partnership Flashcards
partnership
an association of two or more people that carry on as co-owners a business for profit.
factors for partnership
sharing profits (presumption) right to participate in control (presumption)
non-presumption: property held in TiC or JT relationship designated as partnership joint venture req extensive activity sharing of gross returns
partnership by estoppel
if parties words or conduct reps as a partner, that person is liable as partner to third parties that extend credit in reliance of representation
can someone hold out another as a partner?
yes (I know it is weird) can be liable to third party even if not aware. Therefore you have duty to make sure others aren’t holding you out as a partner to the world if you’re not
partnership req consent of all partners
yes
voting for partnership
req maj for ordinary actions
req unanimous for business outside ordinary course
do partners have a right to compensation
no, have a right to co-ownership
profit sharing
equal amongst partners
losses are the same
unless stipulated otherwise in partnership agreement
liability to third parties
each partner is an agent of the partnership
actual and apparent authority
liability in tort
partnership is liable for partners conduct while in ordinary course of business OR with partnership authority
liability in contract
partnership liable for all contracts entered into by a partner in scope of ordinary business OR with actual or apparent authority
actual authority
Actual authority is the authority a partner reasonably believes
they have based on the communications between the partnership and the partner
can come from the partnership agreement or vote
apparent authority
partner has apparent authority to bind the partnership to transactions within the ordinary course of the partnership’s business or business of the kind carried out by the partnership (unless the third party is aware that the partner lacks actual authority to act).
what is the limitation on apparent authority
when the third party had notification or knowledge of the partner’s lack of authority to act
notification: effective when comes to attn or when it is delivered
knowledge: actual subjective knowledge; should have known is irrelevant
joint and several liability
partners liability
creditor must first exhaust all partnership assets, then go after partners
is each partner resp for all partnership liabilities
yes, if only one partner pays all liability, then can seek indemnification from other partners
liability for newly admitted partners and dissociating partners
newly admitted: only liable foe their investment
dissociating: liable for preexisting debts unless payment, release, or novation
fiduciary duties of partners
loyalty (each other and partnership)
care (each other and partnership)
disclosure
obedience
duty of care
don’t engage in grossly negligent or reckless conduct
duty of disclosure
complete and accurate info concerning the partnership
without demand: info regarding partnership affairs req for exercise of rights
with demand: all other info regarding business affairs
duty of obedience
not act outside authority and comply with directions of partnership
partners rights in partnership property
no right to ownership, only right to use in connection with partnership business
partnership interest
comprised of financial rights and management rights
no unilateral transfer of management right; must have unanimous vote by partners for new partner
CAN unilaterally transfer financial rights (recieve profits)
dissociation
by:
- oral/written
- happening of agreed event
- valid expulsion
- bankruptcy
- death/incapacitation
- court
- term of org that is the partner
terms for partnerships
at will (most partnerships)
term
what happens when a partner dissociates
partnership is dissolved and wind up OR
partnership continues and partner bought out
when is partnership dissolution req
at will partnership when a partner expressly dissociates
term partnership: partner dissociates wrongfully orbc of death/bankrupty is req ONLY IF within 90 days reamining partners vote to dissolve. otherwise partnership remains
liability and authority of dissociated partner
up to two years after dissociation if
- third party reasonbly believed still a partner
- no notice of dissociation
same test for authority to bind partnership, but must be something the partner could have bound the partner with previously
priority of distribution
- creditors of the partnership
- capital contributions of partners
- profits or losses
can a legal rep of a deceased partner wind up business
yes
can dissolution be waived
yes by unanimity
LP
The general
partner(s) is personally liable for partnership obligations, while
the limited partner(s) generally does not have any liability
beyond the liability to make agreed-upon contributions.
must be filed with sec of state and include:
- name of partnership (must have LP orLLP)
- name/address for service of process
- name/address of GP(s)
- if an LP or LLP
when is vote of LPs req
extraordinary matter
to: (1) amend
the partnership agreement; (2) convert the partnership to
a limited liability limited partnership; (3) dispose of all or
substantially all of the limited partnership’s property outside
the usual and regular course of the partnership’s activities; (4)
admit a new partner; or (5) compromise a partner’s obligation
to make a contribution or to return an improper distribution
distribution rights of LP’s
based on contribution NOT equal split like in a GP
any contribution: money, property, services
does dual LP and GP statuts in an LP save someone from liability
no
does an LP have fiduciary duties to the LP
no
dissocaiton rules for LP
same as for GP, except
dissociation of an LP turns LP into transferee of LPs transferable interest
power to bind LP after dissolution
bound for actions by GP for business related to wind up, not any other business
formation of an LLP
statement of qualification with the sec of state
- name/address of LLP
- statement of election for LLP business type
- deffered eff date
llp formed at time of filing or the date on form, whichever is later
limited liability company
A limited liability company (“LLC”) is a hybrid business organization
between a corporation and a partnership that (1) is
taxed like a partnership (except for a single-member LLC),
(2) offers its owners (called members) the limited liability
of shareholders of a corporation, and (3) can be run like
either a corporation or a partnership.
forming an LLC
cert of organization with the sec of state
name of LLC
address of registered office
name/address of registered agent
operating agreement
like the bylaws for a corp or the partnership agreement for GP/LP/LLP
distributions in an LLC
most states: based on the contribution of the members
fiduciary duties of members in an llc
care
loyalty
