Partnership

Question 1

Partnership Requirements

Answer 1

(1) mutual consent to a relationship that involves the combining of resources and efforts (includes a promise to provide resources)
(2) in determined proportions
(3) to collaborate at mutual risk
(4) for their common profit or benefit

Question 2

Partnership for a Fixed Term

Answer 2

partnership that has a stated term

Question 3

Voluntary Withdrawal from Partnership: Fixed Term

Answer 3

requires unanimous consent of all other partners

*exception: does not require unanimous consent where one or more partners have failed to perform a material obligation

Question 4

Voluntary Withdrawal from Partnership: Indefinite Term

Answer 4

Requirements:
(1) withdrawal is in good faith
(2) partner gives notice to other partners
(3) notice is given at a time not unfavorable to the partnership

Question 5

Involuntary Withdrawal from Partnership

Answer 5

(1) death
(2) interdiction
(3) seizure of partner’s partnership interest by a creditor (with 30 day cure period)
(4) expulsion of partner for just cause with majority vote

Question 6

Effect of Withdrawal of Partner

Answer 6

partner entitled to be paid out his partnership interest, calculated in one of three ways:
(a) book value
(b) fair value (price between a knowing buyer and seller)
(c) market value (price on the market fetched by unknowing buyer)

Question 7

Actions Beyond Scope of Authority

Answer 7

if a partner acts beyond their scope of authority, they are liable for damages to the partnership

Question 8

Authority as to Third Persons

Answer 8

if partnership decides to strip partner of mandatary authority but fails to inform third parties, the partnership can still be bound by the non-authoritative partner’s actions with third parties

Question 9

Partnership: Authority

Answer 9

each partner is a mandatary for the partnership and has the authority to bind the partnership in all matters “involving the ordinary course of the partnership business”

things NOT considered ordinary: alienating, leasing, encumbering any immovable property owned by the partnership

Question 10

Partnership: Personal Liability

Answer 10

each partner is personally liable for partnership debts, but only after the partnership’s assets have been depleted and only for their virile share

Question 11

Defense to Personal Liability where Partnership Assets have Not Yet Been Depleted

Answer 11

Discussion

Question 12

Duty of Loyalty

Answer 12

each partner owes a duty of loyalty to the partnership to act in the best interest of the individual partners and the partnership

Question 13

Breach of Duty of Loyalty

Answer 13

breach of the duty of loyalty opens partner up to liability for damages to indemnify the partnership for any wrongful gain or losses incurred as a result of breach

Question 14

Unpaid Partner Contribution

Answer 14

3rd parties (and the partnership itself) can sue for unpaid but promised partnership contributions

Question 15

Termination

Answer 15

(1) unanimous consent of the partners
(2) judgement of termination
(3) bankruptcy of the partnership (granting of an order for relief to the partnership under Chapter 7 of the Bankruptcy Code)
(4) reduction of the membership to 1 person
(5) expiration of term
(6) the attainment or the impossibility of attainment of the object of the partnership
(7) in accordance with the partnership agreement

Question 16

Effect of Termination of Partnership

Answer 16

mandatary authority terminates
*Exceptions: partner unaware of termination, 3rd party unaware of termination

liquidation of partnership assets

Question 17

Liquidation Priority

Answer 17

(1) partnership creditors
(a) secured creditors
(b) unsecured creditors
(i) non partner unsecured creditors
(ii) partner unsecured creditors

(2) fulfillment of partners’ contributions to the partnership (value of capital contribution)

(3) divided among partners in accordance with ownership of partnership interests

Question 18

Form Requirement

Answer 18

none* unless partnership wishes to own immovable property

Question 19

Partnership Ownership of Immovable Property

Answer 19

partnership agreement MUST be in writing for partnership to own immovable property

Question 20

Partnership Ownership of Immovable Property: If No Written Partnership Agreement

Answer 20

all partners co-own in indivisibility immovable property attained in the name of the partnership without a written partnership agreement

Question 21

Partnership Ownership of Immovable Property: Effect on Third Persons

Answer 21

partnership ownership of immovable property only affects third persons if the partnership agreement is written and filed with the Secretary of State

if not written/filed, third persons are entitled to assume that the immovable property is co-owned in indivision by all partners of the partnership

Question 22

Partnership Ownership of Immovable Property: Cure

Answer 22

partnership can cure ownership of immovable property without a written/filed partnership agreement by making a written partnership agreement (and filing it to affect 3rd parties), BUT the cure does not retroactively prejudice the rights of third parties

Question 23

Requirements to File Partnership Agreement with Secretary of State

Answer 23

(1) name and address of the partnership
(2) name and address of all partners to the partnership

Question 24

Contribution

Answer 24

all partners must contribute something of economic value to the partnership

Question 25

Equality

Answer 25

generally, all partners are treated equally unless otherwise agreed in the partnership agreement meaning all are equally liable for partnership debts, losses, and profits

Question 26

Unanimous Consent of Partners Required When...

Answer 26

(1) decision to amend the partnership agreement (2) decision to terminate the partnership (3) decision to add a new partner *unless otherwise agreed in the partnership agreement

Question 27

Majority Consent of Partners Required When...

Answer 27

(1) determining power of individual partners to govern the partnership (2) other operational/policy decisions affecting the partnership *unless otherwise agreed in the partnership agreement

Question 28

Right to Inspect Partnership Records

Answer 28

absolute right of all partners, cannot be limited or eliminated by partnership agreement

Question 29

Obligation of Partners to Each Other and to the Partnership

Answer 29

Fiduciary duty to (a) act in the best interest of the partnership (b) abstain from wrongfully taking partnership property or partnership business opportunities

Question 30

Breach of Fiduciary Duty

Answer 30

breaching partner is liable for damages caused by the breach to the partnership, including any wrongful gain incurred by the partner in the course of his breach

Question 31

Assignment of Partnership Interest

Answer 31

partners can only assign their economic interest in the partnership to a 3rd person 3rd person is not treated as a new partner unless there is unanimous consent from all other parters

Question 32

Services Rendered to Partnership by Partner

Answer 32

partner is not entitled to reimbursement *unless otherwise agreed under the partnership agreement Exceptions: partner acts in good faith in (a) loaning money to the partnership (b) incurring liability/loss for partnership (ex: becoming a surety)

Question 33

Partnership in Commendam: Requirements

Answer 33

Must have a Partnership Agreement that complies with the following: (1) in writing (2) name of the partnership must clearly indicate that it is an in commendam partnership (and must not suggest that any of the in commendam partners are general partners) (3) must indicate 1 or more partners in commendam (4) must identify property contributed by the partner(s) in commendam in a dollar ($) amount or with a method of valuation (5) must describe when contribution by partner(s) in commendam will be made (if not, due at creation) (6) must be filed with the Secretary of State

Question 34

Undoing Limited Liability in LLP

Answer 34

(1) limited partner allows their name to be used in dealings of the limited partnership (2) limited partner participates in the management of the limited partnership (3) limited partner conducts business with a 3rd party in the name of the limited partnership, if the 3rd party believes that the limited partner is actually a general partner

Question 35

Permissible Limited Partner Activities

Answer 35

(1) discussing business matters with other partners (2) serving as a guarantor for the debts of the limited partnership (3) voting on matters that require partnership approval *limited partner is NOT a mandatary of the limited partnership!

Question 36

Registered Limited Liability Partnership

Answer 36

LLP, shields all partners from liability in certain situations

Question 37

Registered Limited Liability Partnership: Form Requirements

Answer 37

(1) partnership must already exist, need to convert the partnership into an LLP by filing a application of conversion with the Secretary of State (2) name of LLP must include "LLP"

Question 38

Registered Limited Liability Partnership: Secretary of State Requirements

Answer 38

(1) name of partnership (2) number of partners (no names required) (3) statement of purpose (4) signed by a majority of the partnership interest (not necessarily majority of the partners) *status of LLP is ONLY GOOD FOR 1 YEAR (must refile every year)

Question 39

Benefits of LLP

Answer 39

all partners are shielded from liability incurred by a partners actions in the conducting of business of the partnership that include: error, omission, negligence, malfeasance, or incompetence but partners are liable for all other debts!

Question 40

Can a partner sued in her capacity as partner automatically recover expenses from the suit from the partnership?

Answer 40

No, no provision requiring reimbursement in the civil code. Corporations on the other hand have statutory authority entitling the directors or officers sued in their official capacity to recover litigation expenses, including attorneys' fees, if they were successful, and giving the corporation discretion to reimburse the fees if they were unsuccessful.