Formation

Question 1

Definition of Pship

Answer 1

• an association of 2 or more persons who carry on a for profit business as co-owners
• may be formed by an individual or a company

Question 2

Persons

Answer 2

• anything that has legal capacity to K
• humans who are not incapacitated minors
• includes legal entities such as corporations, LLCs, trusts, etc

Question 3

Intent to Form

Answer 3

• no intent needed to form a partnership

- simple requires intent to carry on a for profit business as co-owners

Question 4

Co-Ownership

Answer 4

• sharing of profits, which creates a presumption of a partnership
• NOT debt payments, interest charges, rent, wages, goodwill

Question 5

Sharing Control

Answer 5

• share voting or areas of control
• divisions of ownership and control need not be equal but both are required
• employer/employee and borrower/lender are not a partnership

Question 6

Separate Legal Entity

Answer 6

• distinct from each of the partners who are part of the partnership
• partnership can hold property and sue and be sued in its own name

Question 7

partnership liability

Answer 7

• partners are personally liable for partnership obligations

- no limited liability

Question 8

No Entity Level taxation

Answer 8

• a corporation is taxed as a business
• investors are also taxed when money is paid out
• a partnership is not taxed as an entity
• partners are taxed when money is paid out

Question 9

Partnership Agreement

Answer 9

• the law of the partnership
• written agreement is not required
• in absence of agreement, state partnership law governs
• written agreement governs

Question 10

Exceptions to when agreement governs

Answer 10

1) disclaims liability to 3p
2) cannot deny partners ccess to books and records
3) fiduciary duties cannot be eliminated

Question 11

Defined Generally

Answer 11

• created by the association of two or more persons to carry on as co-owners of a business for profit, regardless of whether:
  (i) the persons intend to create a partnership, or
  (ii) the association is called a “partnership,” “joint venture,” or other name.
• no formalities required
• As soon as two or more people associate to carry on, as co-owners, a business for profit, a partnership comes into existence.

Question 12

Partnership Agreement

Answer 12

• Although not required, partners may agree to rules for the governance of their partnership through a partnership agreement.
• partnership agreement can modify or waive the default rules provided by the TBOC.

Question 13

TBOC Partnership agreement overrides

Answer 13

-TBOC does place limitations on the partners’ ability to override the statute in certain matters.
-PA may not unreasonably restrict any partner’s access to the partnership’s books, records, and other partnership information.
-A partnership agreement can never eliminate the partners’ duties of loyalty, care, or good faith.
-

Question 14

Location of Partnership’s REcords

Answer 14

• Unless there is an agreement to the contrary, all partnership books must be kept at the partnership’s chief executive office.
• Every partner has the right to inspect and copy those books.

Question 15

Liability

Answer 15

• All partners are jointly and severally liable for all obligations of the partnership, whether in contract or tort.
• a partnership creditor may bring an action against any one or more partners, or against the partnership, in the same or in separate actions
• Because partners are severally, as well as jointly, liable for partnership obligations, every partner is personally and individually liable for the entire amount of all partnership obligations

Question 16

Indemnification

Answer 16

• a partner who is compelled to pay the entire partnership obligation is entitled to indemnification from the partnership.
• may also require that the other partners contribute their pro rata shares of the payment in the event the partnership is unable to completely indemnify her
• these remedies do not permit her to limit her liability to partnership creditors to her own contributions, and this liability cannot be lifted by the partnership agreement.

Question 17

Things partnership agreement can say

Answer 17

• may identify specific types or categories of activities that do not violate the duty of loyalty if they are not manifestly unreasonable, and the partnership agreement may determine the standards by which the performance of these obligations is to be measured, provided that the standards are not manifestly unreasonable.
• a broad statement that only willful or intentional misconduct will violate these duties would likely be unenforceable.

Question 18

Transferring partnership interest

Answer 18

• If the partnership agreement does not restrict the partner’s right to do so, a partner may voluntarily transfer all or part of his partnership interest to a third party at any time.
• However, a partnership may restrict this right

Question 19

Jurisdiction

Answer 19

• formation and internal affairs of a partnership are governed by the law of its jurisdiction of formation.
• partnership’s jurisdiction of formation is the jurisdiction chosen in the partnership agreement, provided that the jurisdiction bears a reasonable relation to the partners or to the partnership’s business