Creation of Partnerships

Question 1

What is a general partnership?

Answer 1

An association of two or more persons to carry on as co-owners a business for profit.

Intent to form a partnership is not required.

Question 2

What factors to consider whether a general partnership exists?

Answer 2

• Sharing of profits – raises a presumption of a partnership
• Right to participate in control – if doesn’t exist, can be used to rebut above presumption

Question 3

Voting in a general partnership

Answer 3

All partners have equal votes.

Matters in the ordinary course: majority vote

Matters outside ordinary course: unanimous

Question 4

Is a partner entitled to compensation for services rendered?

Answer 4

No, unless it’s for reasonable compensation for services rendered in winding up the partnership.

Question 5

How are profits and losses shared in a general partnership (unless agreed otherwise)?

Answer 5

Profits are shared equally by number.

Losses are shared in the same manner as profits

Question 6

What is a limited partnership?

Answer 6

Has 1+ general partner and 1+ limited partner.

Formed upon filing a certificate of limited partnership that must include:

• name
• address
• each general partner’s name and address
• whether pship is LP or LLLP

Question 7

How do LPs function?

Answer 7

General partners manage.

Limited partners put in money.
– but get a vote for extraordinary activities

Distributions are based on partner’s contribution to the LP.

Question 8

What is a limited liability partnership?

Answer 8

All partners have limited liability.

Apply GP rules, except:

• to form, must file a statement of qualification
• must be approved by the same vote necessary to amend the pship agreement
• partners not personally liable for co-partner’s obligations/torts