OH Bar Business Associations 2 — Questions and Answers
Question 1: In a general partnership, unless the partnership agreement provides otherwise, how are profits and management rights allocated among partners?
- Equally among all partners, regardless of capital contributions (Correct answer)
- Proportional to each partner's capital contribution
- Proportional to each partner's time and effort devoted to the business
- As determined by the majority vote of partners by capital interest
Correct answer: Equally among all partners, regardless of capital contributions
Under default partnership rules, all partners have equal rights in management and share equally in profits and losses, regardless of the amount of their capital contributions.
Question 2: Under the Uniform Partnership Act as adopted in Ohio, a partner's personal liability for partnership debts is:
- Joint and several for all partnership obligations (Correct answer)
- Limited to the amount of the partner's capital contribution
- Limited to obligations incurred before the partner joined the partnership
- Shared proportionally based on each partner's ownership percentage
Correct answer: Joint and several for all partnership obligations
Under the UPA as adopted in Ohio, partners in a general partnership are jointly and severally liable for all partnership obligations, exposing personal assets to partnership creditors.
Question 3: A limited partnership in Ohio must have at a minimum:
- At least one general partner and at least one limited partner (Correct answer)
- At least two general partners and at least two limited partners
- At least one general partner and at least two limited partners
- At least two general partners and at least one limited partner
Correct answer: At least one general partner and at least one limited partner
A limited partnership requires at least one general partner who bears unlimited personal liability for partnership obligations and at least one limited partner with limited liability.
Question 4: Under Ohio law, a limited partner who actively participates in the control of the partnership business risks:
- Losing limited liability protection and becoming personally liable to third parties who believed the limited partner was a general partner (Correct answer)
- Automatic expulsion from the limited partnership by operation of law
- Mandatory conversion to general partner status for all future transactions
- A civil penalty but no change in personal liability exposure
Correct answer: Losing limited liability protection and becoming personally liable to third parties who believed the limited partner was a general partner
A limited partner who participates in the control of the business may lose limited liability protection and be held personally liable to third parties who reasonably believed the limited partner was a general partner.
Question 5: When a partnership agreement is silent as to the duration of the partnership, the partnership is treated as:
- A partnership at will, which any partner may dissolve at any time by giving notice (Correct answer)
- A partnership for a default term of ten years under Ohio law
- A perpetual partnership that continues until all partners unanimously agree to dissolve
- A partnership that automatically terminates upon the death or withdrawal of any partner
Correct answer: A partnership at will, which any partner may dissolve at any time by giving notice
Without an agreed term or specific undertaking, a partnership is a partnership at will, meaning any partner may dissociate and trigger dissolution at any time.
Question 6: In a general partnership, each partner's apparent authority to bind the partnership extends to:
- Acts for carrying on in the usual way the business of the kind carried on by the partnership (Correct answer)
- Any transaction the partner personally guarantees with their own assets
- Only transactions specifically authorized in the written partnership agreement
- Contracts whose value does not exceed the partner's capital contribution
Correct answer: Acts for carrying on in the usual way the business of the kind carried on by the partnership
Under the UPA, each partner is an agent of the partnership and has apparent authority to bind the partnership for acts carried out in the ordinary course of the partnership's business.
Question 7: Upon dissolution of a general partnership, partnership assets are distributed in which order?
- Outside creditors, then partner loans to the partnership, then return of capital contributions, then remaining profits (Correct answer)
- Partners first, then outside creditors, then any remaining distribution of profits
- Equal distribution among all partners and creditors simultaneously
- Profits first, then capital accounts, then outside creditors last
Correct answer: Outside creditors, then partner loans to the partnership, then return of capital contributions, then remaining profits
Upon dissolution, assets are distributed: first to outside creditors, then to partners who loaned money to the partnership, then return of capital contributions, and finally any remaining profits.
OH Bar Business Associations 2
In a general partnership, unless the partnership agreement provides otherwise, how are profits and management rights allocated among partners?