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agency/partnership part 2 > partnership > Flashcards

partnership Flashcards

1
Q

partnership capital

A

property or money contributed by each partner for purpose of carrying on partnership business

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2
Q

in determining partnership property- presumptions

A

Purchased with partnership funds- presumed partnership property

NOT w/ partnership funds- presumed the partner’s ind. property IF in his name and doc doesn’t incl.

i) capacity as partner or
ii) the partnership

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3
Q

if no title document, factors in classifying property

A

-Partnership funds used to buy
-whether used in conducting business
-whether named as a p’ship asset in p’ship books
-improved w partnership funds
-maintained w/ partnership funds
-Whether there is a close relationship between the property and partnership business

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4
Q

partnership rights as a manager- information

A

-right to inspect and copy partnership books without having to state a purpose

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5
Q

partnership rights- payment rights

A
  • no right to salary
  • have a right to be indemnified with regard to payments made and obligations reasonably incurred in carrying on partnership business
  • settlement of partnership account at dissolution
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6
Q

statement of authority

A

grants or limits partners’ authority to enter into transactions on behalf of partnership. filed with secretary of state, and for real property must also be filed with county recorder.

  • grant of authority in the statement is conclusive in favor of BFP
  • limitation of authority to transfer real property gives BFPs constructive notice of no authority to transfer real property, but does NOT give notice for other limitations.
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7
Q

agreements between partners to limit liability

A

not effective against third parties
only valid between partners and allows partner to seek indemnification for what he has to pay to the 3rd party (i.e. normally can get indemnified beyond your share, but here you’re indemnified as if you should pay 0)

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8
Q

liability of an incoming partner

A

only personally liable for debts after he becomes a partner. they can still be liable up to the amt. of their investment.

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9
Q

liability of outgoing partner after dissociation

A

liable for debts during membership and

liable for partnership acts done up to 2 years after dissolution. Notifying creditors directly will make the partner unable to bind the partnership as to those creditors.

remaining partners can also file a notice of dissociation to creditors. it does not become effective until 90 days after filing

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10
Q

types of general partnership

which is the default?

A

At will: partners have not stated the partnership ends at a certain time or upon occurrence of event
*default

Term: partners agree to remain partners for a definite term or completion of particular undertaking

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11
Q

on what grounds can a partner get a judicial decree to dissolve?

A
  • not reasonably practicable to carry on business b/c of conduct of a partner
  • economic purpose of partnership likely frustrated
  • business cannot be carried on in conformance with the partnership agreement
    -a transferee of a partner’s interest can apply for a dissolution order showing it is equitable to wind it up after the term expires/undertaking completed, or any time during partnership at will
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12
Q

dissociation: dissociating partner entering into contracts on behalf of the p’ship

A

Yes. It will bind the partnership if it is w/in 2 years and could have bound the partnership when he was a partner, unless the other party to the contract had notice of the dissociation

Partnership can notify creditors directly or file statement of dissociation (again, 90 day issue)

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13
Q

is dissolution the end of the partnership?

A

no, it continues to exist until wound up.

remaining partners can waive dissolution and continue the partnership if ALL agree

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14
Q

winding up process- who is paid first?

A
  1. creditors
  2. creditors who are partners (partners who loaned)
  3. capital contributions of partners
  4. profits or losses (split or borne equally unless otherwise stated)
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15
Q

winding up: who may participate

A

all living partners but NOT
partners who wrongfully dissolved the partnership
bankrupt partners

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16
Q

dissolution of a partnership

A

partnership is dissolved and may be wound up when:

  • notification by 1 partner in a partnership at will of intent to withdraw
  • within 90 days by the express will of half the remaining partners if a partner dissociates by bankruptcy, death, or wrongful
  • happening of agreed event
  • happening of event that makes it unlawful to continue partnership
  • issuance of judicial decree
  • -consent of all partners in a term partnership
  • -less than 2 partners for 90 consecutive days
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17
Q

dissolution: liability of partnership for contracts after

A

partnership will be bound by partner’s act if appropriate for winding up (settling claims, selling assets, collecting debts)

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18
Q

Partnership

A

Two or more persons or entities
Carrying out a business for profit
As co owners

Look for evidence of intent to co own a business

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19
Q

Things that create presumption of partnership

A

1 Sharing of profits (not gross returns- for example an employee getting a salary gets some of the gross revenue. That person would have to show other evidence of partnership)

The presumption can be rebutted! For example
1 someone who shares in profits but has no management rights and doesn’t share in losses may have rebutted presumption

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20
Q

Other evidence of partnership - but does not create presumption

A

Right to participate in management of the business or certain aspects of it (control)
Title to property held as joint tenants
Calling themselves partners or saying the business is a partnership
Business requires work and is not just passive investment
Sharing of gross returns
Sharing in losses

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21
Q

Is a written partnership agreement required?

A

Only if the partnership is for longer than a year or otherwise falls within the statute of frauds

If there is one it can alter default rules of law and will be enforced as long as it does not change the default rules regarding rights of third parties dealing with the partnership

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22
Q

Types of agreement

A

Writing
Oral
Implication
Conduct

23
Q

Is a partnership a separate legal entity?

A

Yes- so it can hold title in its own name and it can sue and be sued

24
Q

Partner voting rights and votes needed for decision

A

Each partner has one vote
A majority of the partners voting in favor have made a decision
If you have two partners it must be unanimous because 50% is not majority

If outside ordinary course of business must be unanimous vote

25
Partnership sharing of profits and losses
Equally (or if different way of sharing profits and silent on losses, the losses are divided how profits are divided)
26
If the partnership agrees to split losses according to contributions , how are profits shared?
Equally - this is the default rule. Profits do not follow the agreement for loss sharing
27
Liability of partners
Jointly and severally liable for partnership debts from personal assets. Any partner can be sued for any other partners' acts. But plaintiff first needs to exhaust partnership assets before going after personal assets of partners
28
Vote required to admit a new partner
Unanimous vote of partners
29
Fiduciary duties of partners & ability to modify
Owed to partners and partnership Duty of care- not to engage in grossly negligent, reckless, intentional misconduct or unlawful conduct knowing it’s unlawful Duty of loyalty (put partners and partnership interests ahead of your own) Cannot contract around these!
30
Duty of partners to disclose & ability to modify
Not a fiduciary duty Can be removed or modified in partnership agreement Without demand partners have to provide accurate and complete info about the partnership business or affairs necessary for the other partners to do their duties or exercise their rights On demand must provide any other info about partnership business and affairs
31
Partnership interest
- partnership interest is his or her personal property -Can only transfer the financial rights associated with it unilaterally- note that the transferee doesn't become a partner -Cannot transfer management rights (right to vote, info), must have unanimity to admit a new partner
32
What rights does a partner have in partnership property?
the partners do not do own it. Each partner only has the right to use it for partnership purposes
33
Dissociation events
Partner giving notice that he wants to withdraw Happening of an agreed event Expulsion of a partner Bankruptcy of partner or appt of receiver for a partner Partner death Partner incapacity Termination of a business entity partner Court decision that partner not capable of performing duties
34
Wrongful dissociation
Dissociation by any partner in a term partnership if it is before the end of the term remaining partners choose whether to continue business and buy out dissociating partner or dissolve Partner is liable to partnership for damages
35
Term partnership
Agreement to carry on a business as co owners for a certain period of time or until a specific task is completed
36
Effect when a partner dissociates
Option a: the partnership is dissolved, business wound up, and assets sold Option b: the partnership continues but the partnership buys out the dissociating partner’s interest at will partnership must dissolve if a partner voluntarily dissociates, otherwise it is the remaining partners’ choice (50% of remaining would have to agree to dissolve) any partnership must dissolve if For 90 days there is only 1 partner remaining A partner or transferee of partner interest gets a court order Partners CAN CHOOSE to dissolve on wrongful dissociation (term only), death, bankruptcy- 50% of the remaining partners must agree to do so within 90 days of dissociation
37
Distributions at dissolution
1 creditors 2 repay capital contributions made by partners 3 pay profits to partners or allocate losses among partners and get contribution from each partner for their share of the loss
38
partnership by estoppel
a person who holds themselves out as a partner of someone else will be liable as if there is a partnership to third parties (for example, to a bank that thinks person x is your business partner)
39
if someone holds you out as a partner, are you liable as if the two of you were partners?
No, unless you consent to it. failing to deny doesn't give rise to liability.
40
capacity needed to be a partner
capacity to enter into contracts lack of capacity of one partner does not void a partnership
41
what statutory provisions can't a partnership agreement waive?
duty of loyalty right of a court to expel a partner
42
partner rights to sue the partnership
for breach of duty by another partner or to enforce a right granted by partnership agreement
43
what happens if a partner pays more than his fair share of a judgment?
can seek contribution from other partners
44
tort liability of partnerships
liable for torts of partnership in the ordinary course of partnership business or with the authority of the partnership
45
when does a partner lack apparent authority?
if the third party actually knew they did not have authority or received notification that the partner did not (effective on earlier of delivery or when they read it or are otherwise informed of the lack of authority)
46
who has the right to convey partnership property?
if it is in the partnership name, any partner if it is individually in the partners' names noting that they are partners, then the title holders must transfer it in their own names. if it is in the partners' names without reference to capacity as partner or partnership, must convey in own names
47
if there was no authority to convey property, what are the partners' rights?
if the property is in the partnership name or shows that the title holders are partners, then can recover against initial transferee if the property is held in partners' individual names without noting they are partners, they cannot get it back
48
if a partner has notice of fact, what is the effect on the partnership?
notice is imputed to the partnership
49
partner notice of facts
when they have actual knowledge, are notified of the fact (earlier of aware or delivered), or should know of it based on surrounding circumstances
50
duty of obedience
duty to obey all reasonable directions of the partnership and not act outside the scope of his authority
51
what does the title of partnership property need to say for it to be treated as partnership property?
must be in the partnership name or say the person is acting as a partner
52
what approval is needed for dissolution of a partnership at will?
notice of dissolution from any partner
53
if partners have decided to dissolve, can they reverse that decision?
yes they can waive it by unanimous vote of all partners other than the ones who wrongfully dissolved
54
when can a partner bind the partnership to a contract?
Partner is an agent of the partnership Partner can bind the partnership to contracts within the ordinary course of the partnership business or of the kind carried out by partnership when he has actual authority, conferred by a majority vote OR when he has apparent authority

agency/partnership part 2 (3 decks)

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