VT Bar Business Organizations 2

Question 1

Under the Uniform Partnership Act (UPA), when is a general partnership formed?

Accepted Answer

When two or more persons agree to carry on as co-owners of a business for profit, regardless of whether they intended to form a partnership

Answer

When partners file articles of partnership with the Secretary of State

Answer

Only when a formal written partnership agreement is signed

Answer

When the partnership is registered and issues a certificate of partnership

Question 2

In a general partnership, how are partners liable for partnership debts?

Accepted Answer

Jointly and severally to the full extent of their personal assets

Answer

Only to the extent of their capital contributions

Answer

Only if they personally participated in creating the specific debt

Answer

Up to a liability cap negotiated in the partnership agreement

Question 3

A limited partnership must have:

Accepted Answer

At least one general partner with unlimited liability and one or more limited partners whose liability is limited to their contributions

Answer

At least two general partners and two limited partners

Answer

All partners enjoying limited liability

Answer

A minimum capitalization requirement set by state law

Question 4

Under the traditional control rule, a limited partner may lose limited liability protection if:

Accepted Answer

The limited partner participates in the control and management of the business, causing third parties to believe they are a general partner

Answer

The limited partner receives distributions from the partnership

Answer

The limited partner transfers their interest to another party

Answer

The limited partner attends partnership meetings and votes on partnership matters

Question 5

Where a general partnership agreement is silent on profit and loss sharing, the default rule is:

Accepted Answer

Both profits and losses split equally among all partners

Answer

Profits split proportionally to capital contributions; losses split equally

Answer

Profits and losses split proportionally to time each partner devotes to the business

Answer

Profits split equally; losses allocated only to the managing partner

Question 6

In an LLC, members are generally:

Accepted Answer

Not personally liable for LLC debts and obligations beyond their investment in the LLC

Answer

Personally liable for all LLC obligations as in a general partnership

Answer

Personally liable if they are also designated as managers of the LLC

Answer

Personally liable if the LLC has fewer than three members

Question 7

When a member transfers their LLC interest to a third party, the transferee:

Accepted Answer

Acquires only the economic rights (right to distributions) but not governance or management rights, absent consent of other members

Answer

Acquires both the economic rights and the right to participate in management

Answer

Automatically becomes a full member with all voting rights

Answer

Must be unanimously approved by all other members before any transfer is effective