Partnership Flashcards
Law governing partnerships
- The Revised Uniform Partnership Act (“R.U.P.A.”) provides default rules for
- general contract rules
does formation of a partnership require a writing?
no
who may enter into a partnership
anyone capable of entering a binding contract
requirements to form a partnership
- intent
- capacity to contract
- no illegal purpose
- consent of all partners
the sharing of profits raises a _____ or partnership
presumption
what factors raise a presumptions that a partnership has been formed
factors that do not raise a presumption (but are evidence) that a partnership has been formed
- Title to property is held jointly
- Parties designate their relationship as a partnership
- venture requires extensive activity
- sharing of gross returns
Under RUPA when does property belong to a partnership?
- titled in partnership name
- transferring title notes the titleholders capacity as a partner or references the partnership
- purchased with partnership funds
Under RUPA when is property presumed NOT to be held by the partnership
- held in the name of a partner
- instrument transferring title does not reference a partner or the partnership
- partnership funds not used to purchase
Common Law factors to determine ownership of untitled property
a. Used partnership funds
b. Use of property by partnership
c. Listed in partnership books as an asset
d. Close relationship between property and the business
e. Improvement with partnership funds
f. Maintenance with partnership funds
are partners considered co-owners of partnership property?
no
do partners have a transferable interest in partnership property
no
partners may only use partnership property
for the benefit of the partnership
rights of partners in a general partnership
- participate in management
- equal right to share profits
- equal right to share loses
- reasonable compensation for services rendered in winding up partnership business
- indemnification for payments reasonably made and obligations reasonably incurred in carrying out partnership business
- contribution from other partners for payment of partnership debt
- inspection of books and records
- sue or be sued in the partnerships name
duties of partners in a partnership
loyalty
care
obedience
provide complete and accurate information
duty of loyalty
a. account for all profits or other benefits
b. may not deal with partnership as one with an adverse interest
c. may not compete with the partnership
duty of care
refrain from engaging in negligent, reckless, or unlawful conduct
refrain from engaging in intentional misconduct
duty of obediance
obey all reasonable directions of the partnership refrain from acting outside the scope of the partner’s actual authority
is a partner an agent of the partnership?
yes, and the act of any partner binds the partnership
when will a partners action not be binding on the partnership?
the partner had no authority and the third party knew or had notice that the partner lacked authority
contract lability of a partnership
partners are liable on contracts made by a partner in the scope
of the partnership business and on any other contracts expressly authorized by the
partners
tort liability of a partnership
partners are liable for any torts committed by a partner or an employee of the partnership in the ordinary course of partnership business
A partner is dissociated from a partnership upon:
a. Notice of the partner’s express will to withdraw
b. The happening of an agreed upon event
c. The valid expulsion of a partner
d. The partner becoming bankrupt
e. The death of an individual partner, or the termination of a partner that is a business entity, or
f. A court decision that a partner is incapable of performing her duties
When must a partnership be dissolved in a partnership at will?
when a partner gives notice of her express will to withdraw
When must a partnership be dissolved in a partnership for a definite term or particular undertaking
1) Within 90 days after a partner’s death, bankruptcy, or wrongful dissociation, at least half the remaining partners express a will to wind up the business
2) All the partners express a will to wind up the business, or
3) The term expires or the undertaking is complete
other times when a partnership must be dissolved
c. Upon the happening of an agreed upon event
d. Upon the happening of an event that makes it unlawful for the partnership to
continue, or
e. Upon a judicial decree
What law governs Limited Partnerships
Uniform Limited Partnership Act
(“U.L.P.A.”)
Requirements for a Limited Partnership
- Need one or more general partners plus at least one limited partner
- Need to file a certificate of limited partnership with the secretary of state
when does a partner in a Limited Partnership have a right to a distribution
when the partner has made a contribution.
may be in the form of any benefit to the partnership (e.g., money,
property, services, and promises to make such contributions
liability of a limited partner in a Limited Partnership
no personal liability for obligations of the partnership
liability of a general partner in a Limited Partnership
General partners are jointly and severally liable for all partnership obligations
General partners may also be limited partners but they still have all of the liabilities and duties of a general partner
duties of general partners in a limited partnership
fiduciary duties of care and loyalty
duties of a limited partner in a limited partnership
no fiduciary duty to the partnership and are free to compete with the partnership, except as otherwise provided in the partnership
agreement
in a limited partnership who has a right to distributions
both general and limited partners
in a limited partnership who may transact business with the limited partnership
both general and limited partners
in a limited partnership who may maintain a derivative action on behalf of the partnership if the
partner first makes demand on the general partners or the demand would be futile
both general and limited partners
in a limited partnership apply for a decree of dissolution whenever it is not reasonably practicable to carry on the business in conformity with the partnership agreement
both general and limited partners
in a limited partnership who has equal rights to mange
general partners
in a limited partnership who has a right to the partnership’s business information
general partners
is a general partner in a limited partnership entitled to remuneration for services performed for the partnership
no (assumption do not have a salary because you are getting a percentage of the profits)
is a general partner entitled to indemnification for liabilities incurred in the ordinary
course of the partnership’s activities
yes
do limited partners have a right to inspect and copy certain partnership records that
are required to be kept in the records office
yes
when may a general partner in a limited partnership dissociate?
same as in a general partnership
a. Notice of the partner’s express will to withdraw
b. The happening of an agreed upon event
c. The valid expulsion of a partner
d. The partner becoming bankrupt
e. The death of an individual partner, or the termination of a partner that is a business entity, or
f. A court decision that a partner is incapable of performing her duties
May a limited partner in a limited partnership dissociate before the termination of the limited partnership?
no
A limited partnership may be judicially and administratively dissolved; otherwise, a
limited partnership may be dissolved only by the occurrence of one of the following:
a. The happening of an agreed upon event
b. The consent of all the partners holding a majority in interest
c. After dissociation of a general partner and the consent of the majority in interest
d. if no general partner remains, after 90 days unless a new partner is admitted, or
d. 90 days after dissociation of the last limited partner, unless a new limited partner is admitted
how are the assets in a limited partnership distributed upon dissolution of the partnership
first to creditors (including partners who are creditors) and
then to the partners as a distribution
Requirements for formation of a limited lIbility Partnership (LLP)
- must be approved by whatever vote is necessary to amend
the partnership agreement - Requires statement of qualification (registration) filed with the secretary of state
what must an LLPs filing with the secretary of state contain
a. Name and address of partnership
b. Statement of election to be an L.L.P
Liability of partners in an LLC
- A partner is not personally liable for the obligations of the partnership
- However, a partner remains personally liable for her own wrongful acts
Rights of Partners in an LLP
identical to those of general partners in a general partnership
- participate in management
- equal right to share profits
- equal right to share loses
- reasonable compensation for services rendered in winding up partnership business
- indemnification for payments reasonably made and obligations reasonably incurred in carrying out partnership business
- contribution from other partners for payment of partnership debt
- inspection of books and records
- sue or be sued in the partnerships name
If partnership assets are insufficient to indemnify a partner for an L.L.P
each partner forfeits a right to receive contributions in exchange for being relieved
of the obligation to contribute to the personal liability of other partners
What is the governing law for a Limited Liability Company (LLC)
what must an LLP include in their name
the letters LLP or Limited Liability Partnership
what is the governing law for Limited Liability Companies (LLC)
Revised Uniform Limited Liability Company Act of 2006
(“R.U.L.L.C.A.”),
How is an LLC taxed?
like a partnership
An LLC is an entity ____ from its members
distinct
what is the liability of members in an LLC
members are not personally liable, but are liable for their own tortious conduct
not liable for the tortious conduct conduct of other LLC members
must an LLC file a certificate with the secretary of state
yes (certificate of organization)
In an LLC who participates in management?
all members unless otherwise specified in the operating agreement
member-managed LLC
Each member of a member-managed LLC has authority to bind the company to contracts, unless the member lacks actual authority to do so and the other party has
notice of same
members subject to duty of care and loyalty
members must o discharge their duties consistently with the contractual obligation of good faith and fair dealing
Manager-managed
a. In manager-managed LLCs, only the managers are subject to the duties of care and loyalty
b. Only the members may authorize or ratify an act by a manager that would otherwise violate the duty of loyalty
may a court pierce the LLC veil to reach personal assets of members?
yes under circumstances similar to those justifying piercing in a corporation
Distributions in an LLC
uniform act = distributions in equal shares unless the operating
agreement provides otherwise,
most states = allocate distributions on the basis of contributions unless the operating agreement provides otherwise
in a member managed LLC who has a right to inspect and copy any
record concerning the LLC’s business
members if the records are material to the members rights and duties
in a manager managed LLC who has a right to inspect and copy any
record concerning the LLC’s business
the managers have a right to information and duty to furnish information a
When may a member disassociate?
at any time
what happens if a member wrongfully disassociates?
A wrongfully dissociating member may be liable to the LLC for damages
An LLC will dissolve when any of the following occurs:
a. An agreed upon event of dissolution
b. The consent of all the members
c. The passage of 90 consecutive days during which the LLC has no members
d. Judicial decree
e. Administrative dissolution by the secretary of state
