Partnership Flashcards
What are the five issue areas tested in P’ship?
- General P’ship Formation
- Liabilities of General Partners to Third Parties
- Rights and Liabilities between General Partners
- General Partnership Dissolution
- Alternative Unincorporated Business Organizations.
How are General Partnerships formed?
Formalities: none
Definition: association of two or more person who are carrying on as co-owners of a business for profit.
Sharing of profits is the key facto, Therefore:
Partners contribute money or services for a share of profits, if any. The contribution of money or services in return for a share of the profits, if any, creates a presumption that a general partnership exists.
What principals apply for the liability of general partners to third parties?
Agency principals
Partners are agents of the p’ship for apparently carrying on usual p’ship business.
What may each partner be personally liable for?
all debts of the p’ship and for each co-partner’s torts.
What is an incoming partner’s liability for pre-existing debts?
No direct personal liability, but capital contributed can be used for that purpose.
When will a dissociating partner no longer be liable for subsequent debts?
partner retains liability until actual notice of dissociation is given to creditor, or until 90 days after filing notice of dissociation with state.
What is liability by estoppel for General Partners?
One who represents to a third party that a general partnership exists will be liable as if a general partnership exists.
What are the rights and liabilities of general partners?
- Fiduciaries of each other and the P’ship.
- Action for accounting
- Rights in p’ship property and liquidity
- Management
- Salary only with agreement.
- Share of Profits and losses.
What are the rights and liabilities of general partners?
- Fiduciaries of each other and the P’ship.
- Action for accounting
- Rights in p’ship property and liquidity
- Management
- Salary only with agreement.
- Share of Profits and losses.
As fiduciaries what is required of General Partners?
General Partners owe to each other and the p’ship the duty of loyalty, which means that general partners:
Never engage in self dealing
Never usurp p’ship opportunity
Never make secret profits
What does an action for accounting allow in partnerships?
P’ship may now bring action to recoup losses, or to account for profits made by breaching partner (disgorge).
How is the management of the P’ship determined?
Absent an agreement, each partner is entitled to equal control (vote).
How are the P’ships profits and losses shared?
Absent an agreement profits are shared equally
Absent an agreement losses are shared like profits.
How is dissolution of a a general partnership determined?
In the absence of an agreement that specifies the event of dissolution, a GP dissolves upon notice of the express will of one one GP to dissociate.
What is the real end of a P’ship called?
Termination
What is winding up the P’ship?
Remaining partners liquidate assets to satisfy creditors.
How long does partnership laibility last after dissolution?
Old business: the p’ship and the partners remain liable on all transactions entered to wind up old business with existing creditors.
New Business: remain liable on brand new transaction during wind up until notice of dissolution is given, but liability terminates 90 days after filing statement of dissolution.
How long does partnership liability last after dissolution?
Old business: the p’ship and the partners remain liable on all transactions entered to wind up old business with existing creditors.
New Business: remain liable on brand new transaction during wind up until notice of dissolution is given, but liability terminates 90 days after filing statement of dissolution.
What is the priority of distribution for a P’Ship in dissolution?
Pay all creditors first
Pay all capital contributions paid into the p’ship by partners
Pay profits and losses, if any.
What is the definition, formation, and control of a limited P’ship
Definition: a pship with at least 1 GP and at least 1 LP, dual liability/limited liability form.
Formation: limited liability forms must file LLP certificate that includes the names of all GPs
Liability and control :
- General Ps: general (substantial managerial) control, and general liability
- LPs: Limited liability. Not liable for obligations of other partners or pship.
May not manage business without forfeiting limited liability.
What is the formation and liabilities of Registered Limited Liability pships (RLLP)?
Formation: file statement of qualification and annual reports.
Liabilities: no partner is liable for pship obligations, but they are liable for own wrongdoing, or wrongdoing of those under their direct supervision.
