Question

16. Teresa leased a house from Lawrence for two years, ending on January 31, 2020. She paid a security deposit of $2,000, and they signed a written lease. Teresa took possession, and lived there without incident for the entire period, always paying her rent on time. She left the house in clean condition, on January 31, 2020. Lawrence has not returned the security deposit, and has not responded to Teresa’s multiple requests for the money.

a. Teresa should just forget about the deposit.

b. Teresa has no statutory protection here – just a common-law right to sue her formerlandlord.

c. Teresa has statutory protection, under Washington’s Residential Landlord-Tenant Act. If she sues her former landlord, she will be entitled to get her security deposit back, but that’s all.

d. Teresa has statutory protection, under Washington’s Residential Landlord-Tenant Act. If she sues her former landlord, the court can award Teresa up to twice the amount of her security deposit.

17. An “S-Corporation” can have up to 300 shareholders. True/False

18. True or False General Partners in a General Partnership each have unlimited personal liability for all obligations of the partnership.

Facts for Questions 19 & 20:
Roberto and Maria are general partners in a general partnership. They have entered into a partnership agreement which provides as follows: 1. Roberto is to contribute $100,000 to the partnership. 2. Maria is to contribute $200,000 to the partnership. 3. Roberto is to have a 1/3 ownership interest; and Maria is to have a 2/3 ownership interest. 4. Roberto is to receive 40% of all profits earned by the partnership, and Maria is to receive 60% of all profits. 5. Roberto and Maria are to each be responsible for 50% of all losses or other obligations of the partnership. Roberto has a net worth of about $400,000, all in bank accounts. Maria has a net worth of about $4 Million, all in a stock-brokerage account.

In Year 1 of operations, the company has a disastrous year financially! They lose $500,000. Roberto and Maria each contribute another $250,000, to make up for the loss, reducing Roberto’s net worth down to $150,000, and Maria’s net worth down to $3.75 Million. In Year 2, they lose another $400,000! Roberto pays into the business all that he can - $150,000. Maria pays in the other $250,000, so the company can keep going. In Year 3, the company finally breaks even, but a customer sues for $2 Million in physical harm when the product they sell explodes and results in the customer losing both of his legs. The customer wins in court, and gets a judgment against the partnership for the full $2 Million. The company has virtually no assets left.

19. The customer can take his judgment and:
a. claim $2 Million of Maria’s stocks. Maria will have to seek reimbursement from Roberto for his 50% responsibility.

b.   claim $1 Million of Maria’s stocks. The customer will have to get the rest from Roberto when (and if) Roberto ever gets any more net worth.

c. claim $1 Million of Maria’s stocks. The customer will have a claim on any assets that Roberto gets in the future, until his $1 Million is paid off. In the meantime, the customer can get a portion of Roberto’s monthly paychecks by turning in a “garnishment” order to his payroll office.

20. True or False If Maria and Roberto had set up a corporation or LLC, instead of a general partnership, they could have limited their individual liability for debts of the company, to just what they had invested.

Answer 1

16)This amount is commonly known as Rental Deposit or Security Deposit. The security deposit is refundable to the tenant once the lease period is over or when the tenant opts out of the premises for some reason or the other by serving a notice to the landlord.

The answer is (d) that is Teresa has statutory protection, under Washington’s Residential Landlord-Tenant Act. If she sues her former landlord, the court can award Teresa up to twice the amount .

17) An “S-Corporation” can have up to 300 shareholders. TRUE

18) A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business. In a general partnership, partners agree to unlimited liability, meaning liabilities are not capped and can be paid through the seizure of an owner's assets

General Partners in a General Partnership each have unlimited personal liability for all obligations of the partnership.: TRUE

19)It is a Partnership firm and each partner is acting as a Prinipal and Agent for one another. All the Partners are responsible for the actions done by any of the partner.In this case since Robert is not having any other personal assets so the customer can take his judgement and claim $2 million of Maria's Stock and Maria will have to seek reimbursement from Roberto for his 50% responsibility.

So the correct answer is (a.) claim $2 Million of Maria’s stocks. Maria will have to seek reimbursement from Roberto for his 50% responsibility.

20)If Maria and Roberto had set up a corporation or LLC, instead of a general partnership, they could have limited their individual liability for debts of the company, to just what they had invested.: TRUE

It is true that If Maria and Roberto had set up a corporation or LLC, instead of a general partnership, they could have limited their individual liability for debts of the company, to just what they had invested.Unlike a Partnership which has a unlimited liability and a Corporation or LLC is having a Limited Liability feature.