Formation + Relationships

Question 1

When is a partnership formed?

Answer 1

1) Two or more persons associate to carry on a for-profit business as co-owners.
2) Do not need specific intent to form a partnership, but need intent to carry on a business for profit as co-owners.
3) The persons must be sharing the profits of the business.

Question 2

Liability of a purported partner:

Answer 2

1) representation or implication that a person is a partner in an actual or purported partnership
2) Purported partner makes or consent to the representation
3) 3rd Party reasonably relied on the representation
4) 3rd party suffered from damages as a result of that reliance.

Question 3

Can a partner bind the partnership through contracts?

Answer 3

Yes.

Question 4

Is a partner an agent?

Answer 4

Yes.

Question 5

What are the partner’s fiduciary duties?

Answer 5

1) Duty of Loyalty

2) Duty of Care

Question 6

What does the duty of loyalty require the partner to refrain from?

Answer 6

1) Competing with the partnership business
2) Advancing an interest adverse to the partnership
3) Usurping a partnership opportunity or using partnership property to derive a personal benefit w/o notifying the partnership.

Question 7

May a partnership agreement eliminate the duty of loyalty?

Answer 7

No, but it may identify specific categories of activities that do not violate the duty.

Partners may ratify a transaction b/w partnership and partner.

Question 8

Duty of care:

Answer 8

Partner must refrain from grossly negligent, reckless, intentional misconduct or knowing violation of the law.

Question 9

When an agreement addresses only the division of partnership profits, how are losses shared?

Answer 9

In the same manner.

Question 10

When there is no agreement as to the division of the profits and losses, how are they divided?

Answer 10

Equally.

Question 11

May a partnership agreement specify a percentage for sharing profits that is different from the percentage for sharing losses?

Answer 11

Yes.

Question 12

Can a partner transfer an ownership interest?

Answer 12

No, but he may transfer the partnership interest which is the right to share in the profits, losses and distributions.

Question 13

What happens when the partnership agreement prohibits the transfer of a partnership interest?

Answer 13

Then a transfer in violation of this restriction is ineffective if the transferee had notice.

Question 14

When property isn’t titled as partnership property, what presumptions help you categorize it?

Answer 14

1) When property is purchased with partnership funds, it is presumed to be partnership property
2) property is presumed to be a partner’s separate property when the property is acquired in the name of one or more partners, the instrument doesn’t name the person’s capacity, and partnership assets weren’t used to acquire the property. Use of the property as partnership property won’t overcome this presumption.

Question 15

What is the default requirement for someone to become a new partner?

Answer 15

unanimous consent of all existing partners.

Question 16

How much of a vote is required for ordinary partnership business?

Answer 16

a majority of the partners.

Question 17

How much of a vote is required for special partnership business?

Answer 17

all partners.

Question 18

What are the limits placed on dissociation by RUPA?

Answer 18

1) Can’t prevent a partner from withdrawing from the partnership
2) Can’t prohibit a partnership from seeking judicial expulsion of a partner

Question 19

In an unlimited timed partnership, when is dissociation wrongful?

Answer 19

Only if it is in breach of the partnership agreement.

Question 20

In a definite term partnership, when is dissociation wrongful?

Answer 20

Before the expiration of the term:

1) withdraws unless it follows w/in 90 days of another partner’s wrongful dissociation or dissociation due to death, bankruptcy
2) is expelled by court order
3) is a debtor in bankruptcy
4) is not an individual trust or estate and the partner willfully dissolved

Question 21

What is the effect of wrongful dissociation?

Answer 21

Damages caused by the dissociation.

Question 22

When does a partner’s duty not to compete terminate?

Answer 22

Upon dissociation.

Question 23

When a partner dissociates, what happens to their interest?

Answer 23

The partnership must but the interest based on its liquidation value or value of partnership as a going concern. Payment must happen w/in 120 days.

Question 24

When does a partner have apparent authority?

Answer 24

• act must e performed in the ordinary course of carrying on the partnership business
• 3rd party can’t hold partnership liable when it knew that partner lacked authority.

Question 25

Is a partnership liable for a partner’s tortious acts?

Answer 25

yes, if committed in the ordinary course of the partnership business or with partnership authority.

Question 26

Is a partner liable for partnership obligations?

Answer 26

Yes, the partner is jointly and severally liable.

Question 27

What is an incoming partner’s potential liability?

Answer 27

Only to the amount of capital contribution. Can’t be personally liable for previous obligations.

Question 28

What is a dissociated partner’s liability?

Answer 28

Liable for partnership obligation incurred before the dissociation. And can in certain instance be liable for partnership obligations afterwards.

Question 29

How is a partnership’s assets reached through a judgment?

Answer 29

• 1st exhaust the partnership’s assets before levying on the partners’ personal assets