FL PARTNERSHIPS Flashcards
Partnership
Association of two or more persons to carry on as co owners a business for profit, whether they intend to form a partnership or not.
Who is a partner?
1. Contribution of capital?
2. Right to control the business?
3. Share of profits? (prima facie evidence of a partner) (NOT prima facie when wages, rent, repayment of debts, interest on loan, or gross receipts)
Writing for Partnership
No formal agreement is required to form a partnership, the parties’ intent may be implied from their conduct.
However, is governed by the SOF so look for more than 1 year
Registration statement
A partnership may file a registration statement with the Dept of State. Its a pre-requisite for filing other statements.
Purported Partners
If no partnership was formed, parties may still be liable as purported partners to protect reasonable reliance by third parties.
Applies on a creditor to creditor basis
Partnership Property
Partnership Property if
– Acquired in Partnership name or
– Acquired in the name of one or more partners and title indicates they are acting as partnership
Presumed to be partnership property if
– property funds are used to pay for it
Partner Property
Property presumed to be Partner’s separate property if property is held in the name of one or more partners and
1. partnership funds were not used and
2. instrument transferring does not indicate the person’s capacity as a partner or mention the existence of a partnership
Untitled Property - Common Law Criteria
In cases not governed by RUPA, factors to be considered are
1. acquisition with property funds
2. use of property by the partnership
3. entry of property in partnership books
4. close relationship between property and partnership purpose
5. improvement of property with partnership funds and
6. maintenance with partnership funds
Partnership’s Rights in Partnership Property
Are totally unrestricted
May pledge for collateral, may attach it. etc.
Partner’s Rights in Partnership Property
Are extremely limited
They can use the property for partnership purposes only, unless the other partners consent. The right in the partnership property cannot transfer it.
A and B form a partnership. They acquire a truck in the partnership’s name and use it for deliveries in the regular course of business. Which of the following is true?
A. A has the right to use for both business and personal
B. A ahs the right to sell his one half interest in the truck
C. Personal judgment creditors of A may attach A’s one half interest in the truck
D. None of the above
D
A Partner’s Economic Interest in the Partnership
A partner’s economic interest in the partnership is their right to receive a share eof the profits. This right is trannsferable and a partner may do so without dissolving the partnership or causing transferring partner’s dissociation. A conveyance of the interest redirects the flow of profits, it does not confer any other rights or impose any obligations.
A, B, and C are partners. B assigns his interest in the partnership to D. The partnership loses $50,000 in an ill-fated venture. Which of the following is correct?
A. B must share in the loss
B. D must share in the loss
C. Neither B or D must share
D. Both B and D must share in the loss
A.
All an assignment does is redirect the flow of profits. It does not transfer any obligations.
Relations Among Partners
Statute supplies default rules governing relations, but partners may contract around them, so their agreement usually controls. However, partners cannot waive certain rules including those relating to the partners right to access books, the duties of loyalty and care, or the power to dissociate or expel partner.
Profits and Losses Shared Equally
Absent OA, a partner shares equally in the partnership profits and must contribute to the losses in proportion to their share of the profits.
Partner’s cannot limit the rights of a 3rd party without that 3rd party’s consent.
No Right to Compensation (partnership)
Absent an agreement, there is no right to remuneration for services rendered except for services performed in winding up the business.
Management Rights
All partners have equal rights in the management of the partnership business absent OA.
Majority vote for ordinary matters
– unanimity for other acts and to amend the partnership agreement
Right to Indemnification
Indemnification is proper with regard to payments made and personal liabilities reasonably incurred in the ordinary and proper conduct of business, or for payments made beyond the partner’s contribution.
Duties
Partners owe duties to the partnership and Cannot eliminate these duties but may determine the applicable standard, if reasonable. The duties include:
duty of care – requires the partner to refrain from grossly negligent or reckless conduct, unlawful, or intentional misconduct.
duty of loyalty – requires (1) account for profit or other benefits derived by the partner from use of the partnership property (2) not compete with the partnership before dissolution and (3) not deal with the partnership as one with an adverse interest without disclosure of all material facts
good faith and fair dealing – each partner owes the partnership a duty of GF and fair dealing
duty to provide information – each partner must provide without demand information a partner needs to exercise their rights, and on reasonable demand, any other informaiton
Partners’ Accounts
Each partner is deemed to have an account in an amount equal to the partner’s contribution plus the partner’s share of undistributed profits or minus the partner’s share of losses, less any partnership liabilities.
Right to Inspect Books
Books and info must be kept in the chief executive office. Each partner has a right to inspect and copy.
A transferee of a partner’s partnership right has no right to inspect by virtue of the transfer
New Partner
Requires unanimous consent. Liable for pre-existing debt but limited to partnership interest. Liable on future debts and interest.
Outgoing Partners Remain Reliable Unless Released
Outgoing partner is liable on debt unless released by creditor. Other partner must consent when creditor wants to release outgoing partner.
Agency Principles
The RUPA generally provides that each partner is an agent of the partnership for the purpose of its business. An act performed by any partner either with actual or apparent authority or that is ratified by the partnership will bind the partnership and thereby other partners.
Actual authority
Actual authority is the authority a partner reasonably believes he has based on the communications between the partnership and the partner
Apparent Authority
With apparent authority, the Principal (P) leads the third party (T) to believe that Agent (A) has authority to bind the P even though A has no authority.
Lingering Apparent Authority
Apparent authority can linger even after actual authority has been terminated if T is not aware of the termination.
Ratification
Even if A had no authority, P can still ratify the contract. Ratification is retroactive to the time of the K, meaning, its as if P were a party to the K from the start. Because ratification is retroactive, we must protect the intervening rights of a BFP.
L, acting w/o authority, sold Ds car for $6k. Later, D agreed to sell the same car to J for $5k. Can D ratify Ls sale?
No, because J is a BFP
Statement of Authority
A statement of authority grants or limits a partner’s authority to enter into transactions on behalf of the partnership. Must be filed with the Dept of State and is good for 5 years.
For real property:
– Effective if also filed at the county recording office where the property is located
Statement of Authority and Other Transactions
If a statement of authority grants a partner authority to enter transactions on the partnership’s behalf other than the transfer of real property, the grant is conclusive in favor of a BFP. Restrictions effective only if the buyer knew about the statement of authority restricting.
