Which of the following statements is true of a limited liability partnership LLP )?

Answer the following questions and then press 'Submit' to get your score.

Question 1

Regarding sole proprietorships, which one of the following statements is NOT true?

a) If the sole proprietor is a professional, then he will be known as a sole practitioner.

b) Sole proprietors are personally liable for the sole proprietorship's debts.

c) Sole proprietors own all the assets of the business and are entitled to all the profits that the business generates.

d) Sole proprietorships are subject to the same limitations as companies regarding the naming of the business.

e) Sole proprietors are not permitted to take on employees.

f) Sole proprietorships are not legal persons.

g) Sole proprietors are self-employed.

Question 2

A partnership agreement must be in writing. True of False?

a) True

b) False

Question 3

A partnership can consist of both natural and legal persons. True or False?

a) True

b) False

Question 4

Identify which one of the following statements is NOT true?

a) A partnership only comes into existence once it starts trading.

b) A partnership created for a one-off transaction will cease after that transaction is complete.

c) Partnerships cannot be formed for altruistic or benevolent purposes.

d) A person can be a partner even if he does not share in the profits of the partnership.

Question 5

There exists a special form of partnership called a limited partnership. Which one of the following statements concerning limited partnerships is NOT true?

a) Limited partners do not have power to bind the firm.

b) A limited partnership must have at least one general partner.

c) Limited partnerships are formed by registering documents with the Registrar of Companies.

d) Limited partners have limited liability while taking part in the management of the firm.

Question 6

It is a prudent step to have in place, before the partnership begins trading, a written partnership agreement setting out the rights and obligations of the partner. Bearing this in mind, which one of the following statements is NOT true?

a) If a written partnership agreement exists, the implied terms contained in the Partnership Act 1890 will not form part of the partnership agreement.

b) If a written partnership agreement does not exist, then the terms implied by the Partnership Act 1890 will form terms of the partnership agreement.

c) If a written partnership agreement exists, the terms implied by the Partnership Act 1890 will still form part of the agreement, except where they are inconsistent with the agreement.

Question 7

Which one of the following is NOT a term implied by the Partnership Act 1890?

a) All the partners are entitled to an equal share in the firm's profits.

b) Every partner has the right to inspect and take a copy of the firm's books.

c) The majority cannot expel a partner, unless a power to do so has been conferred by express agreement between the partners.

d) No person may be introduced as a partner without the consent of all of the other partners.

e) Every partner may take part in the management of the firm.

f) All the partners are entitled to be fairly remunerated for their management of the firm.

g) Every partner is entitled to be indemnified for payments made and liabilities incurred whilst engaged in the ordinary and proper conduct of the business of the firm.

Question 8

Partnership agreements constitute a contract of utmost good faith and, accordingly, the Partnership Act 1890 imposes a number of fiduciary duties upon the partners. Regarding such duties, which ONE of the following statements is NOT true?

a) The partners are under a duty to account for any profits made whilst competing with the firm.

b) If a partner makes a profit using information gained from inside the firm, but uses that information in a venture that is outside the firm, he may keep that profit.

c) The duty to render accounts will only be breached if the partner acts in a negligent or fraudulent manner.

d) The partners are under a duty to account to the firm for any benefit derived from a transaction concerning the partnership, of which the other partners are unaware.

e) A partner who makes a profit competing with the firm may keep that profit if he has disclosed his competing business to the other partners.

Question 9

Regarding 'partnership property,' which one of the following statements is NOT true?

a) The change in value of partnership property belongs to the partnership.

b) Partnership property is available to the partnership's creditors upon the partnership's insolvency.

c) Partnership property can be used for whatever lawful purposes a partners deems fit.

d) Upon dissolution of the partnership, partners can insist on the sale of partnership property and are entitled to the proceeds of sale.

Question 10

Upon dissolution, once the losses of the partnership have been paid, the remaining assets must be applied in a set order. What should these assets be used to pay first?

a) Outside creditors.

b) The costs of dissolution.

c) Repay any loans made by partners to the firm.

d) Repaying the partners for any capital contributions that they made.

Which of the following statement is true for a limited liability partnership?

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