Partnership Flashcards
What is a partnership?
an association of two or more legal persons who Carry on for profit business as co-owners
who can form a partnership?
any individual or company
who has the capacity to create a partnership?
anyone who is not incapacitated, includes any legal entity or persons
How to determine co-ownership?
when two or persons share profits, there is a presumption of paternship relationship
presumption will not apply to: payment of debt, interest payment, rent, goodwill
How do demonstrate that partnership is carry on for-profit business
intent is not requires,
sharing profits (presumption unless exceptions apply)
How do demonstrate that partnership is carry on for-profit business
intent is not requires,
sharing profits (presumption unless exceptions apply)
What are consequences of valid partnership
can hold property, sue, and be sued
there is no limited liability, partners are personally liable for partnerships obligations
no entity level taxation
What is Partnership Agreement?
law that governs the partnership agreement, doesn’t need to be written
if add’l terms will be apart of the partnership
What happens if there is no partnership agreement?
State law will govern terms
when will the partnership agreement not govern over state law?
cant agree to remove 3rd party liability
cant deny partner access to books & records
cant contract away fud. duties
What are fiduciary duties for partnership?
every partner is a fiduciary of the partnership and owes a fiduciary duty of loyalty and care to p’ship
what are limitations on duty of loyalty
cant
interfere with p’ship business
advance adverse interest
usurp a p’ship opportunity
Can the partner limit the duty of loyalty?
can’t eliminate duty of loyalty
can limit: by describing it differently as long as they are unreasonable
What violates duty of care?
engage in grossly negligent or reckless conduct
engage in intentional misconduct
engage in knowing violation of the law
cant unreasonable limit duty of care
scope of duties of loyalty and care?
doesn’t apply to prospective or former partners
scope of duties of loyalty and care?
doesn’t apply to prospective or former partners
How to determine the division of profit and losses
determined by agreement, if no p’ship agreement default rule is that distributions are divided equally
profits are not divided equally, they follow profits
When can partners be allowed to receive distribution?
partners cant demand (default rule)
can agree otherwise
can a partner transfer their interest?
default rule is that you may transfer, Partners are still allowed to agree otherwise
What is disassociation?
when a partner ceases to be associated with p’ship this can be voluntary or involuntary
what is voluntary dislocation?
gives notice that partner wants to withdraw
what is involuntary dissociation?
event triggered by agreement
expulsion
unlawful to carry on
court order
bankruptcy
incapacitated
death
one of the entities dissolves
What happens if partner disassociated?
p’ship doesn’t dissolve, the partner no longer has duty and has no right to participate in management.
if p’ship continues must buy out their shares
What Is liability for p’ship?
every partner acts as an agent for the p’ship, the partners may be liable for the other partners actions so long as they hav authority
