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Agency & Partnerships Flashcards

1
Q

What are the ABCs of agency?

A

Assent
Benefit (to principal)
Control

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2
Q

Who can’t be a principal?

A

minors

intoxicated people

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3
Q

What is a partnership?

A

An association of two or more legal persons who carry on a for profit business as co-owners

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4
Q

What is a “legal person” in terms of a partnership

A
  • anyone with legal capacity to contract (not inebriated or a minor)
  • legal entities (corporations, LLCs, etc.)
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5
Q

What intent do you need to form a partnership?

A
  1. intent to carry on as co-owners (sharing control)

2. intent to split profits

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6
Q

When is there a presumption of a partnership?

A

When 2 or more people share profits

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7
Q

What’s the key phrase for partnerships?

A

The partnership agreement is the law of partnerships

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8
Q

Partnership Liability

A

partners are personally liable for the partnership’s obligations

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9
Q

Taxation for partnerships

A

no entity-level taxation (less taxes)

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10
Q

When is state law mandatory for partnerships?

A
  • liability to 3rd parties
  • cannot deny partners access to books and records
  • fiduciary duties cannot be eliminated
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11
Q

Who owes fiduciary duties to the partnership and what are they?

A

Every partner

loyalty & care

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12
Q

3 violations of duty of loyalty in a partnership

A
  • compete with partnership business
  • advance interest that is adverse to partnership
  • Usurp a partnership opportunity
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13
Q

What should a partner do if they’re worried their behavior is disloyal?

A

make full disclosure of all material facts

- certain percentage of other partners may authorize or ratify the transaction

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14
Q

3 violations of duty of care in partnership

A
  • grossly negligent or reckless conduct
  • intentional misconduct
  • knowing violation of the law
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15
Q

Who are fiduciary duties in a partnership owed to?

A

only current partners - not former or prospective partners

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16
Q

When there’s no partnership agreement, how are profits divided?

A

evenly

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17
Q

With losses in a partnership, what’s the key phrase

A

losses follow profits

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18
Q

default rule with partnership distributions

A

partners do not have a right to demand distributions

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19
Q

default rule with transfer of partnership interest

A

a partner does not have the right to transfer their partnership responsibilities BUT they can transfer their partnership interest

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20
Q

default rule for adding a new partner to a partnership>

A

all existing partners must consent to new partner (partners can modify this in their agreement)

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21
Q

default rule for partnership management

A

every partner has equal rights in management

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22
Q

default rule for partnership voting on ordinary business matter

A

majority vote (remember this can be changed in the partnership agreement)

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23
Q

default rule for partnership voting on extraordinary business matter

A

vote of all partners (remember this can be changed in the partnership agreement)

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24
Q

mandatory rule for partnership records

A

access to records MUST be provided to partners and their agents (this cannot be changed by agreement!!)

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25
What is dissociation
When a partner ceases to be associated with a partnership
26
Dissociation can be ________ or __________
voluntary (may give notice), involuntary
27
7 forms of involuntary dissociation
1. Event that was mentioned in the partnership agreement happens 2. expelled pursuant to agreement 3. unlawful for partnership to carry on business with that partner 4. court orders partner dissociated 5. partner goes bankrupt 6. partner has become incapacitated 7. one of the entities of the partnership dissolves (Every Chicken Bawks if Under Extreme Duress)
28
T/F - if a partner is dissociated the partnership automatically ends
FALSE
29
if a partnership continues after a partner is disassociated, what does it need to do?
buy out the dissociated partner's interest
30
A partner is ___________, ____________, & __________ liable for all partnership obligations
personally jointly & severally
31
every partner is an ________ of the partnership
agent
32
implied authority
exists based on the partner's reasonable belief that an action is necessary to carry out express authority
33
apparent authority
based on interactions between the principal and a 3rd party
34
creditors must do what first when going after a partnership
FIRST - exhaust partnership's funds THEN - can go after individual partners' assets
35
liability of incoming partners
not personally liable for contract or tortious obligations incurred before they became partner
36
liability of outgoing partners
may be personally liable for partnership obligation that occurred after they were disassociated
37
2 steps for termination of partnership
1. Dissolution | 2. Winding UP
38
3 ways to dissolve partnership
1. any dissolving event set forth in partnership agreement 2. any event that makes it unlawful to continue if not cured within 90 days 3. judicial determination
39
Who can wind up a partnership?
- any partner that hasn't been wrongfully dissociated - a legal rep of the last surviving partner - a court (through requested judicial supervision)
40
power of person winding up a partnership
- dispose of and transfer partnership property | - preserve partnership business to maximize value as a going concern
41
what's a statement of dissolution?
notice to 3rd parties that partnership has been dissolved after 90 days
42
priority of distributions in partnership?
creditors first then partners
43
When does an LP come into existence?
when filed
44
What partnership entities need to file with the state?
LP & LLC
45
How does a general partnership become an LP
partners vote to authorize transformation
46
limited partners' liability
- NOT personally liable for obligations of LLP | - personally liable for their own personal misconduct or negligence
47
Canceling an LLP's status?
- parters can voluntarily cancel it | - state can revoke LLP's status
48
What's an LP?
A partnership formed by two or more persons that has at least one general partner and one limited partner - limited partners have limited liability - general partners have personal liability
49
What needs to be on a certificate of limited partnership?
- name of limited partnership (including LP) - in state address - name of agent in that state - names and addresses of all general partners - statement of duration - signed by general partner
50
what kind of compliance does an LLP need with its filing to be formed?
substantial compliance
51
default rule for limited partner voting
a limited partner DOES NOT VOTE
52
what can a limited partner do without technically running the business?
- be an officer, director, shareholder of general partner - consult general partner on partnership affairs - act as a surety of the partnership - request to attend meetings - wind up partnership - propose or approve partnership matters
53
limited partner must give _____ written notice before withdrawing
6 months
54
how to terminate status as a general partner?
- voluntarily withdraw - remove the general partner - general partner goes bankrupt or becomes insolvent - death or incapacitation - business-entity partner is terminated
55
In an employer/employee relationship, the employer controls the employee's what?
"physical conduct of work"
56
actual express authority
principal creates authority through words (written or spoken) to convey authority to the agent
57
actual implied authority
principal uses words (written or spoken) to convey authority to the agent to take whatever steps necessary to achieve the principal's objectives
58
agent has actual implied authority to act within the _______________ or _______________
accepted business custom or general trade usage
59
apparent authority
principal's words cause a third party to reasonably believe the principal consents to having acts done on the principal's behalf by the agent
60
ratification
1. the principal has knowledge of the material terms of the contract and 2. the principal then accepts the contract's benefits
61
exceptions where principal is vicariously liable for agent's intentional torts:
1. conduct occurred within the general space and time limits of employment 2. agent was motivated in some part to benefit the principal 3. Act is of a kind that the agent was hired to perform
62
what duties does an agent have to a principal?
1. duty of care 2. duty of loyalty 3. duty to obey reasonable instructions
63
under duty of loyalty, what can an agent NOT do?
- usurp a business opportunity - take in secret profits - compete in a competing business with the principal
64
Who can never create apparent authority?
An undisclosed principal

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