Business Structures Flashcards
Must have two or more partners. Must intend to engage in business for profit. Life of partnership is of limited duration in most cases. Agency/fiduciary relationship is created. Partnership interest is always considered personal property.
Business Structures
Yes; corporations and other partnerships can become partners of a partnership
Business Structures
Agreement can be very informal - either ORAL; IMPLIED or WRITTEN
Intent is to make a profit
Business Structures
Must be WRITTEN if partnership activity falls within Statute of Frauds:
A. Can’t be completed in 1 year
B. Even if partners reside in different states; not necessary unless within Statute of Frauds
C. Neither dollar amount of transactions nor purchasing of real estate has bearing on whether partnership agreement must be in writing
Business Structures
Profit sharing is equal by default
A. Unless partnership agreement says otherwise
B. Unless specified; sharing of losses follows same pattern as sharing of profits
Business Structures
Joint Liability - Partners are collectively liable for debts/torts
Several Liability - Partners are individually liable for debts/torts
Business Structures
Creditors must go after partnership assets first before suing partners individually
Business Structures
General Partners have joint control over the management of the partnership and its affairs
Unanimous vote needed to change the structure of the partnership
Each partner has full right to inspect partnership accounting and business
Partner has the authority to assign their interest to another partner
Business Structures
- Other party gets that partner’s share of the profits and/or capital contribution.
- Does NOT give assignee authority to vote on partnership business
- Assignee does NOT have right to inspect partnership books
- Assignor still maintains liability
- Partner does NOT have the right to assign their interest in partnership property or allow partner’s creditors to attach a lien.
Business Structures
Has authority to bind the partners to a contract.
Business Structures
A third party reasonably believes partner has authority to bind partnership to contract
Cannot use apparent authority to add a new partner
Cannot use apparent authority to sell or bind partnership assets
Business Structures
Partner not liable assuming notice given.
Notice must be given to nullify apparent authority
People who had knowledge of their role must be personally notified
Public must be notified
Business Structures
Old partners: Jointly and severally liable unless creditors grant novation
New partners: Only capital account at risk on preceding debts. For subsequent debts; they are joint and severally liable.
Business Structures
Partner’s estate gets share of partnership profits and capital account
Estate does NOT get any partnership assets
Remainder of partners own partnership assets
Heirs of decedent are not added as partners unless remaining partners unanimously agree
Business Structures
- Creditors get paid; Partners can also be creditors
- Distributions in arrears get paid
- Partners get return of Capital accounts
- Any remaining distributions
Note: NO documents need to be filed with state to dissolve general partnership.
Business Structures
Governed by state L.P. laws
Must file L.P. certificate with Sec. of State
Only General Partners must be listed
Future additions or subtractions of G.P. require certificate to be updated with state
Business Structures
Unlike G.P.; L.P. profits/losses are split according to capital contributions by default
Business Structures
True.
A Limited Partner; however; cannot also be a General Partner and maintain limited liability.
Business Structures
No. Limited Partners are do not have a fiduciary responsibility to Limited Partnership
Business Structures
- Right to inspect records of the business.
- Can still vote on partnership business without losing limited liability
- Can consult and advise partnership without losing limited liability (assuming they don’t actually make the decisions)
Business Structures
