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 Robertos net worth down to $150,000, and Marias 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 Marias stocks. Maria will have to seek reimbursement from Roberto for his 50% responsibility.

b. claim $1 Million of Marias 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 Marias 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 Robertos 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.

21. Sunil and his brother Leandro set up an investment account with a bank, as Tenants in Common. Each puts $25,000 into the account, and they buy and sell stock together, splitting all interest and dividend income equally, and sharing any losses equally. After about thirty years of doing this, the account has grown to a total of about $200,000. Sunil got married, and had one child, Arjun. Sunils wife unfortunately died in 2015. Leandro has never married, and has no children. Sunil died in February, 2020. Leandro is claiming ownership of the entire Investment account. Result if Arjun challenges Leandro in court? Everyone lives (or lived) in the State of Washington.

A. Leandro will be awarded ownership of the entire account.

B. Arjun will be awarded half of the account.