Partnership Flashcards
Partnership
A partnership is an association of two or more persons to carry on as co-owners a business for profit.
Governed by the Revised Uniform Partnership Act (RUPA), contract law, and agency.
Partnership formation requirements
- No need for formal writing requirement, can be implied by conduct;
- Consent of all parties for new partners;
- Sharing of profits raises presumption of partnership
- Right to participate in control
Partners have equal rights to:
- Participate in management and control of the partnership
- Share in profits and losses
- Receive distributions
- Inspect books and records
Do partners have indemnification for payments and obligations?
Yes, if carrying out the business of the partnership.
Partner’s duty of loyalty
Account for all profits/benefits derived by partner in connection with the partnership business
No competing with the partnership
Partner’s duty of care
Refrain from negligent, reckless, or unlawful conduct, and from intentional misconduct
Partner’s duty of obedience
Obey the reasonable directions of the partnership
Refrain from acting outside the scope of partner’s actual authority
When does real or personal property belong to the partnership?
If titled in the partnership name, or the name of the partnership and the instrument transferring title notes the title holder’s capacity as partner or existence of partnership.
Presumed partnership property if purchased with partnership funds.
Property is presumed separate property of the partner if:
- Held in partner’s name;
- Instrument transferring title does not indicate person’s capacity as a partner or mention partnership’s existence;
- Partnership funds not used
When is untitled property considered partnership property?
Common law:
- Used partnership funds
- Use of property by the partnership
- Listed as an asset in the books
- Close relationship between property and business
- Improvement and maintenance with partnership funds
Partner’s rights in partnership property
Partners are not co-owners of partnership property and have no transferable interest in partnership property.
Partners have no right to use the property other than for the benefit of the partnership.
Partner liability
Each partner is an agent of the partnership, and the actions of any partner binds the partnership unless the partner had no authority & a 3rd party knew or had notice of partner’s lack of authority.
When will a partnership not be bound to contracts entered into by a partner?
When the contract is outside the scope of the business, despite the partner’s apparent authority.
Partner’s contract liability
Partners are liable on contracts made by a partner in the scope of the partnership business and any other contracts expressly authorized by partners.
Partner’s tort liability
Partners are liable for the torts committed in the ordinary course of business.
A partner is dissociated from the partnership when:
- Notice of partner’s express will to withdraw;
- Happening of an agreed upon event;
- Valid expulsion;
- Death of individual partner; or
- Court decision that partner is incapable of performing duties
In a partnership at will, a partnership is dissolved when:
A partner gives notice of her express will to withdraw
In a partnership for a definite term, a partnership is dissolved when:
- Within 90 days after a partner’s death, bankruptcy, or wrongful dissociation and at least half the he remaining partners express a will to wind up the business;
- All partners express a will to wind up the business;
- The term expires or the undertaking is done
A partnership is dissolved when:
- The happening of an agreed upon event;
- The happening of an event that makes it unlawful for the partnership to continue; or
- Judicial decree
