Basics Flashcards
What is a partnership?
An association of 2+ ppl carrying on as co-owners of a business for profit
How is a partnership formed?
No formalities are required. Court looks at intent of parties to determine existence. If intent is unexpressed, courts consider 1) title to property, 2) designation of entity by parties, 3) amount of activity involved, 4) sharing of gross returns and profits.
Under SOF, if partners want an enforceable agreement for more than a year, writing is required
How is a partnership managed?
Absent an agreement to the contrary, all partners have an equal right to manage partnership, and share equally in profits/ surplus remaining after all liabilities.
How do partnerships share profits and losses?
Absent an agreement to the contrary, all partners share profits/losses and surplus after liability equally.
Liability of Partnership to 3P
Partnership is liable for 1) all debts incurred in the furtherance of partnership and 2)torts w/i scope of partnership. NOT liable for Ks entered into by partners who exceeded their authority.
Liability of General Partners to 3P
General Partners are jointly and severally liable for debts and obligations incurred by partnership.
Personally liable for 1) Ks entered into by a party in the scope of partnership. 2) Entire amt of partnership obligations (but entitled to contribution from other partners)
Liability of Newly Admitted partner to 3P
Only liable to extent of his capital contribution for debts incurred by partnership before his entry
What fiduciary duties do partners in a general partnership have?
Duty of Care and Loyalty. Also statutory duty of disclosure.
Partnership property
Everything partnership owns: capital contributed by members and property acquired in partnership transactions.
Partner’s ownership interest
Only assignable interest is 1) share of profits and surplus (personal property) and 2)right to receive distributions
(unless agreement provides to the contrary)
Dissolution
Change in legal relationship
Dissolution Methods
Unless agreement to the contrary, dissolution occurs 1) by act of partners (agreement, mutual assent, expulsion…) 2) operation of law (death) OR 3) court decree (breach, misconduct…)
Winding up
At dissolution, partner has authority to act as necessary to wind up partnership. Only has authority to do acts to terminate.
Distribution of Assets at Dissolution
At dissolution, partnership assets are converted to cash and distributed in the following order: 1) outside creditors 2) inside creditors 3) capital contributions 4) profits among partners
What happens if partnership assets are insufficient to pay partnership liabilities at dissolution?
Losses will be divided among partners
Partner Dissociation
Change in partner relationship caused by a partner ceasing to be associated with business.
How can a partner dissociate?
1) Notice of Partners express will to withdraw
2) Happening of an agreed up on event
3) Expulsion of partnership agreement
4) Bankruptcy of partner
5) Death/Incapactiy
6) Appt of Receiver
or
7) Termination of business entity
Limited Partnership (LP)
LP with both limited and general partners can be created to limit liability of some partners
LP formation
Certificate of LP must be executed and filed with sec of state with general partners and limited of partners. The business name must include “Limited Partnership”
LP Management
GP has right to manage business. LP forfeit right in exchange for limited liability
LP Liability to 3P
LP is personally liable for her contribution for LP’s obligations
GP Liability to 3P
GP is personally liable for all liabilities and obligations of LP
LLP
Registered LLP is a business designation exclusively for professionals. Name msut include LLP/RLLP. Can have both GP and LPs
How is an LLP formed?
Statement of qualification must be filed with sec of state. Must file annual reports
LLP partner liability to 3P
As an entity liable for all debts, obligations and liabilites of partnership. But a partner isn’t personally liable.
Each partner is liable for 1) their own torts and 2) acts of ppl they supervise.
LLC
Provides 1) same limited liability as corp SH but with 2) tax benefits of partnership.
No personal liability of members! Being taxed as a partnership is less costly than corp
LLC Formation
Articles of orgnaization must be filed with sec of state and summary must be published
LLC Managment
Members control business but can delegate in operating agreement. Mangemget rights can’t be transfered
Profits under LLC
Can be transferred and distributed equally unless agreement to contrary
Dissolution of LLC
1) Death
2) Resignation
3) Incompetence of member
