General Partnerships Flashcards
Define a general partnership
An association
of two or more persons
to carry on as co-owners
a business for profit
whether they intend to form a partnership or not
The factors to consider in evaluating whether an association is a general partnership:
Control
- the right to control may be enough even if control is never exercised
Profit
- a person receiving a share of profits is presumed to be a partner
- profits received as a part of wages, rent, payment of a debt, or interest does NOT give rise to this presumption
NOTE: capital contribution is generally a red herring
Is a writing required to form a partnership?
No, unless it is required to satisfy the Statute of Frauds
NOTE: a partnership may file a statement of partnership** with the superior court clerk of any county–**establishes the existence of apartnership
May individuals still be held to have formed a partnership even if they did not intend to?
Yes, this may be accomplished by a partnership by estoppel
- Parties may be liable as if they are partners to protect the reasonable reliance by third parties that a partnership existed (e.g., F holding out that in a partnership with G, M reasonably relies).
- partnership by estoppel only applies to contracts and NOT tort claims
Identify who owns what in a partnership.
Property is presumed** to **belong to the partnership if it is:
- characterized as such in the partnership agreement; or
- acquired in the partnership’s name; or
- acquired with partnership funds
Property is presumed** to belong to a partner if it’s **acquired in the partner’s name w/o partnership funds
NOTE: if real property is held other than in the partnership’s name, it will not be deemed partnership property to the prejudice of an innocent person
What are the rights involved in a partnership property?
Partnership’s rights: totally unrestricted
Partner’s rights: very limited**–may only use the partnership property for **partnership purposes
- not transferable
What is a partner’s economic interest in the partnership?
A partner’s economic interest (share in the profits**) is **transferable
What are the rights and relations among the partners in a general partnership?
Profits and losses are split equally
- may not insulate a partner from liability to a third party
Equal management rights
No right to compensation
Right to indemnification with interest
Duties owed to each other and to the partnership
- duty of care
- duty of loyalty
- duty to render full information (Ga. in the minority)
Right to inspect books and formal accounting
Admission of a new partner
- requires unanimous consent
- newly admitted partner on the hook for debts already incurred but only to the extent of her economic interest
Outgoing Partners
- still liable for partnership debts incurred up to the point of withdrawal
NOTE: these are largely default rules, so may agree to otherwise in the partnership agreement
What is a partnership’s liability to third parties for a partner’s action?
Contracts: apply agency law
- Actual authority
- Apparent authority
- Ratification
- Adoption
- Real property: if a partner sells real property without authority, the partnership can get it back from an initial transferee, but not from a subsequent bona fide purchaser
Torts: inquire as to wheter the torious act was committed within the ordinary course of a partnership’s business
- partnership employees: apply agency law
- vicarious liability
What is a partner’s liability for partnership obligations?
Partners may be held jointly and severally liable
NOTE: this is the primary drawback to operating general partnerships
How does a general partnership limit the partners’ liability and what are the steps in accomplishing that?
By forming a limited liability partnership
- partners are not liable for partnership obligations except for their own torts
Steps in forming an LLP:
- file an election** with the **superior court clerk of any county** where the LLP has an **office
- pay a fee
- name** of the partnership must inclue the words “**limited liability partnership**” or the initials “**LLP”
What may cause the dissolution of a partnership?
End of a definite term
_Accomplishing a particular undertaking _
A partner’s express will or withdrawal
- partnerships are generally at will
- if a partner withdraws before a definite term ends, liable for breach of contract for wrongful dissolution
Explusion of a partner
Operation of law
- death of a partner
- partnership’s business becomes unlawful
Judicial decree
Does a partnership continue to operate after dissolution?
Yes, a partnership must wind up its old business
- partnership will be liable for expenses incurred in winding up
- joint and several liability still attaches to post-dissolution debts
- right to contribution ceases upon dissolution except where dissolution arises from a partner’s express will, death, or bankruptcy
How does the partnership terminate a former partner’s apparent authority upon dissolution?
By providing notice:
- Prior creditors: personal notice
- Others who knew of the partnership before dissolution: newspaper notice
- Those who didn’t know of the partnership before dissolution: no notice needed
How are partnership assets distributed upon dissolution?
First to third-party creditors
Second to partners other than for capital and profits
Third to partners for capital
Fourth to partners for profit
