they have the authority to make decisions and manage the operations of the partnership. They also have unlimited personal liability for all partnership debts, which means they are personally responsible for any financial obligations or liabilities incurred by the partnership. Additionally, a general partner acts as an agent of the partnership, representing and acting on behalf of the partnership in business transactions.

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  • 8. 

    The partners who haven’t wrongfully dissolved the partnership or the representative of the last surviving partner (not bankrupt) do not have the right to wind up the partnership affairs.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    the partners who haven’t wrongfully dissolved the partnership or the representative of the last surviving partner (not bankrupt) have the right to wind up the partnership affairs

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  • 9. 

    Expiration of term established in certificate of limited partnership (IC 23-16-9-1(1)), completion of objective established in certificate of limited partnership (IC 23-16-9-1(2)) ,unanimous written consent of all partners (limited and general) and withdrawal of general partner (unless certificate establishes that other general partners will continue operation of business) and Court action (IC 23-16-9-2) are all reasons for ______________________ of limited partnership.

    Correct Answer
    dissolution
    Explanation
    The given reasons, such as expiration of term, completion of objective, unanimous written consent, withdrawal of general partner, and court action, all contribute to the process of dissolution of a limited partnership. Dissolution refers to the termination or ending of a partnership, where the partnership ceases to exist and its operations come to a close.

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  • 10. 

    In the case of Kahn and Kahn v. Mesher and Mesher, why did the court rule in favor of Kahn when Mesher sold partnership property during the winding down phase?

    • Mesher is not allowed to sell property during the winding down phases

    • Mesher owed Kahn a fiduciary duty to fully disclose any information pertaining to the winding of a partnership

    • The courts impose a limit on the amount of profit a partnership can make on a dissolution

    • It was Kahn's property

    Correct Answer
    A. Mesher owed Kahn a fiduciary duty to fully disclose any information pertaining to the winding of a partnership
    Explanation
    The court ruled in favor of Kahn because Mesher owed Kahn a fiduciary duty to fully disclose any information pertaining to the winding down of a partnership. This means that Mesher was obligated to inform Kahn about any actions or decisions related to the partnership's dissolution, including the sale of partnership property. By selling the property without disclosing this information to Kahn, Mesher breached their fiduciary duty, leading to the court ruling in favor of Kahn.

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  • 11. 

    What begins when the winding up is concluded?

    Correct Answer
    termination
    Explanation
    Termination begins when the winding up process is concluded. Winding up refers to the process of closing down a company or organization, which involves settling all debts, distributing assets, and dissolving the entity. Once this process is completed, termination occurs, indicating the official end of the company's existence.

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  • 12. 

    How many days does a partnership days has to have independent appraiser value the business:

    • 30

    • 60

    • 45

    • 90

    Correct Answer
    A. 60
    Explanation
    A partnership has 60 days to have an independent appraiser value the business. This means that the partners have two months to hire a professional who will assess and determine the monetary worth of the partnership's business. This valuation is important for various reasons, such as determining the value of each partner's share, facilitating buyouts or mergers, or resolving disputes related to the business's worth.

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  • 13. 

    Check which applies to a limited partner:

    • Has all rights associated with controlling business

    • Has unlimited personal liability for all partnership debts

    • Acts as agent of partnership

    • Has no right to participate in management and control of business

    • Liability limited to amount of capital partner has contributed to business

    • Is not an agent of the partnership

    Correct Answer(s)
    A. Has no right to participate in management and control of business
    A. Liability limited to amount of capital partner has contributed to business
    A. Is not an agent of the partnership
    Explanation
    A limited partner is someone who has invested capital in a partnership but does not have the right to participate in the management and control of the business. This means that they cannot make decisions or have a say in how the partnership is run. Additionally, their liability is limited to the amount of capital they have contributed to the business. This means that they are not personally responsible for the partnership's debts beyond their initial investment. Lastly, a limited partner is not considered an agent of the partnership, meaning they do not have the authority to act on behalf of the partnership.

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  • 14. 

    If a partner quits or is expelled then the partnership dissolution is the result of an Act of the ________________?

    Correct Answer(s)
    partners
    Explanation
    If a partner quits or is expelled, the partnership dissolution is the result of an act of the partners themselves. In a partnership, the decision to dissolve the partnership is typically made collectively by the partners. When a partner decides to leave or is forced out, it triggers the dissolution process, which requires the remaining partners to agree on the terms and conditions of the dissolution. Therefore, the dissolution is a direct consequence of the partners' actions and decisions.

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  • 15. 

    If a partner is adjudicated insane; partner’s other incapacity; partner’s conviction of crime that prejudices the partnership; willful breach of partnership agreement; partnership can only operate on a loss then the partnership dissolution is the result of an Act of the ________________?

    Correct Answer(s)
    court
    Explanation
    The correct answer is court. When a partner is adjudicated insane, has another incapacity, or is convicted of a crime that prejudices the partnership, the court may order the dissolution of the partnership. Additionally, if a partner willfully breaches the partnership agreement or if the partnership can only operate on a loss, the court can also intervene and dissolve the partnership. In all these cases, the dissolution of the partnership is a result of a court decision.

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  • 16. 

    If a partner dies or files bankruptcy then the partnership dissolution is the result of a ________________? three words

    Correct Answer(s)
    Operation of law
    Explanation
    If a partner dies or files bankruptcy, the partnership dissolution occurs automatically without the need for any specific action by the partners. This is because the law recognizes that the death or bankruptcy of a partner fundamentally changes the nature of the partnership and makes it impractical or impossible to continue operating. Therefore, the dissolution is deemed to occur by operation of law, meaning it happens automatically as a result of the legal principles governing partnerships.

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  • Current Version
  • Sep 03, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • May 03, 2012
    Quiz Created by
    Taxslave
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