Partnership Flashcards
Partnership Requirements
(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
Partnership for a Fixed Term
partnership that has a stated term
Voluntary Withdrawal from Partnership: Fixed Term
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
Voluntary Withdrawal from Partnership: Indefinite Term
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
Involuntary Withdrawal from Partnership
(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
Effect of Withdrawal of Partner
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)
Actions Beyond Scope of Authority
if a partner acts beyond their scope of authority, they are liable for damages to the partnership
Authority as to Third Persons
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
Partnership: Authority
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
Partnership: Personal Liability
each partner is personally liable for partnership debts, but only after the partnership’s assets have been depleted and only for their virile share
Defense to Personal Liability where Partnership Assets have Not Yet Been Depleted
Discussion
Duty of Loyalty
each partner owes a duty of loyalty to the partnership to act in the best interest of the individual partners and the partnership
Breach of Duty of Loyalty
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
Unpaid Partner Contribution
3rd parties (and the partnership itself) can sue for unpaid but promised partnership contributions
Termination
(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
Effect of Termination of Partnership
mandatary authority terminates
*Exceptions: partner unaware of termination, 3rd party unaware of termination
liquidation of partnership assets