PARTNERSHIP

Question 1

DEFINITION

AKA (……)

Answer 1

For-profit business with 2+ owners

AKA GENERAL PARTNERSHIP

Question 2

Owners = (………………)

Answer 2

PARTNERS

Question 3

GOVERNING LAW

Answer 3

UNIFORM PARTNERSHIP ACT (“UPA”) or REVISED UPA (“RUPA”)

Question 4

UNIFORM PARTNERSHIP ACT (“UPA”) or REVISED UPA (“RUPA”)

• FORMED BY (………………) –> most rules for partnerships come from cases
• Exception: (………………….)
• 1914: (………………..) adopted UPA
• 1994: ULC adopted (……………..) – called UPA
• Amended 1996, 1997, 2011, and 2013
• Majority of states (…………….) UPA for RUPA

Answer 4

• FORMED BY COMMON LAW –> most rules for partnerships come from cases
• Exception: Louisiana
• 1914: **Uniform Law Commission (“ULC”) **adopted UPA
• 1994: ULC adopted RUPA – called UPA
• Amended 1996, 1997, 2011, and 2013
• Majority of states repealed UPA for RUPA

Question 5

PARTNERSHIP governed by partnership statute of (…………………………)

Answer 5

PARTNERSHIP governed by partnership statute of state it is organized in

Question 6

PARTNERSHIP AGREEMENT

• Usually have (……………..) partnership AGREEMENT SIGNED BY (…………………..)
• Does not have to be (………………….) but is INADVISABLE
  - WHY?

Answer 6

• Usually have WRITTEN partnership AGREEMENT SIGNED BY EACH PARTNER
• Does not have to be in writing but is INADVISABLE
  - Written agreement helps with issues in future
  - More detail than oral agreement can accomplish

Question 7

PARTNERSHIP AGREEMENT

Addresses (among other things):

5 ITEMS

Answer 7

• Management structure
• Allocation of profits and losses among partners
• Partner taxation
• Admission and withdrawal of partners
• Dissolution

Question 8

PARTNERSHIP AGREEMENT

Default rules can be (……………) to meet needs and preferences of partners

Answer 8

Default rules can be adjusted to meet needs and preferences of partners

Question 9

MANAGEMENT

DEFAULT RULE (if agreement silent) – each partner has (……………………………) in management of partnership business

Answer 9

DEFAULT RULE (if agreement silent) – each partner has EQUAL RIGHTS in management of partnership business

Question 10

4 Common MANAGEMENT approaches

Answer 10

• Select MANAGING PARTNER
• Select MANAGEMENT COMMITTEE
• ALL have say in managing business with each partner having EQUAL VOTE
• ALL have say in managing business with each partner having voting power EQUAL TO PARTNER’S CAPITAL CONTRIBUTION to partnership

Question 11

MANAGEMENT

MANAGING PARTNER

Answer 11

generally vested with authority to make all decisions

Question 12

MANAGING PARTNER

Agreement will typically require partnership vote on (……………………………………………………….)
- Will specify (……………………….) for approval

Answer 12

Agreement will typically require partnership vote on **matters OUTSIDE of ordinary course of business **
- Will specify required vote for approval

Question 14

4 Common MANAGEMENT approaches

Answer 14

• Select MANAGING PARTNER
• Select MANAGEMENT COMMITTEE
• ALL have say in managing business with each partner having EQUAL VOTE
• ALL have say in managing business with each partner having voting power EQUAL TO PARTNER’S CAPITAL CONTRIBUTION to partnership

Question 15

MANAGEMENT COMMITTEE

Composed of (…………..)

Answer 15

Composed of partners (generally vested with authority to make all decisions)

Question 16

LIABILITY EXPOSURE

• EACH PARTNER (……………………) for obligations of partnership
  
  • (…………………….) at risk to satisfy obligations of business
  • EXAUSTION RULE: (………………………………………..)

Answer 16

• EACH PARTNER PERSONALLY LIABLE for obligations of partnership
  
  • Personal assets at risk to satisfy obligations of business
  • EXAUSTION RULE: partnership assets depleted first, then individual partners can be sued

Question 17

TAXATION

Normally taxed under (…………………….)

Answer 17

Normally taxed under Subchapter K (“Sub-K”)

Question 18

Sub-K

• Specifically designed for taxation of business organized as a partnership
• NOT REQUIRED to (………………………….)

Answer 18

• NOT REQUIRED to pay federal income tax

Question 19

TAXATION

PASS-THROUGH

Answer 19

• Allocates profits/losses to partners pursuant to partnership agreement
• Each partner reports their share of profits/losses on personal federal income tax return + pays any resulting tax liability
  • SCHEDULE E on Form 1040

Question 19

TAXATION

Can OPT OUT of Sub-K taxation and INTO (……..) or (……..) taxation

Answer 19

Can OPT OUT of Sub-K taxation and INTO Sub-C or Sub-S taxation

Question 20

4 Common MANAGEMENT approaches

Answer 20

• Select MANAGING PARTNER
• Select MANAGEMENT COMMITTEE
• ALL have say in managing business with each partner having EQUAL VOTE
• ALL have say in managing business with each partner having voting power EQUAL TO PARTNER’S CAPITAL CONTRIBUTION to partnership

Question 20

• IRS requires partnership to file ANNUAL INFORMATION RETURN specifying partnership’s income, deductions, and each partner’s allocation of profits/losses
   FORM 1065