Business Associations - Partnerships

Question 1

Partnership Formation?

Answer 1

1. No formalities required.
2. Intent to be co-owners of business required.
3. Agency-like relationship.

Question 2

Parntership Assets (Titled and Untitled)?

Answer 2

Titled Property (under RUPA):
* If titled in partnership name; or
* Purchased with partnership funds

Untilted Property (based on parties’ intent):
* Use of partnership funds;
* Close relationship/use of property partnership business operations; or
* Listed as asset in books.

RUPA = Revised Uniform Partnership Act

Question 3

Five Partnership Rights?

Answer 3

1. Ownership of property (owned by partnership not individual partners)
2. Use of property for benefit of partnership
3. Equal control (vote) and management but can’t transfer property
4. Profits and losses (default is shared equally) but no right to salary (except for winding up)
5. Indemnification for liabilities and expense incurred on behalf of partnership.

Question 4

Six Partnership Duties?

Answer 4

1. Duty of Care
2. Duty of Loyalty
3. Duty to Disclose
4. Duty to Account
5. Duty of Obedience
6. Duty of Good Faith/Fair Dealing

Question 5

Partner’s Duty of Care?

Answer 5

Must use reasonable care. BJR applies in most jurisdictions.

Question 6

Partner’s Duty of Loyalty?

Answer 6

Further the partnership’s interests over her own.
1. No conflicts of interest - No Self-Dealing
2. No conflicts of interest - No usurping the partnership’s opportunities
3. No conflicts of interest - No secret profits
4. No conflicts of interest - No competing with the partnership.

Similar to Agent’s Duty of Loyalty

Question 7

Partner’s Duty to Disclose?

Answer 7

Must disclose any material fact regarding partnership business.

Question 8

Partner’s Duty to Account?

Answer 8

May bring actions against other partner for losses caused by breach and may disgorge breaching partner’s profits.

Question 9

Partner’s Duty of Obedience?

Answer 9

Partners are agents of the partnership and must act in accordance with their authority as a partner.

Question 10

Partner’s Duty of Good Faith/Fair Dealings?

Answer 10

Implied (as in contracts)

Question 11

Individual Partner Relationship with Third Parties?

Answer 11

1. Personal liabilty for debts
2. Contract Authority (actual, apparent, and estoppel)
3. Torts - joint and severally liable

Question 12

Partnership Liability?

Answer 12

Civil liablity (joint and several) extends to:
1. Contracts within the scope and with authority
2. Torts of partners and employees within the course of partnership business or made with authority

Incoming partners not personally liable for debts incurred prior to joining the partnership.

Outgoing partners remain personally liable for debts incurred prior to dissociating unless novation or release.

Question 13

Partnership Dissociation?

Answer 13

A Partner leaves.

Question 14

Partnership Dissolution?

Answer 14

Partnership ceases.

Question 15

Winding Up of Partnership?

Answer 15

Compensation allowed.
Priority of Distribution:
1. Creditors
2. Partner loans
3. Capital contributions
4. Profits and surplus

Question 16

Formation of Limited Partnership?

Answer 16

1. File certificate with State signed by all general partners
2. Name of partnership
3. Names and addresses of agents and each general partner
4. Maintain records

Question 17

Limited Partnership Rights and Duties?

Answer 17

General Partner: Same as general partnership
Limited Partner: No right to act on behalf of the partnership and owe no duties to partnership; but have right to full accounting and inspection

Question 18

Limited Partnership Liabilities?

Answer 18

General Partner: Same as general partnership
Limited Partner: Not liable beyond capital contribution

Question 19

Dissolution of Limited Partnership?

Answer 19

Prompted by:
1. Time specified on certificate
2. Written consent of all
3. Dissociation of gneral partner
4. 90 days after dissociation of last limited partner
5. Judicial decree

Question 20

Winding Up of Limited Partnership?

Answer 20

Priority of Distibution:
1. Creditors - both outside and partner loans
2. Partners and former partners distribution previously required under agreement
3. Capital Contributions
4. Partners

Question 21

Limited Liability Partnership Overview

Answer 21

1. Formed by filing statement
2. Limited Liability Partners have no personal liability
3. Duty of Care and Duty of Loyalty owed
4. Dissociation and dissolution similar to regular partnership

Question 22

Limited Liability Corporation Overview

Answer 22

1. Formed by filing articles of organization
2. No personal liability beyond capital contribution but court may pierce the veil
3. Profits and losses based on contributions
4. Management interest not freely transferable (limited liquidity)
5. Duty of Care and Duty of Loyalty owed
6. Dissolution - split jurisdiction - Traditional rule is any dissociation of any LLC member; Modern trend is only if specified event, consent of all, 90 days after no LLC members left, or juducial/adminstrative decree.