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My MEE Topics > General Partnerships > Flashcards

General Partnerships Flashcards

1
Q

Partnership

A

An association of two or more persons to carry on as co-owners of a business for profit.
Formed when that happens regardless of subjective intent.

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2
Q

Intent Necessary

A

Whether parties intented to carry on business as co-owners

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3
Q

Factors to Consider

A
  1. Sharing of Profits
  2. Right to participate in control
  3. Title to Property held in joint or common tenancy
  4. Parties designate the relationship as partnership
  5. Sharing of Gross Returns
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4
Q

Writing?

A

Not required unless by SOF

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5
Q

Partnership by Estoppel

A

If no Partnership was formed in fact, parties may still be liable as partners to protects reasonable reliance by third parties

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6
Q

Partnership Agreement

A

Not required, but be on the lookout because it gets around most statutory provisions

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7
Q

Entity Status

A

Is a legal entity distinct from the partners

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8
Q

Capacity

A

Contractual

Party lacks capacity is liable to the extent of capital contributions

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9
Q

Voting

A

Unless otherwise agreed, all partners have equal rights in the management of the business and equal votes

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10
Q

Decisions W/I Ordinary Course (Voting)

A

Require Majority of the Votes

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11
Q

Decision Outside Ordinary Course (Voting)

A

Require Unanimous Votes

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12
Q

Right to Salary?

A

No.

However, a partner that has promised to devote time to the partnership and fails to do so, may be charged in an accounting for damages caused by partnership.

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13
Q

Legal Actions Against Partnership

A

Partnership may be sued in its own name, but to reach a partner’s personal assets, there must be a judgment against the individual partner

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14
Q

Rights of Partners

A
  • Management
  • Distributions
  • Renumeration
    -Indemnification
  • Contribution
  • Inspection
  • Lawsuits
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15
Q

Rights of Partners

Management

A

All partners have an equal right to participate in the management unless agreement provides otherwise

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16
Q

Rights of Partners

Distributions

A

Partners have whatever rights are granted in the agreement as to distribution, if agreement is silent then profit share is equal

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17
Q

Rights of Partners

Renumeration

A

Partners have NO right to renumeration for their services to the partnership except for winding up the business

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18
Q

Rights of Partners

Indemnification

A

A partner has a right to be indemnified by fellow partners for expenses incurred on behalf of the partnership

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19
Q

Rights of Partners

Contribution

A

A partner has a right to contribution from fellow partners where the partner has paid more than his share of a partnership liability

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20
Q

Rights of Partners

Inspection

A

A partner has a right to inspect and copy the partnership books

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21
Q

Rights of Partners

Lawsuits

A

Generally, a partner may sue his partnership and the partnership may sue a partner in an action at law or equity.

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22
Q

Rights of Partners

Losses

A

Shared in the same manner as profits, unless otherwise agreed

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23
Q

Liability to Third Parties

A

Generally, each partner is an agent of the partnership for the purpose of business. (See agency liability)

24
Q

Liability of the Partnership in Tort

A

Liable for loss or injury caused to a person as a result of the tortious conduct of a partner acting in the ordinary course of business or with authority of the partnership

25
Q

Liability of the Partnership in Contract

A

Liable for all contracts entered into by a partner in the scope of the partnership or with actual or apparent authority of the partnership

26
Q

Statement of Authority

A

Grants or limits the partner’s authority to enter into transactions on behalf of the partnership

Effect depends on whether it involves transfer of real property

27
Q

Partner Authority

Transactions Involving Real Property

A

Grants of and restrictions on partner authority to transfer real property in the statement are binding on third parties if the statement is recorded in the county where the property is locatd.

28
Q

Partner Authority

Transactions Not Involving Real Property

A

Grants of partner authority are binding (unless 3rd party has actual knowledge the partner lacks authority)

Restrictions on partner authority are not binding

29
Q

Liability of the Partners

A

Each Partner is jointly and severally liable for all obligations of the partnership, whether arising in tort or contract

30
Q

When can Plaintiff go after Partner’s personal assets?

A

Plaintiff must first exhaust partnership resources before seeking to collect from an individual partner’s assets

Partners are like guarantors

31
Q

Fiduciary Duties

Duty of Loyalty

A
  1. Account to the partnership any benefit derived by the partner in conducting the partnership business
  2. Refrain from dealing with the partnership in the conduct of its business as a party having an adverse interest
  3. Refrain from competing with the partnership
32
Q

Fiduciary Duties

Duty of Care

A

Requires each partner to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law

33
Q

Fiduciary Duties

Duty to Disclose

A

Partner has a duty to provide complete and accurate information concerning the partnership.

34
Q

Duty to Disclose

Without Demand

A

Any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties

35
Q

Duty to Disclose

On Demand

A

Any other information concerning the partnership’s business and affairs (unless demand is unreasonable)

36
Q

Fiduciary Duties

Duty of Obedience

A

Requires the partner to obey all reasonable directions of the partnership and not act outside the scope of his or her authority

37
Q

Elimination of Duties

A

May not eliminate duty of loyalty or care; but can eliminate the duty to disclose

38
Q

Partnership Capital

A

Property or Money contributed by each partner for the purpose of carrying on the business

39
Q

Partnership Property

A

Everything the partnership owns, including both capital and property subsequently acquired in partnership transactions

40
Q

Partnership Rights

Property

A

Totally unrestricted

41
Q

Partner’s Rights

Partnership Property

A

Not a co-owner and has no interest in it that can be transferred, can use for partnership purposes although

42
Q

Partnership Interest

A

Partner’s ownership interest:
1. Management Rights
2. Financial Rights

43
Q

Management Rights

A

Partner’s right to participate in the management of the business, to obtain information about the partnership, and to be recognized as a “partner”

NO UNILATERAL TRANSFER; needs unanimous vote “pick your partner”

44
Q

Financial Rights

A

Partner’s right to receive their share of any profit distributions made by the partnership.

Unilaterally transferable; receiver known as “Mere transferee”

45
Q

Dissociation

A

Withdrawal

46
Q

Wrongful Dissociation

A

If withdrawal is in breach of an express term in the partnership agreement (i.e Term Partnership)

47
Q

At-Will Partnership

A

One where the parties have not agreed to remain partners until the expiration of a definite term or completion of particular events

Default type

48
Q

Term Partnership

A

Where the parties have agreed, explicitly or implicitly, to remain partners for a definite term or until the completion of a particular event

49
Q

Effects of Dissociation

For Partnership

A
  1. Dissolution
  2. Buyout and Continuation
50
Q

Effect of Dissociation

For Partner

A

Right to participate ceases
Partnership must purchase their interest and indemnify them against known pre-dissociation liabilities, as well as post not incurred by the dissociating partners acts

51
Q

Dissolution

A
  • Required when partner dissociates by express will
  • In a term partnership, if one partner dissociates wrongfully or if by death or bankruptcy, dissolution is required only if within 90 days 1/2 of remaining partners agree to wind up and liquidate
52
Q

Buyout and Continuation

A

If a parnter’s dissociation does not require dissolution, the partner is entitled to receive a buyout of partnership interest.
(if for term dissociating partner must wait till end of term for buyout)

If dissociation is wrongful, any damages offset against buyout price

53
Q

Liability of Dissociated Partner

Pre-Dissociation

A

Generally, a dissociated partner remains liable for pre-dissociation partnership obligations

54
Q

Liability of a Dissociated Partner

Post-Dissociation

A

A dissociated parner can be liable for post-dissociation partnership liabilities incurred within two years after the dissociation if:
1. 3rd party entered into transaction reasonably believing DP was still a partner; AND
2. 3rd Party did not have notice of the partner’s dissociation

DP can protect themself by notifying creditors directly of dissociation; OR by filing a public notice of dissociation which becomes effective after 90 days

55
Q

DP’s power to Bind Partnership

A

Partnership can be bound by the acts of a DP undertaken within 2 years of dissociation if:
1. the act would have bound the partnership before dissociation; AND
2. the other party reasonably believed the DP was still a partner and did not have notice of dissociation

Partnership can protect itself by directly notifying creditors of dissociation OR by filing public statement of dissociation which becomes effective after 90 days

56
Q

Dissolution

A

Generally requires the partnership to be wound up and partnership assets must be applied to discharge of the parties.

If the assets are insufficient, individual partners are required to contribute in accordance with their loss shares.

57
Q

Dissolution or Dissociation can be accomplished by?

A
  1. Oral or written notice (express will)
  2. Happening of an agreed event
  3. Valid expulsion
  4. Bankruptcy
  5. Death or incapacity
  6. Decision of a court
  7. Termination of a business entity that is a partner

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