MEE one sheet partnership Flashcards
Partnership generally
A partnership is ‘the association of two or more persons to carry on as co-owners, a business for profit . . . whether or not the persons intended to form the partnership.’
Profit sharing presumption
Profit sharing creates a presumption that a person is a partner unless the profits were received in payment of a debt, rent to a landlord, wages, etc. Other indicia of a partnership include capital contributions and mutual agency. Neither a writing nor a certificate needs to be filed for a general partnership to be formed. Note that a general partnership is the default form; sometimes a general partnership is formed because a limited partnership was improperly formed (e.g., the paperwork was not filed correctly).
Partner rights in the business
Ordinary Affairs: Have equal rights and majority vote is needed
Extraordinary matters: require a unanimous vote
Partner liability
Partners are jointly and severally liable for partnership debts in a general partnership.
Incoming partner
An incoming partner is not personally liable for prior debts of the partnership (although his capital contributions can be used to satisfy such debts). Outgoing partners are personally liable for debts incurred during their time at the partnership.
partner fiduciary duties
Partners are in a fiduciary relationship with one another and must act honestly and in good faith. They
are charged with the duty of loyalty (i.e., they may not usurp corporate opportunities for a personal advantage, engage in self-dealing, or compete with the partnership), the duty of care, and the duty to account (they must account for any profits)
Termination of Partnership
Partnership is not termination until winding up is complete.
1) dissociation
2) winding up
3) termination
Dissolution
The dissolution of a partnership is the change in the relation of the partners.
Prior creditors are entitled to personal notice of the dissolution of the partnership. Others who knew of
the partnership are entitled to newspaper notice. Note that a partner can withdraw from a partnership
by giving notice at any time. This will trigger dissolution in an at will partnership
Winding up
This is where partnership assets are liquidated and creditors are paid. Note that
partners are still liable for any liabilities that occur during the winding up phase.
Creditors and Partnerships
If a creditor has a claim against a partner, the creditor can obtain an interest in the partnership.
This includes profits but not management or voting rights. If a creditor has a claim against the partnership, the creditor can try to collect from the individual partners.
The creditor must obtain a judgment against the partners personally to go after each partner’s personal assets. The creditor should attempt to collect from the partnership before seeking personal assets of the partners.
Partnership liability
Partners are jointly and severally liable for the obligations of the partnership. Even if a partner enters into a contract without actual authority to do so, the partnership and the partners are bound (so long as the partner had apparent authority).
LLP
no partner is personally liable for the obligations of the partnership (but partners are liable for their personal torts)
LP
At least one general partner must be listed on the certificate filed with the state. Limited partners have limited liability (limited to their capital contributions). General partners are liable for all partnership obligations and manage control of the business. If a general partnership converts into an LLP, then partners remain jointly and severally liable for actions that took place before the conversion
