3. Rights and Liabilities Between General Partners Flashcards
Duty of Loyalty
General partners owe to each other and the partnership a duty of loyalty, which means that general partners may never:
- Engage in self-dealing;
- Usurp partnership opportunities, or
- Make a secret profit at the partnership’s expense.
Action for Accounting
In the action for accounting, the partnership may recover losses that are cause by the breach and also may disgorge profits made by the breaching partner as well.
Partners’ Rights in Specific Partnership Assets
Assets such as land, leases, or equipment which are owned only by the partnership itself and therefore may not be transferred by individual partners without partnership authority.
Partners’ Rights in Share of Profits
Personal property owned by individual partners, and therefore may be transferred by individual partners, and may be transferred to third parties
Partners’ Rights in Share in Management
An asset owned only by the partnership itself, and therefore may not be transferred by individual partners to third parties.
In order to determine whether the fact pattern involves property owned by the partnership or personal property owned by an individual partner, the test is:
Whose money was used to buy the property?
If personal money was used to buy the property, it becomes personal property.
If partnership money was used to buy the property, it becomes partnership property.
Partners’ Rights to their Share
Absent an agreement, each partner is entitled to EQUAL control (vote).
Partners’ Rights to their Salary
Absent an agreement, partners get NO SALARY.
But they can get paid for helping to wind up a partnership business.
Partner’s Share of Profits and Losses
- Absent an agreement, PROFITS SHARED EQUALLY
2. Absent an agreement, LOSSES SHARED LIKE PROFITS
If agreement states that “losses are shared 60/40” but is silent on profits. Profits shared?
Equally
