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Florida Bar Exam Topics > Corp/Agency/Partnerships > Flashcards

Corp/Agency/Partnerships Flashcards

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1
Q

Promoters?

A

one who causes a corp to be formed, organized & financed

  • Promoters can be liable for pre-incorporation transactions as long as the person they are entering into a contract with has no actual knowledge that the corporation does not exist.
  • Corporations, by default, are not liable for pre-incorporation transactions.
    • Exception: The corporation can adopt and ratify the transactions that the promoter entered into.
  • Fiduciary duty of disclosure: fully all mat’l facts concerning any assets they sell to the corp, including whether the promote is profiting off the sale
    • Breach of fiduciary duty, corp may either: (1) avoid the transaction; OR hold the promoter liable for the secret profits.
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2
Q

FORMATION OF CORPORATIONS:

Incorporation?

A
  1. To form a corporation, incorporators must file articles of incorporation with the Dep’t of State.
  2. AoI REQ: NAME of the Corporation (includes company, corp or inc. & not imply corp is a natural person, affiliated with gov or illegal); ADDRESS (corp’s principal office, registered office, & names & address of each incorporator); & # SHARES.
  3. AoI MAY: Name Initial Directors; Par value of shares (prices below which the corporation cannot issue the shares); Limit the duration of corp; how business run or operated.
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3
Q

FORMATION OF CORPORATIONS:

Defective Incorporation?

A

statutory compliance is insufficient for de jure status

  1. De Facto Corporation: may have been formed if:

GF, colorable attempt to comply; & Corporate principals, in GF, acted as if they were a corp

  1. Corporation by Estoppel: Will bar a 3rd party from: from saying its not a corp if they dealt w/ de facto corp as though it was a de jure (: organized in compliance w/ the statute) corp. In the same manner, a corp which has held itself out to be a corp cannot try to avoid liability under this theory.
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4
Q

FORMATION OF CORPORATIONS:

Corporate Purpose

A

Default rule: A Florida corporation’s “purpose” is to engage in any and all lawful business

  • The articles of incorporation narrow the default corporate “purpose.”
  • Ex: A corporation’s articles can state: “The purpose of this corporation is to buy and raise chickens.” If the corporation then wants to buy and raise cows, it cannot do that.
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5
Q

FORMATION OF CORPORATIONS:

Defective Incorporation?

A
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6
Q

FORMATION OF CORPORATIONS:

Ultra Vires

A

CoA brought by a SH against a BoD for undertaking an action beyond corp’s authority, as set for in AoI. [if corp narrows its purpose]

If a corporation takes an act outside its purpose, the act is said to be ultra vires (beyond the powers).

  • Shareholder (sue to enjoin the corporation’s ultra vires act), corp (sue to get an injunction against one of its managers) and state can sue.
  • Court may uphold such challenge if: 1) equitable to strike down the ultra vires action; and All affected parties are joined to the suit
  • Damages from such a challenge cannot include anticipated profits.
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7
Q

FORMATION OF CORPORATIONS:

Hierarchy of authority:

A

STATUTES ► ARTICLES OF INCORP ► BYLAWS

  • Bylaws: internal rules & regulations enacted by the corp to govern its actions & relation to SHs, directors & officers
  • Bylaws can be altered, amended, or appealed, by the BoD or SHs
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8
Q

FORMATION OF CORPORATIONS:

Tax Rate & Reporting

A
  • After an exemption of $25,000 of income, Florida corporations pay an income tax of 5.5% to Florida.
    • They may also pay federal income tax.
  • Florida corporations must file annual report with the Department of State.
    • If they don’t, they may be dissolved
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9
Q

Corporation can issue two basic kinds of securities:

A
  1. stocks, which are typically associated with ownership and control of a business (a corp must have stocks), and
  2. debt or bonds, which are typically associated with loans made to a business.
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10
Q

CORPORATE STOCK AND SECURITIES:

Stock

A

certificated interest that SH receive in consideration of the capital put into the corporation

  • Stocks can be divided into classes
  • 2 rights that at least one class of shares needs to have (rights don’t need to be held by the same class(es) of shares):
    1. Final Voting Rights; &
      1. Ability to receive the net assets
  • By default, Directors issues shares; however, AoI may allow SHs to issues shares

*

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11
Q

SHAREHOLDER RIGHTS AND DUTIES:

Shareholder Meetings

A
  • Florida requires Florida corps to hold an annual SH meeting
  • Directors or SHs who own 10% of the outstanding shares may call special meetings.
  • SHs generally must receive b/w 10-60 days’ notice before a meeting.
  • Shareholders may waive notice of the meeting by showing up or by sending a written objection stating that they did not have notice.
  • Instead of a meeting, shareholders may take action by unanimous written consent
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12
Q

SHAREHOLDER RIGHTS AND DUTIES:

Shareholder Voting Quorum

A

By default, a quorum of 50% is necessary before a vote may be taken at a meeting. The articles of incorporation may increase the quorum requirement to any level. Corp cannot lower quorum amount to any level.

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13
Q

SHAREHOLDER RIGHTS AND DUTIES:

Shareholder Agreements

A

Shareholders in corporations with 100 or fewer shareholders may unanimously enter into agreements that:

  1. eliminate the board of directors;
  2. limit the powers of the board of directors; &
  3. permit one shareholder, or any group of them, to exercise corporate powers
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14
Q

SHAREHOLDER RIGHTS AND DUTIES:

Inspection Rights

A
  • Shareholders may inspect corporate records if their purpose is to do anything that relates to their shareholder interest
  • The corporation may charge the shareholder reasonable fees
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15
Q

SHAREHOLDER RIGHTS AND DUTIES:

Shareholder Suits

A
  1. direct action: SH sues on his own behalf to redress a personal injury
  2. derivative action: SH sues on behalf of corp to redress a wrong to corp when it fails to enforce its right. [equitable action & damages go to corp]
    • Before a derivative action is filed, a shareholder must make “demand” on the board unless demand would be futile or delay would lead to irreparable injury
    • Reimbursement for litigation expenses:
      • Π SH: when corp recovers a substantial benefit
      • Corp: Π SH uses the suit for improper purpose (subjective) or there was no reasonable cause (objective)
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16
Q

SHAREHOLDER RIGHTS AND DUTIES:

Shareholder Duties to Each Other

A
  • Shareholders generally do not have duties to other shareholders.
  • A shareholder may owe fiduciary duties to other shareholders when the controlling shareholder seeks to restrict minority shareholders or when they aretrying to eliminate them from the corporation entirely
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17
Q

DIRECTORS AND OFFICERS:

Structure of the Board of Directors

A
  • natural person
  • 18+ years old
  • corp must have at least 1
  • non-SH may serve
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18
Q

DIRECTORS AND OFFICERS:

Indemnification of Directors and Officers

A
  1. Corps MUST indemnify directors for reasonable costs incurred in successfully defending a claim.
  2. Corps MAY indemnify directors for all breaches of duty of care as long as they acted in good faith
  3. Corporations MAY NOT indemnify directors for breaches of the duty of loyalty
    * Indemnity may take the form of advances of litigation expenses or liability insurance
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19
Q

OTHER BUSINESS ENTITIES AND TERMINOLOGY:

Definitions:

close corporation?

professional corp

A
  • closely held corporation; a corporation with relatively few shareholders
  • corporation that provides professional services
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20
Q

OTHER BUSINESS ENTITIES AND TERMINOLOGY:

Definitions:

foreign corporation?

A

any corp incorporated in outside of Florida

  • only domestic when incorped in Florida
  • foreign corporation must incorp with the state of Florida before doing business in Florida
  • If it fails to do so, it cannot sue in Florida courts
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21
Q

OTHER BUSINESS ENTITIES AND TERMINOLOGY:

Tax

A
  • For tax purposes, a corporation is by default a “C” corporation, which means that it is taxed as a corporate entity.
  • Under some circumstances, a corporation may elect to avoid this “double taxation” and choose to be taxed like a partnership; if it does this, it becomes an “S” corporation.
  • To qualify for this “pass through” status, a corporation can have no more than 100 shareholders, and the shareholders may include only individuals, estates, and and a handful of entities that are not a corporation.
  • Corp may not have more than 1 class of stock.

*

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22
Q

OTHER BUSINESS ENTITIES AND TERMINOLOGY:

Limited Liability Companies (LLCs)

A
  • LLC ‘s operation & agreements among owners & managers, is generally more flexible than corps.
  • Member of LLC typically not liable for debts of LLC.
  • Manager of LLC typically not liable for debts of LLC.
  • By default, members of LLCs share profits and losses in proportion to their contributions to the LLC
  • Sale or other assignment of an LLC membership typically does not give transferee a right to participate in the management of an LLC.
  • Ex: While studying, focus on rules that are definite in the statute.
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23
Q

CORPORATE STOCK AND SECURITIES:

Issuance

A
  • Must a corporation issue all the shares that its articles of incorporation authorize? _______.
  • By default, Directors determines whether consideration for issued shares is adequate
  • Pre-incorporation subscription (must be in writing) for shares is irrevocable for 6 months
    • Exceptions: Parties can agree to longer or shorter periods of time; All subscribers can release each other
    • If a subscriber defaults, corp has the right to:
      • Attempt collect $$$ from subscriber; OR
      • Sell shares to another & recover difference
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24
Q

CORPORATE STOCK AND SECURITIES:

Distributions

A

transfer by corp to SHs of $$$ or property

  • Dividend most common type; may be cumulative, noncumulative, or partially cumulative
  • Record date: If board of directors does not decide on a dividend record date, date will be date directors issue dividend
  • Corp may not make distributions if:
    • unable to pay the debt that arise in the usual course of business (broader test); or
    • would immediately cause corp to have less $$$ than its current debts (more specific test).
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25
Q

CORPORATE STOCK AND SECURITIES:

Distributions:

Some classes of shares may have priority in receiving distributions. These shares are called?

A

preferred shares, as opposed to common shares.

  • Priority of claims upon liquidation of the corporation:
    1. Creditors
    2. preferred shares
    3. common shares
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26
Q

CORPORATE STOCK AND SECURITIES:

Securities Fraud and Insider Trading

A
  • SEC rule 10b-5 governs fraudulent purchase or sale of securities
  • Insiders to a corporation may be liable for trading using material non-punlic info
  • Traders in possession of inside info about a corp that is material are presumed to have used it while trading unless they are selling their shares according to a prewritten plan of sale
  • trader under duty to avoid using material inside info
  • rules only apply to public shares.
27
Q

CREATING THE AGENCY RELATIONSHIP?

A
  1. Assent: both parties agree to the relationship
  2. Benefit: agent agrees to work for the principal’s benefit
  3. Control: agent agrees to to work subject to the control
  • Consideration is not needed
  • When one or more parties disclaim the creation of an agency relationship, courts will look to manifestations of assent, which can range from a formal letter, to spoken words, to physical actions.
28
Q

CREATING THE AGENCY RELATIONSHIP:

Who cannot be a principal?

A
  • Minors
  • Under influence of drugs or lacks mental capacity
  • unincorporated association
    • A book group, a bird-watching group, or a collection of folks who like to hang out at coffee shops lack legal capacity.
29
Q

CREATING THE AGENCY RELATIONSHIP:

Who can be an agent?

A

Any person or entity who has minimum capacity

  • A minor may serve as an agent.
  • Types of Agents:
    • Servants/employees: The employer has the right to control the agent’s physical conduct of work.
    • Independent contractors: The principal does not control or have the right to control the agent’s physical conduct of work.
      • Characteristics of an independent contractor: Maintain a high level of independence; Free to work for other people; Paid on a fixed fee; Has his own tools
30
Q

Formation of a General Partnership?

A
  • A general partnership requires 2+ “persons.”
    • Person: any legal entity (an individual, a corporation or other legal entity).
  • For there to be a partnership, the persons must carry on a for-profit business as co-owners
  • Doesn’t require a written agreement or filing with the Department of State.
  • Presumption of a partnership if they share profits; even if they state in writing they aren’t partners
    • Statutory exceptions: rent; Annuity Payment; Debt; wages; Interest; Goodwill payments
    • Without an agreement to the contrary, partners share profits and losses equally
31
Q

joint venture?

A

partnership for a specific purpose (or limited time)

32
Q

Purported Partner?

A

For a purported partner to be liable for the debts of a partnership:

  1. He must make or consent a representation; and
  2. 3rd party must detrimentally rely
33
Q

RIGHTS AND DUTIES OF PARTNERS:

Fiduciary Duties of Partners:

Loyalty

A

Under FRUPA, a partner can violate the duty of loyalty in only 3 ways:

  1. Steal from the partnership (includes taking business opportunity);
  2. Compete with partnership; &
  3. Self-dealing
  • partnership agreement cannot eliminate the duty of loyalty.
    • Note 2: “All partners or a number or percentage specified in the partnership agreement may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty.” Fla. Stat. § 620.8103.
34
Q

RIGHTS AND DUTIES OF PARTNERS:

Fiduciary Duties of Partners:

Care

A
  • The standard of care under FRUPA is to avoid grossly negligent or reckless conduct, intentionally negligent misconduct, or a knowing violation of a law.
  • A partnership agreement may reduce this duty further as long as the reduction is not unreasonable
35
Q

RIGHTS AND DUTIES OF PARTNERS:

Fiduciary Duties of Partners:

Good Faith

A

Partnership agreement cannot limit the duty of good faith and fair dealing.

  • The partnership agreement cannot the duty of good faith and fair dealing.
  • A partnership agreement may “prescribe the standards by which the performance of the obligation is to be measured” as long as the agreement is not manifestly unreasonable
36
Q

RIGHTS AND DUTIES OF PARTNERS:

Partnership Accounting

A
  • Background: Partners in a partnership are deemed to have capital accounts. Basically, capital accounts are accounts that the partnership keeps for each partner, reflecting money that the partners have contributed, gains that they’ve received but haven’t had distributed yet, and losses that have been assessed to them.
  • A partner cannot demand a distribution of partnership gains.
37
Q

RIGHTS AND DUTIES OF PARTNERS:

Partnership Interest

A
  • By default, a partner can unilaterally transfer her right to profits to a 3rd party.
  • By default, a partner cannot unilaterally transfer his right to management to a third party.
  • A charging order is lien on the partner’s partnership interest.
38
Q

RIGHTS AND DUTIES OF PARTNERS:

Partnership Property

A
  • **Property acquired in name of partnership: ** partnership property
  • Property purchased with partnership assets or credit: presumed partnership property
  • “Partnership interest”—right to receive distributions from partnership—is individual property
  • By default, a partner may use or possess partnership property only for the purpose of partnership business
39
Q

RIGHTS AND DUTIES OF PARTNERS:

Adding a New Partner

A

In order to become a new partner, all partners must approve that person’s partnership status.

40
Q

RIGHTS AND DUTIES OF PARTNERS:

Management Rights

A

By default, each partner gets one vote in the ordinary course of business in the partnership, and a majority is sufficient to bind the partnership.

41
Q

RIGHTS AND DUTIES OF PARTNERS:

Partnership Services

A

A partner is not entitled to payment for services rendered during the ordinary operation of the partnership.

  • Exception: A partner may be paid for winding up the partnership.
  • Ex: Bob, Sally, and Pete form a partnership. Bob contributes $7000, Sally contributes $20,000, and Pete contributes $3000. Sally does all the work of the partnership, performing a management role that would have cost the partnership approximately $80,000 if it had to find a third party to do it. The partnership makes $300,000 in its first year. How much is Sally’s partnership account credited? $20,000 + $100,000
42
Q

DISSOCIATION OF A PARTNER:

Events Causing a Partner’s Dissociation

A
  • A partner who gives express will to the partnership to dissociate has dissociated
  • The happening of an event specified in the partnership agreement
  • Partners expel partner under partnership agreement
  • Partner is expelled by the court
  • Partner is expelled by all partners if remaining in partnership with partner would be against law
  • Partner’s bankruptcy
  • Partner dies
  • Partner is declared incapable
  • An entity that is a partner terminates
43
Q

DISSOCIATION OF A PARTNER:

Dissociation Rights and Powers

A
  • A partner has the power to dissociate from the partnership at any time, even if is wrongful to do so.
  • Ex: Bob, Sally, and Pete enter into a partnership. Their agreement contains the following provision: “We all agree that the partnership will last for 10 years, and none of us is permitted to withdraw from the partnership within that 10-year period. Does Pete have the power to withdraw from the partnership after 3 years? Yes, give notice of express will
  • The partnership agreement cannot prevent a partner from dissociating from a partnership.
  • The partnership agreement cannot prevent partnership or a group of partners from seeking judicial expulsion of a partner.
44
Q

DISSOCIATION OF A PARTNER:

Wrongful Dissociation

A
  • At-will partnership: any partner can leave at any time. Leaving is not wrongful.
  • Partnership for a term: partnership for a particular TIME
  • Partnership for an undertaking: partnership for a particular purpose

Dissociation from a partnership for a term or undertaking is wrongful if:

* Partner withdraws early from the term
* Partner is expelled by court order
* Partner is expelled because of bankruptcy
* Partner leaving is an entity that decides to terminate on its own * If a partner wrongfully dissociates from a partnership, the partnership ordinarily has what remedy? Damages
45
Q

DISSOCIATION OF A PARTNER:

Effects of Dissociation

A
  • The dissociation of a partner does not cause the automatic dissolution and winding up of a business.
  • A dissociated partner generally does not have the right to continue to manage the business.
  • If partnership continues operating after a dissociation, it must by default buyout interest of the dissociated partner w/in 120 days of written demand for payment.
  • To do this, partnership is valued as the greater of the value of its assets or the value of business as a going concern.
  • Note 5: Even a wrongfully dissociating partner is ordinarily entitled to her share of the partnership’s value. The damages owed by the partner simply offset the payments due.

You may have learned in law school about rules that prevent a wrongful partner from receiving value for the “good will” of the business. That rule is an old UPA rule and does not apply in Florida.

However, FRUPA provides: “A partner who wrongfully dissociates before the expiration of a definite term or the completion of a particular undertaking is not entitled to payment of any portion of the buyout price until the expiration of the term or completion of the undertaking, unless the partner establishes to the satisfaction of the court that earlier payment will not cause undue hardship to the business of the partnership. A deferred payment must be adequately secured and shall bear interest.” Fla. Stat. § 620.8701.

  • Example 11: Bob and Pete were equal partners in a partnership for a 10-year term, and Bob wrongfully dissociated after 2 years. The partnership is estimated by an accountant to have assets worth $50,000 and to be worth $60,000 if sold as a business. Pete was able to replace Bob as a partner, but at a cost to the partnership of $5,000. Ignoring interest, how much does the partnership owe Bob? $25,000. When does it have to pay this amount to Bob? After 10 years, unless no undue hardship
46
Q

DISSOCIATION OF A PARTNER:

Post-Dissociation Actions

A

After dissociating, a partner can still bind the partnership to a third party if the third party:

  • Reasonably believes the partner is still a partner
  • Doesn’t have actual notice
  • Isn’t deemed to have notice
    • (Limited to 1 year after dissociation)
47
Q

The Authority of a Partner

A

Authority is the power of partners to bind the partnership with respect to 3rd parties.

  • Actual authority: “Each partner is an agent of the partnership for the purpose of its business.”
  • Apparent authority: “An act of a partner . . . for apparently carrying on in the ordinary course of partnership business or business of the kind carried on by the partnership, in the geographic area in which the partnership operates, binds the partnership unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had received a notification that the partner lacked authority.” Id.
    • A partner who has no actual authority but who does have apparent authority may still bind the partnership if acting within the ordinary scope of business of the partnership.
48
Q

RELATIONSHIPS BETWEEN PARTNERSHIPS AND THIRD PARTIES:

The Authority of a Partner

A

Statements of authority are public documents filed with a state office

  • Ex: Sarah and Charlie are engaged in a partnership, XYZ Real Estate, that buys and sells real estate for profit. They file a “statement of authority” with the state, under Fla. Stat. § 620.8303, that declares “Charlie has no authority to make any purchases on behalf of XYZ Real Estate.” Charlie then forgets this and makes a large purchase of office supplies from a local office- supply store, using the partnership’s account at that store. Does Charlie’s purchase bind the partnership? Yes
49
Q

RELATIONSHIPS BETWEEN PARTNERSHIPS AND THIRD PARTIES:

Partner Notice

A

If a partner receives legal notice of a fact, the partnership is deemed to be on notice of that fact unless the partner is involved in a fraud against the partnership.

50
Q

RELATIONSHIPS BETWEEN PARTNERSHIPS AND THIRD PARTIES:

Partner Torts

A
  • “A partnership is liable for loss or injury caused . . . [by] a partner acting in the ordinary course of business of the partnership or with authority of the partnership.”
  • “If, in the course of the partnership’s business . . . a partner receives . . . money or property of a person who is not a partner, and the money or property is misapplied by a partner, the partnership is liable for the loss.”
51
Q

RELATIONSHIPS BETWEEN PARTNERSHIPS AND THIRD PARTIES:

Partner Liability

A

Partners in a general partnership are liable for the obligations of the partnership.

  • Ex: Adam and Barbara enter into a partnership to deliver flowers. Adam, driving the partnership’s truck to make a delivery, carelessly hits another car, causing significant property damage. Is Barbara jointly and severally liable with Adam for Adam’s negligence? Yes.
  • Example 19: Adam and Barbara enter into a partnership to deliver flowers. Adam borrows $10,000 from a local bank on behalf of the partnership, and then buys a bunch of bad flowers that he cannot sell; as a result, the partnership has no assets and still has a $10,000 loan to repay. Is Barbara jointly and severally liable with Adam for the loan? Yes. Is Barbara still liable, in the last two examples, if she dissociates from the partnership after the debt is incurred? Yes.
52
Q

RELATIONSHIPS BETWEEN PARTNERSHIPS AND THIRD PARTIES:

Recovery Against Partners

A

In general, without the partner’s consent, a creditor must pursue and exhaust remedies from the partnership before seeking a judgment against an individual partner.

  • Note 7: Common-sense exceptions exist to this rule. For example, FRUPA provides: “A court grants permission to the judgment creditor to proceed against or otherwise levy or execute against the assets of a partner based on a finding that partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court’s equitable powers.” Fla. Stat. § 620.8307(4)(d).
53
Q

PARTNERSHIP CHANGES AND TERMINATION:

Merger

A

A partnership MAY merge with another organization, such as another partnership or a limited partnership.

54
Q

PARTNERSHIP CHANGES AND TERMINATION:

Conversion

A
  • A partnership may convert to a limited partnership if 100% of the partners approve the conversion. To complete the conversion, the partnership must file a statement with the state.
  • Liability for an existing obligation of the partnership remains upon conversion to a limited partnership.
  • In addition, a former general partner may be liable for up to 90 days after the conversion when dealing with someone who thinks the partner is still a general partner.
55
Q

PARTNERSHIP CHANGES AND TERMINATION:

Dissolution, Winding Up, and Termination

A
  • Dissolution: There will be a winding up and termination
  • Winding up: The process of closing down the business
  • Termination: The legal event that occurs that means that the partnership no longer exists
56
Q

PARTNERSHIP CHANGES AND TERMINATION:

Dissolution, Winding Up, and Termination:

Events that Trigger a Dissolution and Winding up

A
  • Partnership at Will: Any dissociation will by default lead to a dissolution, though the partners can agree to continuation agreement
  • Partnership for a Term or Undertaking:
    • Term expires or the undertaking is completed
    • All partners agree to dissolve
    • After dissociation, more than 50% agree to dissolve
  • Any Partnership:
    • Some event in the agreement happens
    • It would be illegal to continue the partnership
    • Judicial decree upon application by a partner
    • Judicial decree on application by a transferree of someone’s property interest
  • Otherwise, the partnership continues and the dissociating partners must be “bought out.”
  • General exception: All partners may agree that there will be a continuation of the business, which will stop dissolution. (Fla. Stat. § 620.8802)
57
Q

PARTNERSHIP CHANGES AND TERMINATION:

Dissolution, Winding Up, and Termination:

The Process of Winding Up

A
  • Any partner or the last surviving partner’s legal representative may wind up a partnership
  • Any partner or legal representative of partner may ask for judicial supervision of a winding up
  • For reasonable amount of time a person winding up a partnership’s business may preserve the partnership business or property
  • Priority of claims in liquidation:
    • First: Creditors
    • Followed by: Partners
  • Priority of partners who are also creditors, in respect of their debts: treated like other creditors
    • Ex: Adam and Barbara are equal partners in a partnership. Adam initially contributed $20,000 to the partnership, and Barbara initially contributed $80,000. They agreed to split profits and losses equally. The partnership is dissolved, and the partnership has $200,000 after all its assets are liquidated.
58
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Liability Partnerships

A
  • Limited Liability Partnerships (LLPs) are very easy to understand. They are identical to general partnerships except in three very simple ways:
    1. General partners get limited liability protection
    2. Must file with state
    3. The name of the partnership must indicate its limited liability status
  • Otherwise, the law of LLPs is just the law of general partnerships.
59
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Partnerships:

Distinguish

A
  1. Name: must include Limited Partnership or Limited or abbreviations LP or LTD
  2. Types of Partners: 2 types of partners
    • General: Active in managing of business and liable for its debts
    • Limited: Passive role, no liability
      • In Florida, if a limited partner participates in the management of a limited partnership, she will not be liable for partnership obligations.
      • Tip: Florida’s limited-partnership laws are based on the 2001 version of the Uniform Limited Partnership Act (ULPA 2001) (“Florida Revised Uniform Limited Partnership Act” or “FRULPA”). This act is much simpler than the previous versions of the Revised Uniform Limited Partnership Act (RULPA). For the Florida bar exam, you can ignore many complications in those prior acts.
60
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Liability Limited Partnerships:

Distinguish

A
  • A Limited Liability Limited Partnership (LLLP) is like a limited partnership, except even the general partners have limited liability
  • Its name must include the words Limited Liability Limited Partnership or the abbreviation LLLP
61
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Partnerships:

Becoming a Limited Partner

A

There are two common ways to become a limited partner:

  1. By partnership agreement
  2. Consent of all the partners
  • Other ways exist but involve more complicated schemes like mergers.
62
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Partnerships:

Becoming a General Partner

A

There are two common ways to become a general partner:

  1. By partnership agreement
  2. Consent of all the partners
  • Other ways exist but involve more complicated schemes like mergers.
63
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Partnerships:

Sharing of Profits and Losses

A

By default: “Profits and losses of a LP shall be allocated among the partners on the basis of the value, as stated in required records when LP makes the allocations, of the contributions LP has received from each partner.”

  • Ex: George is the general partner of ABC Services Ltd., a Florida limited partnership. George contributed $1,000 to the partnership. Louis, Lucy, and Linda are all limited partners, and they each contributed $3,000 to the partnership. George manages all the operations of the partnership. George will share 10% of the partnership’s profits and losses, Louis will share 30%, Lucy will share 30%, and Linda will share 30%.
  • Partners can change this default.
  • By default, distributions are given to partners based on calculating what their contributions have been
  • By default, a partner does not have a right to receive a distribution upon dissociation
64
Q

OTHER TYPES OF PARTNERSHIPS:

Limited Partnerships:

Derivative Actions

A

Partners in a limited partnership can bring derivative suits. First, they need to make demand on the general partners unless futile.

Florida Bar Exam Topics (13 decks)

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