Partnership

Question 1

What is a partnership

Answer 1

-association of 2+ persons carrying on as co-owners of a for-profit business

Question 2

How is partnership formed

Answer 2

Partners must intend to take actions to a create a partnership, but don’t necessarily need to realize or understand that they are creating a partnership
-written agreements are not necessary
-persons who take a share in profit are presumed partners unless the profit is taken for a specific purpose, such as repayment of debt, wages or rent

Question 3

Who has decision-making authority in partnership?

Answer 3

Decisions in the ordinary course of business for a partnership can be made by a majority of partners
-decisions outside the ordinary course of business require agreement by all partners

Question 4

What does partner have power to bind partnership

Answer 4

-each partner in a partnership can bind the partnership for an act in which it seems apparent he is carrying on in the ordinary course of the partnership business

Question 5

What is the 2-part test regarding partner’s power to bind a partnership

Answer 5

1. Was the act must apparently carrying on in the ordinary course of the partnership’s business?
2. Did the person dealing with the partner have actual knowledge or receive notification that the partner had no actual authority to bind the partnership

Question 6

What type of liability do partners have for partnership obligations

Answer 6

All partners are jointly and severally liabile for all partnership obligations.

Question 7

What is the process for claimants against partnership and individual partners

Answer 7

-Claimant must first try to obtain judgement against partnership and exhaust partnership assets
-Claimant must make obtain separate judgement against individual partner to attack that partner’s assets if partnership assets are insufficient (can be made simultaneously with a judgement against the partnership)

Question 8

What is a partnership’s legal status?

Answer 8

A partnership is a distinct legal entity apart from the partners who comprise it

Question 9

What are the types of partnerships in terms of their duration

Answer 9

A partnership may be either “at will” or for a definite time or undertaking

Question 10

What are the nature of general partners?

Answer 10

-are agents of the partnership
-co-manage the business
-share in profits and losses of the business
-are exposed to personal liability for partnership debts and obligations

Question 11

What is the nature of limited partners

Answer 11

-generally passive investors
-not agents of the partnership
-do not participate in management of the partnership
-are generally not personally liable for partnership debts and obligations

Question 12

What are the three primary types of partnerships?

Answer 12

1. General Partnership
2. Limited Partnership
3. Limited Liability Partnership

Question 13

What is the nature of a general partnership

Answer 13

Two or more general partners

Question 14

What is the nature of a limited partnership

Answer 14

At least one general partner and one limited partner

Question 15

What is the nature of a limited liability partnership?

Answer 15

Protect general partners from personal liability

Question 16

What types of partnerships can become LLPs

Answer 16

Any partnership other than a limited partnership and become an LLP

Question 17

How is a general partnership formed?

Answer 17

A general partnership can be formed by an objective agreement between two or more persons to co-own an ongoing business for profit

Question 18

Can a partnership be formed without subjective intent regarding formation?

Answer 18

Yes, a partnership may be formed regardless of what was subjectively intended

Question 19

Do partnership agreements need to conform to any statutory formalities?

Answer 19

No

Question 20

How can partnership agreements be made?

Answer 20

Partnership agreements may be either:
1. express oral or written agreements
2. implied from the parties conduct

Question 21

What is prima facie proof of association?

Answer 21

Sharing profits is prima facie evidence that a partnership exists, with the profit-sharing party presumed to be a partner

Question 22

What does not constitute sharing in profits?

Answer 22

-being paid for a loan
-collecting rent
-earnign a salary

Question 23

How is a limited partnership formed?

Answer 23

A limited partnership may be formed by complying with statutory requirements of:
1. execution of a certificate of LP signed by all named general partners
2. filing a certificate of LP with the secretary of state’s office

Question 24

How can a partnership be converted from a general partnership to an LLP?

Answer 24

A general partnership can be convered to an LLP through the vote of partners holding a majority interest in the partnership

Question 25

How is an LLP formed?

Answer 25

An LLP is formed by filing with the secretary of state's office a certificate of registration that's signed by at least one partner, and paying a filing fee

Question 26

What is required regarding the name of an LLP?

Answer 26

The name of the LLP must say "limited liability partnerhsip" or an abbreviation

Question 27

What governs relationships between partners and partnership?

Answer 27

In general, relations between partners and the partnership are governed by the partnership agreement

Question 28

How are relationships between partners and the partnership governed in circumstances where the partnership agreement is silent?

Answer 28

Where a partnership agreement is silent, relations between the partners and partnership are governed by the Uniform Partnership Act

Question 29

Must a partnership agreement conform to the provisions of the UPA?

Answer 29

No, a partnership agreement can opt out of almost all of UPA's default rules.

Question 30

What are UPA provisions that partnership agreement cannot opt-out of?

Answer 30

The partnership agreement cannot opt out of UPA's default rules to the extent that the agreement: 1. unreasonably restricts a partner's access to books and records 2. removes a partner's duties of loyalty and care 3. disallows a partner's right to disassociate beyond requiring the partner to give written notice of intent to withdraw

Question 31

What are the rights of general partners when conducting partnership business?

Answer 31

Unless otherwise specified in the partnership agreement, each general partner has equal rights to manage the partnership and conduct business

Question 32

When doe a general partner bind a partnership?

Answer 32

A general partner binds the partnership when acting within the ordinary course of business

Question 33

When do a general partner's acts outside the ordinary course of business bind the partnership?

Answer 33

A general partner's acts outside the ordinary course of business bind the partnership only if all general partners consent to the action

Question 34

How are disputes between general partners resolved?

Answer 34

Disputes regarding acts within the ordinary course of business are resolved by majority vote Disputes regarding acts outside the ordinary course of business are resolved through unanimous consent

Question 35

What are rights of limited partners

Answer 35

-limited partners do not have right to co-manage the partnership or engage in partnership business -limited partners do not act as agents of partnership -limited partners retain the right to seek information for a purpose reasonably related to their interest as a limited partner

Question 36

What are rights of limited partners regarding their right to seek information for purposes related to their interests as a limited partner?

Answer 36

A limited partner's right to seek information for a purpose reasonably related to their interest as a limited partner includes the right to: 1. inspect and copy tax returns and other documents required by law 2. obtain true and full information as to the financial condition and state of the partnership's business