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39. CPA-02990 BEC C04 #13 Page 19
Sam, CPA, is one of the partners in a limited liability partnership with other CPAs. Sam avoids personal
liability for:
a. The wrongful acts of employees acting under his supervision.
b. His own negligent acts.
c. The malpractice of his partners regarding errors and omissions.
d. The negligent actions of his subordinates under his direct control.

Choice "c" is correct.
Rule: A partner in a LLP is personally liable for tort liabilities arising from his own negligence and the
negligence of his direct subordinates and for breach of contract damages. He is NOT personally liable for
the negligent actions committed by his partners.
Choices "a", "b", and "d" are incorrect, per the above rule.

40. CPA-02994 BEC C04 #14 Page 19
A limited liability partnership must:
a. File registration documents with the state in which it is formed.
b. Hold all partners personally liable for all debts and liabilities of the partnership and partners.
c. Carry no less than one hundred thousand dollars of property insurance.
d. Not have partners with professional licenses.

Choice "a" is correct.
Rule: To have limited liability, an LLP must file with the state a registration statement usually referred to
as Articles of LLP. It is generally designed for professionals who desire to be partners with other like
professionals and yet not have liability for the malpractice of their partners. Some states require that
personal liability insurance (not property insurance) be carried to protect those harmed by the
professionals' malpractice.
Choices "b", "c", and "d" are incorrect, per the above rule

41. CPA-04837 Released 2005 Page 19
Jones, Smith, and Bay wanted to form a company called JSB Co. but were unsure about which type of
entity would be most beneficial based on their concerns. They all desired the opportunity to make taxfree
contributions and distributions where appropriate. They wanted earnings to accumulate tax-free.
They did not want to be subject to personal holding tax and did not want double taxation of income. Bay
was going to be the only individual giving management advice to the company and wanted to be a
member of JSB through his current company, Channel, Inc. Which of the following would be the most
appropriate business structure to meet all of their concerns?
a. Proprietorship.
b. S corporation.
c. C corporation.
d. Limited liability partnership.

Choice "d" is correct. An LLP does not pay taxes on its earnings. Instead, the profits and losses flow
through to the partners as in a general partnership. The LLP files an informational tax return like that of a
general partnership. The partners may agree to have the entity managed by one or more of the partners.
A partner may be another entity.
Choice "a" is incorrect. A proprietorship by definition has only one owner, not three owners.
Choice "b" is incorrect. While an S corporation allows for the same treatment of its earnings and
distributions as in the facts, it is prohibited from having another company as an owner.
Choice "c" is incorrect. A C corporation pays its own taxes on its earnings, and any distributions to its
shareholders are again taxed at the shareholder level (known as "double taxation").

42. CPA-05560 Released 2007 Page 19
Which of the following partners of a limited liability partnership (LLP) may avoid personal liability when a
partner commits a negligent act?
a. All the partners.
b. The supervisor of the negligent partner.
c. All the partners other than the negligent partner.
d. All the partners other than the supervisor of, and, the negligent partner.

Choice "d" is correct. LLP partners are liable only for their own negligence and the negligence of anyone
who commits a wrongful act under the partner's direct control.
Choices "a", "b", and "c" are incorrect, per the above.

43. CPA-02975 BEC C04 #3 Page 22
Green Trees, LP is a limited partnership. Dave is a limited partner. Seeds Today, Inc. is a creditor of the
limited partnership. Upon dissolution of the partnership, the assets of Green Trees, LP will be distributed
to pay:
a. Seeds Today, Inc., firsT
b. Dave first.
c. Seeds Today, Inc. and Dave.
d. The general partners first.

Choice "a" is correct.
Rule: Upon dissolution, the assets of a limited partnership are first used to pay off the outside creditors.
Limited partners such as Dave are next in line.
Choices "b", "c", and "d" are incorrect, per the above rule.

44. CPA-02977 BEC C04 #4 Page 20
A limited partnership must have:
a. One general partner and two limited partners.
b. All must be general partners and one limited partner.
c. One general partner and one limited partner.
d. All limited partners.

Choice "c" is correct.
Rule: A limited partnership must have at least one general partner and one limited partner.
Choices "a", "b", and "d" are incorrect, per the above rule. Be careful of answers that include the word
"all."

45. CPA-02978 BEC C04 #5 Page 21
Juan is a limited partner in Pet Food and Fun, Limited Partnership. Juan visited Chow, Inc., a local
supplier of dog food claiming to be a "partner" in the partnership and negotiated a distribution contract
between the supplier and limited partnership on behalf of the partnership.
As a result of these actions, Juan:
a. Has limited liability as a limited partner in reference to all creditors.
b. Has limited liability as a limited partner to all creditors except Chow, Inc.
c. Has full personal liability to all creditors.
d. None of the above.

Choice "b" is correct.
Rule: A limited partner will be considered a general partner with full personal liability only to those that the
limited partner transacts with as if he were a general partner. Limited partners have no right to participate
in management, such as negotiating contracts on behalf of the limited partnership. The limited partner
will retain his status and limited liability to all others that the limited partner has not transacted with on
behalf of the partnership.
Choices "a", "c", and "d" are incorrect, per the above rule.

46. CPA-02979 BEC C04 #6 Page 22
Doug was the sole general partner in Heavy Foot, Limited Partnership. While driving to work one
morning, Doug died in a car accident. The limited partnership:
a. Continues to exist as it was before Doug's death.
b. Dissolves by operation of law as a result of Doug's death.
c. Dissolves only by attaining a judicial decree.
d. Converts to a general partnership and all former limited partners become general partners.

Choice "b" is correct.
Rule: The death of a general partner will by operation of law, dissolve the limited partnership. Because
the dissolution is by operation of law, there is no requirement to attain a judicial decree. Remaining
limited partners do not automatically become general partners as a result of the death of the general
partner.
Choices "a", "c", and "d" are incorrect, per the above rule.

47. CPA-03103 May 91 #4 Page 20
Which of the following statements is correct with respect to the differences and similarities between a
corporation and a limited partnership?
a. Stockholders may be entitled to vote on corporate matters but limited partners are prohibited from
voting on any partnership matters.
b. Stock of a corporation may be subject to the registration requirements of the federal securities laws
but limited partnership interests are automatically exempt from those requirements.
c. Directors owe fiduciary duties to the corporation and limited partners owe such duties to the
partnership.
d. A corporation and a limited partnership may be created only under a state statute and each must file
a copy of its organizational document with the proper governmental body.

Choice "d" is correct. Both a limited partnership and a corporation:
1. Can only be created by statute, and
2. Each must file a copy of its certificate with the proper state agency.
Choice "a" is incorrect. There are instances in which limited partners do vote on certain partnership
matters (e.g., approve new general or limited partners).
Choice "b" is incorrect. Limited partnership interests are not automatically exempt from the federal
securities laws.
Choice "c" is incorrect. Limited partners do not owe a fiduciary duty to the limited partnership.

48. CPA-03123 BEC C04 #1 Page 23
Aarons Group, Limited Partnership, was formed by three brothers, Aaron, Barry, and Sam. Aaron is the
general partner and devotes more than 60 hours per week to the business. Barry and Sam are limited
partners who work for different companies having no relationship to the limited partnership. The partners'
capital contributions are as follows: Aaron invested 20%. Barry and Sam invested 40% each.
During the formation of the limited partnership, the brothers signed an agreement that addresses how the
brothers will split profits and losses. At year-end, the limited partnership enjoyed large profits due to high
demand for the business' product line.
The profits will be divided:
a. In proportion to each partner's capital contribution.
b. According to the agreement.
c. Equally.
d. By determining by the amount of time and labor each partner devoted to the operation of the
partnership.

Choice "b" is correct.
Rule: Partners in a limited partnership can agree as to how they will split profits and losses, with losses
shared up to the amount of the limited partners' capital. Profits and losses are shared on the basis of
percentages of capital contributions only in the absence of an agreement otherwise.
Choices "a", "c", and "d" are incorrect, per the above rule.

49. CPA-03153 BEC C04 #7 Page 21
Lisa is a limited partner in a limited partnership. Jen, one of the other limited partners, is seeking to sell
her interest in the partnership to Karen and allow Karen to become a new limited partner. Which of the
following statements is true?
a. Lisa may engage in the management of the limited partnership without losing her limited liability.
b. Jen may transfer her interest and make Karen a new limited partner without the approval of the other
partners.
c. Jen may withdraw from the limited partnership without giving notice to the partnership.
d. Lisa has a right to vote on the transferring of interest to and admission of Karen as a limited partner.

Choice "d" is correct. Limited partners have the right to vote on the transfer of interest and admission of a
new partner. Admission of a new partner requires unanimous consent.
Choice "a" is incorrect. A limited partner who acts as a general partner loses her limited liability status to
those she acted as a general partner towards.
Choice "b" is incorrect. Partners can freely transfer their interests in profits and losses to third parties, but
the third party cannot become a limited partner without the unanimous consent of the other partners.
Choice "c" is incorrect. Limited partners must give 6 months notice of withdrawal in absence of an
agreement to the contrary.

50. CPA-03242 May 92 #11 Page 23
Which of the following statements is correct with respect to a limited partnership?
a. A limited partner may not be an unsecured creditor of the limited partnership.
b. A general partner may not also be a limited partner at the same time.
c. A general partner may be a secured creditor of the limited partnership.
d. A limited partnership can be formed with limited liability for all partners.

Choice "c" is correct. In a limited partnership, a general partner may be a secured creditor of the limited
partnership.
Choice "a" is incorrect. In a limited partnership, a limited partner may be an unsecured creditor of the
limited partnership.
Choice "b" is incorrect. In a limited partnership, a general partner may also be a limited partner at the
same time.
Choice "d" is incorrect. In a limited partnership, only the limited partners will have limited liability. A
limited partnership must have at least one general partner and general partners have unlimited liability.
(The word "all" makes this option wrong.)

51. CPA-03254 Lw Nov 88 #4 Page 23
In general, which of the following statements is correct with respect to a limited partnership?
a. A limited partner has the right to obtain from the general partner(s) financial information and tax
returns of the limited partnership.
b. A limited partnership can be formed with limited liability for all partners.
c. A limited partner may not also be a general partner at the same time.
d. A limited partner may hire employees on behalf of the partnership.

Choice "a" is correct. A limited partner has rights similar to those of a corporate shareholder; he must be
allowed to review financial and tax information of the limited partnership.
Choice "b" is incorrect. A limited partnership must have one or more general partners, whose liability is
unlimited.
Choice "c" is incorrect. One may be both a general and a limited partner simultaneously. Such a person
has all of the rights and liabilities of both a limited partner and a general partner.
Choice "d" is incorrect. A limited partner has no management authority, rather he is a passive investor,
like a corporate shareholder.

52. CPA-03257 Lw Nov 87 #19 Page 21
In general, which of the following statements is correct with respect to a limited partnership?
a. A limited partner will be personally liable for partnership debts incurred in the ordinary course of the
partnership's business.
b. A limited partner is unable to participate in the management of the partnership in the same manner as
general partners and still retain limited liability.
c. A limited partner's death or incompetency will cause the partnership to dissolve.
d. A limited partner is an agent of the partnership and has the authority to bind the partnership to
contracts.

Choice "b" is correct. While the general rule is that a limited partner has no liability on partnership debts
except to the extent of his agreed-upon contribution, the limited partner will lose this limited liability if he
takes part in control of the business, which generally means a limited partner may not manage the
business on a day-to-day basis as a general partner could.
Choice "a" is incorrect. Limited partners are not personally liable for partnership debts; their liability
generally is limited to their contributions.
Choice "c" is incorrect. Death or incapacity of a general partner will cause a dissolution, but the same is
not true of a limited partner.
Choice "d" is incorrect. A limited partner is more like a shareholder in a corporation than like a general
partner. Limited partners are not agents of their partnerships and have no authority to bind their
partnership on contracts.

53. CPA-03259 Lw May 87 #7 Page 24
White, Grey, and Fox formed a limited partnership. White is the general partner and Grey and Fox are
the limited partners. Each agreed to contribute $200,000. Grey and Fox each contributed $200,000 in cash while White contributed $150,000 in cash and $50,000 worth of services already rendered. After
two years, the partnership is insolvent. The fair market value of the assets of the partnership is $150,000
and the liabilities total $275,000. The partners have made no withdrawals.
If Fox is insolvent and White and Grey each has a net worth in excess of $300,000, what is White's
maximum potential liability in the event of a dissolution of the partnership?
a. $62,500
b. $112,500
c. $125,000
d. $175,000

Rule: The liability of a limited partner for partnership debts is limited to the extent of the capital, which he
has contributed or has agreed to contribute. A general partner, however, is liable for all partnership debts
and liabilities.
Choice "c" is correct. In this case, both Grey and Fox are limited partners and, thus, their respective
maximum liability for partnership debts may not exceed their contributions ($200,000 each). Because
White is a general partner, however, he will be personally liable for the excess of any debt remaining after
assets have been applied upon a dissolution. Therefore, White will be liable for $125,000 (the difference
between the fair market value of assets ($150,000) and partnership liabilities ($275,000) at dissolution).
Choices "a", "b", and "d" are incorrect, per the above rule.

54. CPA-02972 BEC C04 #2 Page 20
Harry, Betty, and Jim decide to form a hair salon business. Betty and Jim agree to equally manage the
business and have agreed to accept full personal liability for obligations of the business. Harry
contributes money to help them get started. Harry does not want any personal liability but does want
access to the books and records and to share in the profits. They have all agreed that unanimous
consent is needed to transfer their ownership interests. Assume any necessary filings have been made.
What type of business entity best reflects the terms of their agreement?
The three have formed:
a. A limited partnership.
b. A limited liability company.
c. A general partnership.
d. A corporation.

Choice "a" is correct. A limited partnership best reflects the terms of the parties' agreement. A limited
partnership has one or more general partners and one or more limited partners. The general partners are
personally liable for partnership obligations and run the business (such as Betty and Jim agreed). A
limited partner does not have personal liability for partnership obligations and does not take part in
management; however, limited partners have a right to inspect partnership books and records relevant to
their interest. Thus, a limited partnership has the attributes that Harry agreed to. Finally, all partners
must unanimously consent to a transfer of an ownership interest in a limited partnership, as the parties
agreed here. Thus, a limited partnership best reflects the agreement of the parties.
Choice "b" is incorrect. Members of a limited liability company are not personally liable for the company's
debt. (They may agree otherwise, but this is not a general attribute of a limited liability company.)
Because the facts say Betty and Jim each agreed to have full personal liability, a limited liability company
does not best reflect the parties' agreement.
Choice "c" is incorrect. All partners are personally liable for all obligations of a general partnership.
Because the facts say Harry did not accept personal liability, the agreement does not reflect a general
partnership. Choice "d" is incorrect. Corporate shareholders generally are not liable for the corporation's obligations.
(They may agree otherwise, but this is not a basic attribute of a corporation.) As the facts say Betty and
Jim share full personal liability, the agreement does not reflect a corporation.

55. CPA-03261 Lw May 87 #8 Page 24
White, Grey, and Fox formed a limited partnership. White is the general partner and Grey and Fox are
the limited partners. Each agreed to contribute $200,000. Grey and Fox each contributed $200,000 in
cash while White contributed $150,000 in cash and $50,000 worth of services already rendered. After
two years, the partnership is insolvent. The fair market value of the assets of the partnership is $150,000
and the liabilities total $275,000. The partners have made no withdrawals.
Unless otherwise provided in the certificate of limited partnership, which of the following is correct if Fox
assigns her interest in the partnership to Barr and only White consents to Barr's admission as a limited
partner?
a. Barr will not become a substituted limited partner unless Grey also consents.
b. Barr will have the right to inspect the partnership's books.
c. The partnership will be dissolved.
d. Barr will become a substituted limited partner because White, as general partner, consented.

Choice "a" is correct. In the absence of an agreement between all partners, the assignment of a partner's
interest does not make the assignee a substitute partner; it merely transfers the assignor's rights to
distributions to the assignee.
Choice "b" is incorrect. Absent an agreement among the partners otherwise, an assignment of an interest
in a partnership is merely an assignment of the assignor's rights to receive distributions from the
partnership and does not give the assignee any right to inspect the partnership's books.
Choice "c" is incorrect. Absent an agreement among the partners otherwise, an assignment of an interest
in a partnership is merely an assignment of the assignor's rights to receive distributions from the
partnership; it does not make the assignee a new partner. Since there is no change in who is a partner,
there is no dissolution.
Choice "d" is incorrect. All partners must agree to make someone a partner, not just the general partner.

56. CPA-05243 Released 2006 Page 22
Under the Revised Uniform Limited Partnership Act and in the absence of a contrary agreement by the
partners, which of the following events is most likely to dissolve a limited partnership?
a. A majority vote in favor by the partners.
b. A two-thirds vote in favor by the partners.
c. A withdrawal of a majority of the limited partners.
d. Withdrawal of the only general partner.

Choice "d" is correct. Absent a contrary agreement of the partners, a limited partnership can be dissolved
by written consent of all the general partners, withdrawal or death of a general partner, or judicial decree.
Thus, withdrawal of the only general partner would cause dissolution. (There has to be at least one
general partner in a limited partnership.)
Choice "a" is incorrect. It takes unanimous written consent of all general partners to dissolve the limited
partnership, not majority vote.
Choice "b" is incorrect. It takes unanimous written consent of all general partners to dissolve the limited
partnership, not two-thirds vote.
Choice "c" is incorrect. Death or withdrawal of a limited partner does not cause dissolution. Only death
or withdrawal of a general partner causes dissolution.

57. CPA-02969 Nov 90 #1121 Page 29
Eller, Fort and Owens are members of Venture Associates, LLC. Trent Corp. brought a breach of
contract suit against Venture for a contract executed by Eller as an agent of the LLC. If Trent prevails,
Trent will generally be able to collect the judgment from:
a. The LLC's assets only.
b. The personal assets of Eller, Fort and Owens jointly.
c. Eller's personal assets only after LLC assets are exhausted.
d. Eller's personal assets only.

Choice "a" is correct.
Rule: Members of an LLC are not personally liable for the LLC's obligations. Moreover, an agent is not
liable on a contract the agent enters into on behalf of a disclosed principal. Here, the contract was
entered into by Eller on behalf of Venture, an LLC, and Eller disclosed that he was acting only as an
agent of Venture. Thus, Trent Corp. can collect from the LLC'S assets only.
Choices "b", "c", and "d" are incorrect, per the above rule.

58. CPA-02981 BEC C04 #8 Page 27
Tim, Peter, and Rick want to form a limited liability company. What document must they file with the
state?
a. Operating Agreement.
b. Articles of Incorporation.
c. Bylaws.
d. Articles of Organization

Choice "d" is correct. The Articles of Organization must be filed with the secretary of state.
Choice "a" is incorrect. An operating agreement is an agreement between the members containing
provisions relating to management, profit sharing, transferring interests, etc. and does not need to be filed
with the state.
Choices "b" and "c" are incorrect. Articles of incorporation and bylaws are documents relating to
corporations, and they are not required to be filed with the state.

59. CPA-02983 BEC C04 #9 Page 27
The articles of organization for a limited liability company must contain everything, except the following:
a. The name of the entity that includes some indication it is a LLC.
b. The name and address of the registered agent.
c. Number of shares authorized and issued.
d. If the company is to be manager managed, a statement to that effect.

Choice "c" is correct. Limited liability companies do not issue "shares" held by shareholders like in a
corporation. Instead, members (the owners) are said to have "interests" in the LLC.
Choices "a", "b", and "d" are incorrect. These are all required to be included in the articles of
organization.

60. CPA-02988 BEC C04 #11 Page 28
Unless there is an agreement to the contrary, the voting power of members in a limited liability company
is determined by:
a. Each member's salary.
b. Each member's share of profits.
c. When the member was admitted to the company.
d. Each member's capital contribution.

Choice "d" is correct.
Rule: Absent an agreement otherwise, all members generally participate in management, and their voting
strength is determined in proportion to ownership interest. This is calculated by comparing each
member's capital contribution to that of the other members.
Choices "a", "b", and "c" are incorrect, per the above rule.

61. CPA-03116 Nov 89 #1063 Page 29
Heather, Erika, and Shelby are members in HES LLC. Heather works 40 hours per week and Erika and
Shelby work 20 hours per week. Heather contributed $30,000 to the LLC and Erika and Shelby
contributed $60,000 each. Erika and Shelby have each originated 45% of the LLC's business and
Heather has originated the other 10%. Absent an agreement to the contrary among the owners, who
controls the management of the HES LLC?
a. Heather, because she works the most.
b. Erika and Shelby equally because they contributed the most.
c. Heather, Erika, and Shelby in proportion to their ownership interests.
d. Erika and Shelby, because they originate most of the work.

Choice "c" is correct.
Rule: Absent an agreement to the contrary, the members' voting strength is proportionate to their
contributions.
Choices "a", "b", and "d" are incorrect, per the above rule.

62. CPA-03119 Nov 89 #1065 Page 28
Heather, Erika, and Shelby are members in HES LLC. Heather dies. Absent an agreement to the
contrary, what is the result?
a. The LLC must dissolve.
b. The LLC ceases to exist.
c. The LLC is dissolved unless the other members consent to continue.
d. The LLC continues as though nothing happened.

Choice "c" is correct. Absent an agreement to the contrary, if a member of an LLC dies, the LLC is
dissolved unless the other members consent to continue.
Choice "a" is incorrect, because the LLC does not have to dissolve upon the death of a member.
Choice "b" is incorrect, because the LLC does not cease to exist immediately.
Choice "d" is incorrect, because the LLC does not continue unless the members consent to continue.

63. CPA-03146 Nov 89 #1061 Page 28
Heather, Erika, and Shelby are members in HES LLC. Heather works 40 hours per week and Erika and
Shelby work 20 hours per week. Heather contributed $30,000 to the LLC and Erika and Shelby
contributed $60,000 each. Erika and Shelby have each originated 45% of the LLC's business and
Heather has originated the other 10%. Absent an agreement to the contrary, how will the LLC's $120,000
profits be divided among the members?
Heather Erika Shelby
a. $60,000 $30,000 $30,000
b. $40,000 $40,000 $40,000
c. $12,000 $54,000 $54,000
d. $24,000 $48,000 $48,000

Rule: Absent an agreement to the contrary, the LLC's profits will be divided among the members in
proportion to their contributions. Here, Heather's, Erika's and Shelby's contributions were $30,000,
$60,000, and $60,000, respectively. Thus, the profits will be divided in a 1:2:2 ratio (20% of $120,000 to
Heather; 40% of $120,000 to Erika; and $120,000 to Shelby).
Choice "d" is correct.
Heather Erika Shelby
d. $24,000 $48,000 $48,000
Choices "a", "b", and "c" are incorrect, per the above rule.

64. CPA-03156 BEC C04 #12 Page 29
A member of a limited liability company may generally do all of the following, except:
a. Transfer his membership in the company without the consent of the other members.
b. Participate in the management of the company absent an agreement to the contrary.
c. Have limited liability.
d. Order office supplies for the company.

Choice "a" is correct. The transfer of a member interest requires the consent of the other members.
Members may not assign their interest without the other members' consent.
Choice "b" is incorrect. Unless the members have agreed to operate as a manager managed limited
liability company, all members have the power to participate in management.
Choice "c" is incorrect. Members in a limited liability company all have limited personal liability.
Choice "d" is incorrect. Unless otherwise agreed, members have the right to manage the every day
operations of a limited liability company. This can include the ordering of office supplies.

65. CPA-03237 May 94 #15 Page 29
Jeb, a member in J & S LLC, sold his interest in the LLC to Chris without obtaining the other members'
consent. Absent an agreement to the contrary, Chris:
I. May participate in the management of J & S.
II. May receive Jeb's share of J & S's profits.
III. Is not entitled to anything since Jeb did not obtain the other members' consent.
a. I only.
b. I and II only.
c. II only.
d. III only.

Choice "c" is correct. Absent an agreement to the contrary, if a member in the LLC sells his interest in an
LLC without obtaining the other members' consent, the assignee is only entitled to receive the assignor's
share of profits.
Choices "a", "b", and "d" are incorrect, because, absent an agreement to the contrary, although a member
of an LLC is allowed to assign his interest in profits and losses, an assignee of a membership interest
may not participate in the management of the LLC.

66. CPA-05241 Released 2006 Page 27
Which of the following parties generally has the most management rights?
a. Minority shareholder in a corporation listed on a national stock exchange.
b. Limited partner in a general partnership.
c. Member of a limited liability company.
d. Limited partner in a limited partnership.

Choice "c" is correct. Unless the articles or operating agreement provides otherwise, all members of the
LLC have a right to participate in management. A member of a limited liability company has the most
management rights of any of the parties listed. A minority shareholder in a corporation has no
management rights (and neither does a majority shareholder). A limited partner has no day-to-day
management rights but may have some rights in extraordinary circumstances. It is unclear what a limited
partner in a general partnership would even be; the existence of a limited partner would make a
partnership a limited partnership and not a general partnership.
Choice "a" is incorrect. Stockholders have very limited rights to run the corporation. They generally only
have the right to elect directors and to vote on fundamental changes in the corporation. Such
fundamental changes would include dissolutions, amendments to the articles, mergers, consolidations,
compulsory share exchanges, and sale of substantially all of the corporation's assets.
Choice "b" is incorrect. There are no limited partners in a general partnership. There are only general
partners. Since there are no limited partners, there are no management rights for limited partners.
Choice "d" is incorrect. Limited partners in a limited partnership have very limited rights to participate in
the management of the business. In fact, if they do participate in management, they face potential liability
to those who thought they were a general partner (i.e., if a limited partner becomes involved in day-to-day
management is some way (participating in control), she may be treated as a general partner and lose her
limited liability).

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