Which of the following is not true about a withdrawal from a general partnership?

A limited partnership is a specialized form of general partnership. While it is very similar to a general partnership in most aspects, the limited partnership is made up of at least one or more general partners and at least one or more limited partners. The general partners bear 100% of the risk of liability for the debts of the business, the limited partners risk only their capital contributions, and nothing more. Limited partners may not take a role in the management of the business. If they do, they could be found to be general partners and therefore assume unlimited liability for business debts as a general partner.

Limited partnerships are attractive organizations for purposes of raising capital. The Limited partners are usually investors who have no particular expertise in the business operations. They are usually investors seeking investment opportunities with the hope of earning a meaningful return on their investment in a successful venture.

The Principal Characteristics of Limited Partnerships

Many characteristics of a limited partnership are similar to those of a partnership, yet some of its features are similar to a corporation. Under Utah law and federal tax law, a limited partnership has the following characteristics:

1. A limited partnership may be created only in accordance with a statute. If the statute is not followed, unlimited liability may be imposed on all the partners.
2. A limited partnership has two types of partners: general partners and limited partners. It must have one or more of each type.
3. All partner, limited and general, share the profits of the business.
4. Each general partner has unlimited liability for the obligations of the business. Each limited partner has liability limited to his capitol contribution to the business.
5. Each general partner has a right to manage the business, and he is an agent of the limited partnership. A limited partner has no right to manage the business or to act as its agent, but he does have the right to vote on several important matters, such as admitting new partners. If a limited partner does manage the business, he may incur unlimited liability for partnership obligations.
6. General partners, as agents, are fiduciaries of the business. Limited partners are not fiduciaries.
7. A partner's interest in a limited partnership is not freely transferable. An assignee of a general or limited partnership interest is not necessarily a partner, but is entitled only to the assigning partner's share of capital and profits, absent a contrary agreement.
8. Withdrawal of a general partner may dissolve a limited partnership, absent a contrary agreement of the partners. The withdrawal of a limited partner does not automatically dissolve a limited partnership.
9. A limited partnership pays no federal income taxes. Its partners report their share of the profits and losses on their individual federal income tax returns. A limited partnership files an information return with the Internal Revenue Service, notifying the IRS of each partner's share of the year's profit or loss.

Creating a Limited Partnership

A limited partnership can be created only by complying with the Utah Uniform Limited Partnership Act, Chapter 2e of Title 48 the Utah Code . Under Utah law, the general partners must file a "Certificate of Limited Partnership" with the Utah Division of Corporations and Commercial Code. The Certificate must be signed by all of the general partners and must include:

1. The name of the limited partnership.
2. The street address of the principal place of business.
3. The name and street address of the partnership's registered agent.
4. The name and street address of each general partner.
5. The signature of each general partner acknowledging acceptance as such.
   Optional
6. The specific purpose, but not limited to, for which the partnership is formed.

When filing a Certificate of Limited Partnership, the General Partners must include the following:

• Two (2) copies, originally signed, of the Certificate of Limited Partnership and:
• One (1) copy of the original containing all of the information listed above, and:
• The filing fee of $70.00, payable to the State of Utah.

Where to file:
Division of Corporations and Commercial Code
Utah Department of Commerce
160 East 300 South
S.M. Box 146705
Salt Lake City, Utah 84145-0801

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 is not true about the partnership?

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