[Partnership Agreement] Rufus, Sven, and Igor Are Partners in a Health

question 86

Multiple Choice

[Partnership Agreement] 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 the two potential new partners be added to the partnership without Igor's vote in favor of doing so?

• A) Yes, because there is a majority vote in favor of the admission of new partners.
• B) No, because there is no unanimous vote in favor of the admission of new partners.
• C) No, because there is no 4/5 vote in favor of the admission of new partners.
• D) Yes, but only if all material facts about the new partners have been disclosed to Igor.
• E) Yes, because the two potential partners will bring significant capital into the partnership.

---

Definitions:

Planned Activity Level

The expected volume of production or sales used in budgeting and decision-making processes.

Machine Hours

A measure of the amount of time a machine is operated, used for allocating manufacturing costs.

Flexible Budget Total

A financial plan that adjusts or varies with changes in the volume of activity or business.

Direct Labor Hours

The total hours of labor directly involved in producing goods or services, often used as a basis for allocating overhead costs.