Future Business Leaders of America (FBLA) Agribusiness Practice Test

How can a partnership be terminated?

1. Only by mutual consent of all partners

2. By a partnership legal document

3. By operation of law, such as bankruptcy or death

4. Automatically after a certain number of years

The correct answer is: By operation of law, such as bankruptcy or death

A partnership can be terminated in several ways, and one significant method is through operation of law, which includes events such as bankruptcy or the death of a partner. These circumstances often lead to an automatic dissolution of the partnership because they fundamentally alter the nature of the partnership agreement and the ability of the remaining partners to continue the business. When a partner dies or is declared bankrupt, it can complicate or halt business operations, making it impossible for the partnership to function as intended. In such cases, the law provides for dissolution to protect the interests of all parties involved. This legal framework ensures that partnerships have a clear exit strategy in the event of unforeseen and dramatic changes to the partnership's composition or viability. The other options suggest conditions that may not always apply to every partnership. Mutual consent implies all partners agree to termination, which may not be feasible in all situations. A partnership legal document can outline conditions for termination, but it is not a standalone basis for dissolution. The idea that partnerships automatically terminate after a certain number of years is misleading; many partnerships are designed to last indefinitely until a specific termination condition is met. Thus, option C accurately reflects a universal circumstance that can lead to partnership termination.