Agency and Partnership

Question 1

LP/LLP Formation

Answer 1

A partnership may become an LP / LLP by filing a registration with the Secretary of State.

The partnership becomes an LP / LLP at the time of filing or on the date specified in the registration.

*Although available for corporations, doctrines of de facto corporation or corporation by estoppel is not available to partnerships.

Question 2

General Partnership

Answer 2

a) A GP is
1) an association of 2 or more persons
2) to carry on as CO-OWNERS
3) a business FOR PROFIT.
b) NO FORMALITIES are required to form a partnership
c) the parties need not INTEND to form a partnership, ONLY to run a BUSINESS AS CO-OWNERS; and
d) an AGREEMENT to SHARE profits raises a PRESUMPTION of partnership

Question 3

GP Liability

Answer 3

1) All partners are JOINTLY and SEVERALLY liable for all obligations of the partnership
2) all partners are PERSONALLY and INDIVIDUALLY LIABLE for the ENTIRE AMOUNT of all partnership obligations; but
3) a JUDGMENT CREDITOR may not levy or execute against a partner’s INDIVIDUAL ASSETS to satisfy a judgment arising from a parternship OBLIGATION until partnership assets have been exhausted.
4) when one partner is compelled to pay or satisfy the whole of a partnership obligation, he is entitled to INDEMNIFICATION from the partnership. If the partnership is unable to indemnify, then he can seek contribution from the other partners.

Question 4

LP

Answer 4

A limited partnership is

1) composed of one or more GENERAL partners and one or more LIMITED partners.
2) GP are PERSONALLY LIABLE for partnership obligations
3) LP generally do not have any liability BEYOND the LIABILITY to make agreed upon CONTRIBUTIONS

Question 5

Actual Express Authority

Answer 5

1) Express authorize is that AUTHORITY contained within the FOUR CORNERS OF THE PARTNERSHIP AGREEMENT and
2) any authority expressly GRANTED BY VOTE of the partnership

Question 6

Actual Implied Authority

Answer 6

1) Implied authority is authority that the PARTNER REASONABLY BELIEVES he has as a RESULT of the ACTIONS of the partnership.
* Unless otherwise agreed to, ALL PARTNERS have EQUAL rights in the management of the p business. Thus argue implied authority to enter the K is within the scope of the business.

Question 7

Apparent Authority

Answer 7

Apparent authority exists if the partnership

1) HOLDS A PARTNER OUT as POSSESSING certain authority; and
2) INDUCES OTHERS to reasonably believe that authority exists
3) a 3rd party must reasonably rely on the holding out
4) Under RUPA,
a) the act of any partner for APPARENTLY carrying on
b) in the ORDINARY course of the p business, or business of the kind carried out,
c) BINDS the p
d) unless the partner HAD NO AUTHORITY to act for the p in the particular matter, and
e) the person with whom the partner was dealing KNEW or had RECEIVED NOTIFICATION that the partner LACKED AUTHORITY

Question 8

Ratification

Answer 8

A relationship is created by ratification when an “agent” PURPORTS to act on behalf of the p WITHOUT any authority at all, but the p subsequently VALIDATES THE ACT and becomes BOUND.

For ratification to occur,

1) the P must KNOW or HAVE REASON TO KNOW
2) all MATERIAL facts
3) accept the transaction; and
4) have capacity

Question 9

Vicarious Liability

Answer 9

Partners are LIABLE FOR TORTS committed by an EMPLOYEE of the partnership in the ORDINARY COURSE of parternship business or with the AUTHORITY of the partnership

Question 10

Agency Relationship Formation

Answer 10

An Agency relationship is created when

1) a person (the principal)
2) manifest an intent
3) that another person (the agent)
4) act on his behalf; and
5) both parties consent to the agreement

Question 11

Duty of Loyalty - Partnership

Answer 11

Partners owe the partnership and other partners the fiduciary duties of loyalty and care, and must discharge their fiduciary duties in good faith with fair dealing. Requires the partner to:

1) accounts for profits, property, opportunities, or other benefits derived by the partner in conjunction with the partnership business
2) refrain from dealing with the paternship as or on behalf of a party having an interest adverse to the partnership and
3) refrain from competing with the partnership

Question 12

Dissolution Order of Payment

Answer 12

When a partnership is dissolved and its assets are reduced to cash, the cash must be used to pay creditors in the following order:

1) creditors (including partners who are creditors)
2) partners in settlement of their accounts [(a) return of their capital accounts then (b) distribution of any profits]
* if the assets at dissolution are with less than the money owed to creditors and partners’ contributions, the shortfall is a loss that must be divided among the partners proportionately or in concurrence with the profit sharing agreement.

Question 13

Duty of Care - Partnership

Answer 13

Requires the partner to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law

Question 14

Independent Contractor

Answer 14

Principal DOES NOT control the individual’s method and manner to complete the task.

Question 15

Employee

Answer 15

Principal has the right TO CONTROL the individual’s method and manner of work.