Partnership

Question 1

General Partnership (Definition)

Answer 1

Any association of two or more people as co-owners of a business for profit.

Question 2

General Partnership (Formation)

Answer 2

No formal agreement required; Parties intent to associate as co-owners can be inferred from their conduct.

Question 3

General Partnership (Liability)

Answer 3

All partners are liable, personally and jointly, for all partnership debts.

Question 4

Limited Liability Partnerships (LLP) (Requirements)

Answer 4

Any partnership can become an LLP by approval of partners by vote. Can be completed by filing a statement of qualification with the state.

Question 5

Limited Liability Partnership (LLP) Liability

Answer 5

A partner in an LLP is not personally liable for partnership obligations of any sort, however every partner remains liable for her own acts or acts she supervises or directs.

Question 6

Limited Partnership (Requirements)

Answer 6

At least one general partnership (manage and control day-to-day operations) and at least one limited partnership (passive investors with limited authority)

Question 7

Limited Partnership (Liability)

Answer 7

General partners (personally, jointly and severally liable) and limited partners (liable only to the extent of their investment)

Question 8

Limited Partnership (Formation)

Answer 8

Filing a certificate of limited partnership with the state.

Question 9

General Partnership (Formation)

Answer 9

Factors to consider if general partnership: (1) parties intent, (2) profit sharing (most convincing factor), (3) sharing of control, (4) capital investment, and (5) joint ownership.

Question 10

Partnership By Estoppel

Answer 10

Where no partnerships exists, parties may be held liable to third parties as a partnership if they actively held themselves or others out as partners or consented to being held out as partners.

Question 11

Partnership’s Rights in Property

Answer 11

If bought with partnership funds and titled in the partnership name = partnership property (partners have no individual interest in the property)

Question 12

Partnership Share of Profits

Answer 12

Each partner has a transferable interest in her share of profits and losses, however management rights not transferable and absent alternative agreement, partners have equal rights in the management of the partnership business

Question 13

Fiduciary Duties of General Partnership

Answer 13

(1) Loyalty (must refrain from competing with the partnership), (2) care (refrain from engaging in grossly negligent conduct/intentional misconduct/knowing violations), (3) obedience, and (4) compete and accurate inforamtion.

Question 14

Partnership Books and Information

Answer 14

Every partner has a right ti inspect and copy partnership financial information.

Question 15

Contract Liability of the General Partnership

Answer 15

All partners are liable for any K made in the scope of the partners and business and other Ks expressly authorized by the partners.

Acts in ordinary course of business = bind partnership

Acts outside the ordinary business = do not bind partnership unless all partners authorize act

Question 16

Tort Liability of the General Partnership

Answer 16

Partners are liable for torts committed by a partner or employee if tort is committed: (1) in ordinary course of business and (2) with authority of partnership.

Question 17

Dissociation (Partner leaving)

Answer 17

Cause – Can be due to departing partners desire to withdraw, happening of an agreed-upon event, valid expulsion of the partner, bankruptcy of the partner

Effect – terminated dissociated partners legal relationship with partnership, including rights to profits and management rights (dissociating partners fiduciary duties terminate except regarding matters occurring prior to the dissociation)

Buying Out – if partnership continues, it must purchase the dissociated partner’s interest

Question 18

Dissolution (Partnership ending)

Answer 18

Cause – happening of an agreed-upon event, expiration of a term in the partnership agreement, issuance of judicial decree (in an at-will partnership any partner can dissolve at any time by providing a notice of dissolution)

Winding-up – upon dissolution, partnership must wind up business activities and distribute assets (partnership continues until winding up is complete)

Question 19

Dissolution – Asset Distribution

Answer 19

Once assets are reduced to cash, liabilities are paid first to creditors, then partners individually

Question 20

Dissolution – Asset Distribution

Answer 20

Once assets are reduced to cash, liabilities are paid first to creditors, then partners individually