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Chapter 37 - Introduction to Forms of Business and Formation of Partnerships
V. ANSWERS TO PROBLEM CASES:
1. The LLC and the LLLP would be better than the limited partnership, unless the only
general partner of the limited partnership was a corporation or LLC, thereby giving
all human investors limited liability, just as the LLC and LLLP do. Because the
2. The LLLP or LLC will work well. Both forms may elect to be taxed like a
partnership, allowing the investors to deduct the businesses losses on their individual
3. a. The LLP permits each of you to manage the business, which each of you wants
and is competent to do, you have limited liability for the obligations of the LLP, and
you equally share profits, which you should equally produce as you expect to devote
b. The LLLP will not work, because no one wants to be a limited partner, as all of
4. Yes. The court pointed out two important factors proving a joint venture or
5. No. The court accepted the subjective manifestations of the intent of Hazel and
Eddie. Tammy’s receiving a share of the profits was only part of her wages as an
6. Yes. Their actions met the definition of partnership. They associated to carry on a
business of providing and selling an electronic payment system. The co-owned the
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 37 - Introduction to Forms of Business and Formation of Partnerships
7. No. The federal court of appeals held that SEM and RIBA were not partners even
though their agreement used the term “partner,” they shared control of and profits
The court found that the parties shared profits 55-45, but did not share losses, since
SEM agreed to indemnify RIBA for all losses of the venture. While the court
SEM made most of the management decisions for the venture, proving to the court
that the association did not comport with the normal partnership relationship of equal
management rights. While this rationale is hardly convincing, because silent partners
Finally, the court found that little of the property in the periodic show was jointly
owned by the parties. Again, the court recognized that partners may agree to such a
Ultimately, the court found ambiguity in the relationship of SEM and RIBA, which
8. Yes, but it did not work out that way. The court held that although Palmer had the
ability to prove purported partnership, she lost on a principle unrelated to partnership
law. Because she released Claydon, the person primarily liable, she released
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 37 - Introduction to Forms of Business and Formation of Partnerships
Nonetheless, Palmer proved that Lawler purported to be or held himself out as the
partner of Claydon or otherwise consented to a creation of the appearance that they
were partners. Lawler and Claydon shared office space, such that someone
9. There is a risk that you or your firm is a purported partner of iBrain LLP, because
To disabuse people of this belief, you should not communicate using iBrain’s
stationery or email address, instead using your firm’s stationery and email address.
You should wear a badge and use a business card that clearly identify you as an
10. There should be an agreement regarding who owns the investment analysis software,
as well as who will pay for upgrades. This agreement will prevent future disputes
11. No. The court concluded that the ranch remained partnership property despite the
transfer of nominal title to Mike. The partners' intent was more persuasive than
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 37 - Introduction to Forms of Business and Formation of Partnerships
case also shows the practical realities of small businesses, which commingle personal
12. Yes. The court concluded that Yan and Fu were partners or joint venturers by
agreeing to share ownership, the construction expenses, and the proceeds from the
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
