Partnership

Question 1

Partnership

Answer 1

A voluntary association of two or more persons carrying on as co-owners a business for profit

Question 2

What is the best evidence of co-ownership?

Answer 2

Sharing net profits

Question 3

Benefit of Partnerships

Answer 3

Favorable tax treatment

- pass thru entity

Question 4

Downside of Partnership

Answer 4

All partners have unlimited personal liability on all partnership debts

Question 5

Partnership for a term

Answer 5

has a fixes, stated term, typically a date or happening of an event

Question 6

Partnership at will

Answer 6

has no fixed termination date - exists until one partner wants to leave

Question 7

All partners are liable:

Answer 7

(a) jointly and severally for everything chargeable to the partnership
(b) jointly for all other debts and obligations to the partnership

Question 8

Partnership by Estoppel

Answer 8

A person who represents himself, or permits another to represent him, to anyone as a partner in an existing partnership or with other who are not actual partners, is liable to any such person to whom such representation is made who has, on the faith of the representation, given credit to the actual or apparent partnership

Reliance has to take the form of giving credit to the partnership

Question 9

Duty of Loyalty

Answer 9

A partners, owe to one another, while the enterprise continues, the duty of the finest loyalty and must notify their co-partners of new opportunities that arise from the original co-partner relationship

Question 10

UPA (1914): Disclosure

Answer 10

Partners shall render ON DEMAND true and full information of all things affecting the partnership to any partner

Question 11

UPA (1997): Disclosure

Answer 11

(1) WITHOUT DEMAND, any information concerning the partnership’s business, financial condition, and other circumstances which the partnership knows and is material to the proper exercise of the partner’s rights and duties under the partnership agreement or this act, except to the extent the partnership can establish that it reasonably believes the partner already knows this
(2) ON DEMAND, any other information concerning the partnership’s business, financial condition, and other circumstances, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances

Question 12

Expulsion

Answer 12

When a partner is involuntarily expelled from a business, his expulsion must have been “bone fide” or in “good faith” for a dissolution to occur without violation of the partnership agreement

Question 13

How to become a partner in an existing partnership?

Answer 13

No person can become a partner without unanimous consent from the partners in the partnership

Question 14

Do withdrawing partners have any transferable right in the partnership?

Answer 14

Yes - they can only assign their right to receive partnership income (but you still remain a partner)

Can’t:

• sell their share of partnership assets to anyone else (unless all agree)
• can’t assign their share of partnership assets to anyone else

Question 15

Agency Power of Partners to bind the partnership to TPs

Answer 15

Each partner is an agent for the partnership for the purpose of its business, and each partner’s acts for apparently carrying on in the ordinary course of the partnership business binds the partnership, unless the partner has no authority and the TP had notice about it

Question 16

§18(h)

Answer 16

Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners
- parties can contract around this if they want to

Question 17

Partnership Dissociation (UPA 1997)

Answer 17

The separation of a partner from the partnership. Upon dissociation, the partnership continues on without the exiting partners

Question 18

Partnership Dissolution (UPA 1914)

Answer 18

The point at which the partnership stops functioning as a forward-looking enterprise. This triggers the winding up vs. reconstitution choice

Question 19

Dissociation vs. Dissolution

Answer 19

A partner can dissociate and leave the partnership. If there is a continuation agreement, the partnership goes on.
- Dissociation does not necessarily lead to dissolution under 1997 UPA

Question 20

Dissolution: Effect on Partnership

Answer 20

After dissolution, the partnership must be wounds up, absent agreement among the partners to carry on the business

Question 21

Winding up

Answer 21

Process of shutting down post-dissolution (turning everything into $)

Question 22

How to dissociate a partner?

Answer 22

To dissociate a partner, the record must demonstrate that they:

(1) engaged in conduct relating to the partnership business; and
(2) such conduct make it not reasonably practical to carry on the business in partnership with them

Question 23

Judicial Dissolution of a Partnership

Answer 23

Courts of equity may order the dissolution of a partnership where there are quarrels and disagreements of such nature and to such extent that all confidence an cooperation between the parties has been destroyed or where one of the parties by his misbehavior materially hinders a proper conduct of the partnership business

Question 24

Limited Partnership

Answer 24

Form of business with at least one general partner and at least one limited partner
- requires a filing with SOS

GP has unlimited personal liability on all partnership debts

LP has limited liability, capped at capital contributions

Question 25

What can the limited partner not do?

Answer 25

LP cannot manage or control the entity and must be a passive investor, or risk being characterized as a general partner, with resulting UPL

LPs can risk losing their limited liability if they participate in management