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Bar Prep > Agency & Partnerships > Flashcards

Agency & Partnerships Flashcards

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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
Q

What is dissociation

A

When a partner ceases to be associated with a partnership

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26
Q

Dissociation can be ________ or __________

A

voluntary (may give notice), involuntary

27
Q

7 forms of involuntary dissociation

A
  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
Q

T/F - if a partner is dissociated the partnership automatically ends

A

FALSE

29
Q

if a partnership continues after a partner is disassociated, what does it need to do?

A

buy out the dissociated partner’s interest

30
Q

A partner is ___________, ____________, & __________ liable for all partnership obligations

A

personally
jointly
& severally

31
Q

every partner is an ________ of the partnership

A

agent

32
Q

implied authority

A

exists based on the partner’s reasonable belief that an action is necessary to carry out express authority

33
Q

apparent authority

A

based on interactions between the principal and a 3rd party

34
Q

creditors must do what first when going after a partnership

A

FIRST - exhaust partnership’s funds

THEN - can go after individual partners’ assets

35
Q

liability of incoming partners

A

not personally liable for contract or tortious obligations incurred before they became partner

36
Q

liability of outgoing partners

A

may be personally liable for partnership obligation that occurred after they were disassociated

37
Q

2 steps for termination of partnership

A
  1. Dissolution

2. Winding UP

38
Q

3 ways to dissolve partnership

A
  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
Q

Who can wind up a partnership?

A
  • any partner that hasn’t been wrongfully dissociated
  • a legal rep of the last surviving partner
  • a court (through requested judicial supervision)
40
Q

power of person winding up a partnership

A
  • dispose of and transfer partnership property

- preserve partnership business to maximize value as a going concern

41
Q

what’s a statement of dissolution?

A

notice to 3rd parties that partnership has been dissolved after 90 days

42
Q

priority of distributions in partnership?

A

creditors first then partners

43
Q

When does an LP come into existence?

A

when filed

44
Q

What partnership entities need to file with the state?

A

LP & LLC

45
Q

How does a general partnership become an LP

A

partners vote to authorize transformation

46
Q

limited partners’ liability

A
  • NOT personally liable for obligations of LLP

- personally liable for their own personal misconduct or negligence

47
Q

Canceling an LLP’s status?

A
  • parters can voluntarily cancel it

- state can revoke LLP’s status

48
Q

What’s an LP?

A

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
Q

What needs to be on a certificate of limited partnership?

A
  • 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
Q

what kind of compliance does an LLP need with its filing to be formed?

A

substantial compliance

51
Q

default rule for limited partner voting

A

a limited partner DOES NOT VOTE

52
Q

what can a limited partner do without technically running the business?

A
  • 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
Q

limited partner must give _____ written notice before withdrawing

A

6 months

54
Q

how to terminate status as a general partner?

A
  • voluntarily withdraw
  • remove the general partner
  • general partner goes bankrupt or becomes insolvent
  • death or incapacitation
  • business-entity partner is terminated
55
Q

In an employer/employee relationship, the employer controls the employee’s what?

A

“physical conduct of work”

56
Q

actual express authority

A

principal creates authority through words (written or spoken) to convey authority to the agent

57
Q

actual implied authority

A

principal uses words (written or spoken) to convey authority to the agent to take whatever steps necessary to achieve the principal’s objectives

58
Q

agent has actual implied authority to act within the _______________ or _______________

A

accepted business custom or general trade usage

59
Q

apparent authority

A

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
Q

ratification

A
  1. the principal has knowledge of the material terms of the contract and
  2. the principal then accepts the contract’s benefits
61
Q

exceptions where principal is vicariously liable for agent’s intentional torts:

A
  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
Q

what duties does an agent have to a principal?

A
  1. duty of care
  2. duty of loyalty
  3. duty to obey reasonable instructions
63
Q

under duty of loyalty, what can an agent NOT do?

A
  • usurp a business opportunity
  • take in secret profits
  • compete in a competing business with the principal
64
Q

Who can never create apparent authority?

A

An undisclosed principal

Bar Prep (9 decks)

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