Partnership

Question 1

Partnership Formation

Answer 1

when two or more people associate to carry on as co-owners a business for profit

receiving a share of the profits gives a presumption of being a partner

Question 2

Who are partnerships agents

Answer 2

each partner is an agent for the purposes of its business

Question 3

When is a partnership bound

Answer 3

a partnership can be bound on a contract entered into by a partner with actual or apparent authority

Question 4

Actual Authority of Partner

Answer 4

authority that a partner reasonably beliefs he has based on his communications with the partnership

can be express or implied through custom, necessity, or acquiescence.

Question 5

Apparent Authority of Partners

Answer 5

act of any partner apparently carrying on in the ordinary court of the partnership business or business of the kind carried out by the partnership will bind the partnership UNLESS:

(1) partner had no authority to act for the partnership AND
(2) the third party with whom the partner dealt knew that the partner lacked authority

Question 6

Actual Authority- Outside ordinary course

Answer 6

Actual authority to enter into matters outside the ordinary course of business requires unanimous consent of all parties

Question 7

Apparent Authority- Belief of 3P

Answer 7

must reasonably believe that the partner was acting within the ordinary course of business

Question 8

Liability of Partners

Answer 8

jointly and severally liable for partnership obligations

Question 9

is the partnership bound by contracts entered into when partner had no uathority

Answer 9

No. When a partner enters a contract he had no authority to enter on behalf of the partnership, the partnership is not bound by the contract.

Question 10

how does a 3P recover from the partnership

Answer 10

To go after partners the 3p must secure a judgment against the partnership and the partners.

• partnership assets first
• then individual partners assets

Question 11

sharing profits presumed to be a partner unless:

Answer 11

profits received as

1. payment of debt
2. payment of wages or other compensation
3. as rent
4. interest on a loan

Question 12

partnership by estoppel

Answer 12

no partnership but liable as if partners to protect reasonable reliance by third parties

Question 13

voting

Answer 13

GR: partners have equal rights in management and equal votes unless otherwise agreed

if within the ordinary course of partnership- majority vote is necessary

outside the ordinary course of partnership- unanimous

Question 14

sharing profits and losses

Answer 14

GR: profits shared equally among partners UNLESS otherwise agreed

GR: lossess shared the same manner as profits unless otherwise agreed (profits do not follow losses)

Question 15

partners fiduciary duties

Answer 15

loyalty and care and disclosure

Question 16

duty of care

Answer 16

requries each partner to refrain from engaging in grossly negligent or reckless conduct ,intentional misconduct, or a knowing violation of law

Question 17

dissociation

Answer 17

occurs by a partner ceasing to be associated wit the carrying on the business

can be by express notice

Question 18

effect of dissociation in at will partnership

Answer 18

partnership at will is dissolved and business must be wound up when a partner notifies the partnership of his intent to withdrawal

Question 19

Partners postdissolution act

Answer 19

partnership bound if the act was appropriate for the winding up of the business

OR if the third party with whom the partner dealt did not have notice of the dissolution

Question 20

judgement creditor collecting from partnership

Answer 20

judgment creditor must first seek satisfaction of any judgment from the partnership and then from the partners personally to the extent not covered by partnership assets

Question 21

general partner rights and powers

Answer 21

all rights and pwoer and subject to restrictions and liabilies of a partner in a regular partnership.

includes duty to disclose to other partners of relevant matters

Question 22

general partner withdrawal

Answer 22

limited partnership will be dissolved by the withdrawal of a general partner unless within 90 days after withdrawal all partners agree in writing to continue and appoint any necessary general partners

Question 23

when can a limited partner be held liable:

Answer 23

if participates in control of the business

Question 24

liability of LLP for outstanding liabilities

Answer 24

an existing partnership may become an LLP andtreated as a legal entity distinct from members BUT continues to be same partnership that existed prior to filing statement of qualification

Question 25

partners in LLP liability

Answer 25

GR: not liable for LLP obligations- but if arose before LLP still liable

Question 26

newly admitted partners liability

Answer 26

not liable for any partnership obligaitons incurred before the person's admission as a partner

Question 27

LLP liability

Answer 27

partners not personally liabile for partnership obligations whether arising in contract, tort, or otherwise