General Partnerships Flashcards
Requirements for a Partnership to be formed
(1) Two or more persons
(2) Carrying out a business in common
(3) With the intention to make a profit
If it is unclear whether a partnership has been formed, when can the court presume that there is a Partnership?
If a party receives a share of the profits of a business.
NOTE: An agreement to share losses is not prima facie evidence of a partnership
When does the partnership profit-sharing presumption NOT apply?
(1) The receipt of profits constitutes repaying a debt
(2) The receipt of profits is renumeration for services by an employee or agent
(3) The receipt of profits is an annuity
What is required for ACTUAL AUTHORITY to bind the partnership?
(1) An act showing intention to bind the firm
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(2) Done by any person actually authorized by the firm to undertake the act
What is IMPLIED ACTUAL AUTHORITY
When partners have allowed someone to regularly do an act without express actual authority
What is required for APPARENT AUTHORITY to bind the partnership?
The act of a partner carrying on business in the usual way will bind the partnership and the other partners, UNLESS:
(1) The partner had no authority to act
AND
(2) The person with whom the partner is dealing knew the partner did not have authority to act / did not know they were a partner.
What happens if a partner enters into a contract without any authority?
Only that partner will be personally liable on the contract.
What is required to add a new partner to the partnership
Unanimous consent of all partners
Can the partners expel another partner?
Not without an express agreement giving them the power to do so.
Is an outgoing parter still responsible for the debts incurred by the partnership before they leave?
Yes.
They can agree with the other parters that they will not be liable to the PARTNERSHIP for these debts, but they would still be liable to a 3P (unless novation)
After a partner leaves the firm, are they still liable for new debts incurred by the partnership?
Yes, if the person they are dealing with thinks they are still a partner (i.e., they need to give NOTICE of their retirement from the partnership to be off the hook)
Existing creditors must receive ACTUAL NOTICE. New customers can be given notice by an advertisement in the London Gazette.
If someone holds themselves out as being a partner, but actually isn’t, who is liable for any contracts entered into with 3Ps?
- The person holding out
- Anyone who knowingly allows the non-parter to hold themselves out as a partner
What is Partnership Property?
Property bought with money belonging to the partnership, or property titled in the partnership’s name (UNLESS there was a different intention).
If an individual partner brings in their own property for use in the partnership, it will remain their property unless it is agreed otherwise.
If there is no agreement stating otherwise, how are profits shared amongst the partners?
Equally. Any other division must be specified in the partnership agreement
How are losses shared between the partners?
If no agreement, equally
If there is an agreement, follow that
If there is only an agreement to share profits, then losses shared the same way.
Are partners entitled to renumeration for acting in the partnership business?
No (but a partner who is mainly responsible for managing the business may get a salary if specified in the agreement)
How are most management decisions made?
Unless agreement says otherwise, a majority vote.
The following decisions require unanimous votes:
- New partner
- Change in nature of partnership business
- Change to partnership agreement
What fiduciary duties to the partners owe to each other?
Duty to disclose information on all things affecting the partnership
Duty to account for profits made without the consent of the other partners
Ways that a Partnership can Terminate
(1) Expiration of business/specified date
(2) Upon notice by any of the partners
(3) By bankruptcy, death, or charge
(4) Illegal to continue partnership (cannot modify this in PA)
(5) Court order
