Business Associations - Partnerships Flashcards
Partnership Formation?
- No formalities required.
- Intent to be co-owners of business required.
- Agency-like relationship.
Parntership Assets (Titled and Untitled)?
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
Five Partnership Rights?
- Ownership of property (owned by partnership not individual partners)
- Use of property for benefit of partnership
- Equal control (vote) and management but can’t transfer property
- Profits and losses (default is shared equally) but no right to salary (except for winding up)
- Indemnification for liabilities and expense incurred on behalf of partnership.
Six Partnership Duties?
- Duty of Care
- Duty of Loyalty
- Duty to Disclose
- Duty to Account
- Duty of Obedience
- Duty of Good Faith/Fair Dealing
Partner’s Duty of Care?
Must use reasonable care. BJR applies in most jurisdictions.
Partner’s Duty of Loyalty?
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
Partner’s Duty to Disclose?
Must disclose any material fact regarding partnership business.
Partner’s Duty to Account?
May bring actions against other partner for losses caused by breach and may disgorge breaching partner’s profits.
Partner’s Duty of Obedience?
Partners are agents of the partnership and must act in accordance with their authority as a partner.
Partner’s Duty of Good Faith/Fair Dealings?
Implied (as in contracts)
Individual Partner Relationship with Third Parties?
- Personal liabilty for debts
- Contract Authority (actual, apparent, and estoppel)
- Torts - joint and severally liable
Partnership Liability?
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.
Partnership Dissociation?
A Partner leaves.
Partnership Dissolution?
Partnership ceases.
Winding Up of Partnership?
Compensation allowed.
Priority of Distribution:
1. Creditors
2. Partner loans
3. Capital contributions
4. Profits and surplus
Formation of Limited Partnership?
- File certificate with State signed by all general partners
- Name of partnership
- Names and addresses of agents and each general partner
- Maintain records
Limited Partnership Rights and Duties?
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
Limited Partnership Liabilities?
General Partner: Same as general partnership
Limited Partner: Not liable beyond capital contribution
Dissolution of Limited Partnership?
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
Winding Up of Limited Partnership?
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
Limited Liability Partnership Overview
- Formed by filing statement
- Limited Liability Partners have no personal liability
- Duty of Care and Duty of Loyalty owed
- Dissociation and dissolution similar to regular partnership
Limited Liability Corporation Overview
- Formed by filing articles of organization
- No personal liability beyond capital contribution but court may pierce the veil
- Profits and losses based on contributions
- Management interest not freely transferable (limited liquidity)
- Duty of Care and Duty of Loyalty owed
- 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.
