General Partnership- McDonald Flashcards
Describe a general partnership:
An association of two or more persons to carry on as co-owners as business for profit.
If a general partnership a taxpaying entity?
No, a partnership is a separate legal entity from the partners, but it is not a taxpaying entity.
In what ways can a partnership be formed?
Can be formed by a written or oral agreement.
Also can be formed by actions of the parties.
What act fills in the gaps of the partnership?
RUPA: Revised Uniform Partnership Act.
What is the RUPA rule for profits and losses?
Profits and losses are split equally, regardless of capital contributions, unless otherwise provided by the partnership agreement.
If partnership agreement splits profits unequally, how will losses be split?
Losses will be split in the same matter, unless provided.
For what kind of extraordinary events is a unanimous consent required?
Admitting new partners
Any actions outside the scope of the partnership business.
Any action contrary or amendments to the partnership agreement.
What are partner rights?
Inspect books and accounting
Return of advances and capital upon dissolution (subject to superior credit claims)
No rights to a salary
To whom does the property belong upon a death of partner?
Property belongs to remaining partners.
May a general partnership interest be sold, assigned, or transferred? And who does the acquirer become?
Yes, may be sold, assigned, or transferred.
Acquirer does NOT become a partner, or manage business, rather has acquired the right to the selling partner’s share of the profits.
Each partner is an ______ of the partnership, therefore, each partner has a _________ relationship with all other partners.
agent; fiduciary
What happens if a partner commits a tort and who is liable?
If a partner commits a tort within the score of employment: partner who committed tort is liable and partnership and thus individual partners are also liable.
In contractual breaches and tortious acts, who can the 3rd parties sue?
Each partner is jointly and severally liable and this allows 3rd parties to sue partners separately or all together.
Once partnership assets are exhausted, who is liable?
Each partner has unlimited personal liability to third parties, once partnership assets are exhausted. Losses are not limited to investment in partnership and cannot be altered by agreement among the partners.
Are withdrawing partners liable for existing debts at the time of withdrawal?
Liable for existing debts at the time of withdrawal.
Are withdrawing partners liable for subsequent debts?
Liable for subsequent debts unless adequate notice is given to 3rd parties.
How do you give notice to limit your liability after withdrawing?
May file a statement of dissociation with the state to limit liability to 90 days from date of filing: otherwise departing partner is liable for transactions 2 years after departure, unless actual notice is given.
Are incoming partners liable for old debts?
Liable for old debts only up to the limit of their capital contribution.
When does the ending of the partnership occur?
The ending of the partnership, only occurs after dissociation, dissolution, and winding up transpire.
What is dissociation?
When any partner ceases to be associated with the partnership.
Dissociation occurs when:
Partner withdrawal occurs
Partner leaves in accordance with the partnership agreement
Partner engages in conduct that interferes with the ability of the partnership to conduct business
Bankruptcy, death, or incapacity of a partner.
Dissolution and winding up will occur in the following situations, unless a majority of the remaining partners agree to continue the partnership:
Expiration of the term of the partnership
Completion of the purpose of the partnership
Death of a partner
Partner’s wrongful dissociation
What authority terminates as the partnership dissolved?
The actual authority of all partners is terminated, other than those transactions necessary for liquidation. Apparent authority may still exist.
When dissolving the partnership, what must be given to 3rd parties to prevent apparent authority?
Notice of dissolution must be given to 3rd parties either through actual notice or filing a statement of dissolution with the secretary of state. All parties are deemed to have notice of dissolution 90 days after this statement is filed.
Limited Partnerships: What are the 2 types of partners in an LP?
General partner- just like a partner in a general partnership.
Limited partner
Limited Partnerships: Describe limited partner
Limited partner may not participate in the management of the limited partnership.
Has limited liability: no personal liability beyond investment in the limited partnership
Not necessarily an agent/fiduciary of the limited partnership
Death does not terminate the partnership
Sale of assignment of partnership interest can be done without approval of the general partner and without terminating the partnership.
Limited Partnerships: Can a general partner be a limited partner also?
Yes, general partner may also be a limited partner.
Limited Partnerships are Creature of Statute: what is necessary to have a LP?
Name must include ltd. or limited partnership
Must have at least one general partner.
Must file a certificate of limited partnership with the state that provides the names of all general partners.
Limited Partnerships: how are profits and losses allocated?
Split on basis of capital contribution, unless otherwise stated.
Joint Ventures: what are joint ventures?
An association of two or more persons to engage in a single business transaction for profit. Similar to partnerships except they have a very limited purpose.
Limited Liability Companies: What is it?
It’s a hybrid between partnership and corporation.
Limited Liability Companies: What aspects are like partnerships?
Taxes- no taxes for the entity
Profits/ losses equally split, unless mentioned.
Member management
May assign financial interest (rights to profits) but not management interest.
Limited Liability Companies: What aspects are like corporations?
Limited liability of members
Must file articles of organization with the state-name must include LLC
Limited Liability Companies: when is dissolution triggered?
Dissolution is triggered by dissociation of a member: death, incapacity, withdrawal, but most states allow continuation by a unanimous or majority vote of the remaining member.
Limited Liability Partnership: A form commonly used by professional partnerships like:
accountants and attorneys.
Limited Liability Partnership: Primarily a partnership in what way?
Tax treatment
Ownership/Management interest, not transferable
Limited Liability Partnership: does it need to be filed with the state?
Yes, need to file with the state and indicate LLP
