PA Partnerships Flashcards
What is required for a partnership?
- At least two persons
- intend to carry on a for-profit business
- as co-owners sharing profits
What are the six statutory exceptions to the rebuttable presumption that profit sharing is a partnership?
- Debt payments
- Interest or loan charges
- Rents
- Wages
- Goodwill payments stemming from the sale of business
- Annuities and the like
What are the elements for partnership by estoppel?
- Representation that a person is a partner (implied ok)
- that a purported partner consents to
- that a third party reasonably relies on
- to the third party’s detriment
When does the Revised Uniform Partnership Act (RUPA) govern a partnership?
In the absence of a partnership agreement
What must a party refrain from doing pursuant to the duty of loyalty?
- Competing
- Advancing adverse interests
- Usurping partnership opportunities or deriving personal benefits without notice to the partnership
How can a partnership agreement limit the duty of loyalty?
Not entirely, but can identify specific types of activities that do not violate the duty of loyalty if NOT manifestly unreasonable
What does the duty of care require of a partner?
Refraining from any of:
- Gross negligence or reckless conduct
- intentional misconduct
- Knowing violation of the law
Also GF, fair dealing
What is RUPA’s default for the division of profits and losses?
Equal shares of profits and losses
What rights does a transferee who has received a partnership interest have?
- Distributions
- Right to seek a judicial order for dissolution
NO management or business rights
What is the default rule for becoming a partner under RUPA?
Consent of all existing partners
What vote is required for ordinary partnership business under RUPA?
Majority vote
What vote is required for special partnership business under RUPA?
All partners
When is a partnership required to reimburse or indemnify a partner?
When a loan or liability was incurred in the ordinary course of partnership business or to preserve partnership business or property
Can a partnership agreement restrict access to records?
Not unreasonably
What events cause a partner to disassociate?
- Notice of withdrawal
- Occurrence of event in partnership agreement
- expulsion under PA
- Expulsion by unanimous vote, if unlawful to carry on business with him
- court order
- BK
- death
- appointment of guardian or incapability
- Termination of entity partner
How can a partnership be bound by the actions of a disassociated partner?
When a third party:
- Reasonably believes that the partner is still partner
- Without notice
- and without constructive knowledge
For how long is a partnership at risk of liability for disassociated partners?
2 years after disassociation, or 90 days if a statement of disassociation is filed
What are the three ways a partner can bind the partnership as an agent?
- Express actual authority (PA, vote, etc.)
- Implied actual authority (reasonable belief of necessity)
- Apparent authority (binding if ordinary course)
What vote is required under RUPA for a merger or conversion into an LLP?
Unanimous vote
What events can cause dissolution?
- Notice of withdrawal for partnerships at will
- for a partnership with a definite term, a vote or expiration/completion
- Express PA provision
- Court order
- 90 days without at least 2 partners
What must a partner show to move to judicially dissolve a partnership?
Any of:
- Unlawful conduct or business
- Economic purpose likely to be unreasonably frustrated
- Another partner has made it not reasonably practical to carry on
- Not reasonably practicable to carry on otherwise
What must a transferee show to move to judicially dissolve a partnership?
That it is equitable because the partnership is completed or is a partnership at will
What must a dissolved partnership do to wind up its business?
Discharge debts, obligations, settle close business, and marshal and distribute assets
What is the priority scheme for winding up a partnership’s business?
- Creditors
- Capital contributions by partners
- Distributions proportionate to rights
What is required to form an LLP?
- Statement of qualification with DOS
- stating name, LLP, limited, or company
- Address and registered agent
When can an LLP not make a distrubution?
- Can’t pay debts as due
2. Assets less than liabilities and amount needed to satisfy creditors if wound up
What is needed to form an LP?
- Certificate of LP with DOS
- with name, address and authorized agent, and names and addresses of GPs
- signatures of all GPs
What is the minimum number of partners for an LP?
One GP and one limited partner
What voting rights does a limited partner have?
Only those provided by the partnership agreement
How can someone become a GP of an LP?
- Upon creation of LP
- Written consent of all partners
NB: corporations can be GPs too (like any partner)
