Bruno and Martin run Skyview, LLC, a drone company that takes aerial photographs. After an accident with the drone, Bruno tells Martin that he does not want to be involved in management any longer. Martin tells Bruno that if he stops participating in management, they will no longer be protected by the limited liability of an LLC. Bruno says that if there is a lawsuit, they are both equally liable. Martin replies that if Bruno wants, he could be a limited LLC member and then he won’t have a say in the company. Is Martin correct that they will lost the protection of limited liability if Bruno ceases participating in management decisions?

Milton, Ava, and Hiro own a candy company. The business is failing and Milton is declared bankrupt by the bankruptcy court. Ava wants to keep the business running because she is sure she can turn it around. Hiro tells her that, it’s too late, the partnership is already over because of Milton. Ava tells him that no one has asked to end the partnership so they do not have to dissolve. The partnership debts include a loan to the bank, loans Ava made to the company, and the initial capital that all three partners invested. Milton has no money to pay any of their debts. In what order should the partnership’s debts be paid?

The president of Kool Science, Inc., which makes educational science kits for children, calls the president of Language Fun, Inc., which makes foreign language learning materials for children. They discuss production of three educational toys which teach both science and foreign language to children. They agree that Kool will work with Language to create and market the three toys, and that they will use Kool’s manufacturer to produce the product. Does the president of Kool Science have the authority to sign a contract with a supplier on behalf of Language Fun for the language-science kits?

Cole, Kyra, and Morton are partners in a startup company that designs software for the biotechnology industry. Their partnership agreement contained a provision that the partnership would be dissolved when Morton retires, or if any partner commits any act that violates the trust of the other partners. The partnership agreement also provided that all intellectual property related to the business of the partnership, including any patents, be owned by the partnership. Cole decides to open another company, ColeCompany, that would design gaming software. He sets up the company secretively, transfers a patent owned by the partnership to ColeCompany, and does not tell his partners until he is ready to do business at ColeCompany. When Kyra and Morton find out that Cole went behind their backs and opened another business, they tell Cole they can no longer trust him and are dissolving the partnership because of his actions. Cole, who is the software designer for the partnership, tells them if they want to dissolve the partnership, then he will also design software for the biotech industry at ColeCompany. Was the partnership rightfully dissolved or wrongfully dissolved?

Ryan was a partner in ZYX law firm. He decided to withdraw from the partnership because he wanted to retire early in Costa Rica. The partnership agreement of ZYX law firm did not specify the objective or duration of the partnership. Although Ryan gave proper notice, the other partners claimed that he had no right to withdraw. Ryan was angry and decided to get even. Two days after he withdrew and before the partnership had provided notification to any suppliers of his departure, Ryan went to the office supply store at which he typically purchased supplies on account for the firm. He purchased several cameras, a computer, and other items, which he placed on the firm’s account. Ryan just smiled when Joe, the manager at the store, told Ryan that he really appreciated the law firm’s business. The next day Ryan headed for Costa Rica and cannot be located. Joe later requests that ZYX firm pay the bill for Ryan’s purchases. The law firm, whose members had decided to continue the partnership after the dissolution resulting from Ryan’s resignation, refused on the basis that Ryan had no authority to make the purchases. Joe says that he did not know that and that he expects to be paid immediately. Which statement is true regarding whether the law firm is liable for purchases made by Ryan?

Bruno and Martin run Skyview, LLC, a drone company that takes aerial photographs. After an accident with the drone, Bruno tells Martin that he does not want to be involved in management any longer. Martin tells Bruno that if he stops participating in management, they will no longer be protected by the limited liability of an LLC. Bruno says that if there is a lawsuit, they are both equally liable. Martin replies that if Bruno wants, he could be a limited LLC member and then he won’t have a say in the company. Is Martin correct that they will lost the protection of limited liability if Bruno ceases participating in management decisions?

Rashi makes great chocolate chip cookies and sells them in her café called Rashi’s Famous Cookies. Some of her friends have expressed interest in selling her cookies. They want to use her name and identify the cookies as Rashi’s Famous Cookies. Seeing a business opportunity, Rashi agrees to bake the cookies and provide them frozen to her friends who will open other cafés under her café’s name. Rashi strictly controls all packaging and sales. She also frequently inspects kitchens used by the sellers, pursuant to her agreements with them. Lola, one of Rashi’s friends who entered into an agreement with Rashi to open a café and sell the cookies, was not being careful and negligently put a harmful ingredient into the cookie dough resulting in a customer, Jonah, becoming ill. Jonah threatens to sue both Lola and Rashi. Rashi is so exasperated that she cancels all the franchise contracts. Although the franchise agreements provide that,as long as requirements are met, the franchise agreements will continue for a period of two years, Rashi takes the position that the cookies involve a personal service using a trade secret, and that she cannot be held liable to her franchisees for discontinuation of the franchises. What type of arrangement did Rashi make with her friends?

Rufus, Sven, and Igor are partners in a Health Club. They executed a partnership agreement ten years ago. Rufus and Sven want to grow the company and approach Igor with their ideas. First, they want to add two partners into the partnership who have extensive capital. Second, they want to move the club into a new direction, by adding a restaurant and a casino. Third, they want to purchase new exercise equipment from SportsCo. Igor doesn’t want to add new partners and despises the idea of adding the restaurant and casino. Igor agrees that new equipment is needed, but insists they continue to purchase equipment from HealthCo. Rufus and Sven tell Igor, that he’s outvoted and also tell him they want to revise the partnership agreement’s provision regarding mandatory retirement. Can Rufus and Sven move forward with the purchase of new equipment from SportsCo, over Igor’s insistence on purchasing the equipment from HealthCo?

André and Sasha want to go into business together and plan on offering a tutoring service to high school and college students. André proposes that they share control of the business and split profits equally and not bother with a written agreement. Sasha, however, is concerned about being able to pay their debts, since they will have to rent tutoring space, and purchase computers and supplies. She is also concerned about parents and students who may sue if their test scores do not improve. She tells André that she just bought a new boat and car, and that she does not want her assets to be in jeopardy. She tells André that they should form a corporation to shield their personal assets. André, however, tells Sasha that their personal assets are not in danger with his proposal because they are a business and that, furthermore, forming a corporation would result in a tax being imposed twice. Which of the following is true regarding André’s assertion regarding taxes?

Andrew, Marie, and Cruz formed a partnership to groom dogs. Because they were good friends and anticipated making a profit sufficient to compensate all partners well, the articles of partnership did not allocate profit or losses. Marie was appointed managing partner. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. Cruz claimed that he should not have to share in losses because he had groomed more dogs than anyone. Cruz also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his extensive work. Marie claimed that she should not have to share in losses because she contributed more capital than did either of the others. Andrew claimed that he should not have to cover the losses because both Marie and Cruz had been hiding the books from him. He demanded to inspect the books and also to review a listing of all partnership assets and profit statements listing distributions to partners. Marie and Cruz denied that they had been hiding the books and claimed complete innocence of any wrongdoing. Is Andrew entitled to a review of all partnership assets and profit statements listing the distributions to partners?