Partnership Flashcards
Definition of partnership
association of two or more legal persons who carry on a for profit business as co-owners
Profit sharing test for partnership
If profit sharing, presumption of partnership
EXCEPTION: payment of debt, wages, rent, goodwill, interest payments
Intent required for Parternship formation
only intend to (1) carry on as co-owners (2) for profit
Partner by estoppel
1 - representation that person is a partner
2 - purported partner accepts the rep
3 - third party reasonably relied on rep
4 - third party suffered damages as a result
P estopped from saying they don’t have liability of they failed to exercise reasonable care in the representation.
Share of profits or losses
If silent, divided equally
If only profits, losses will be allocated in same way
Three aspects of partnership duty of loyalty
Refrain from:
(i) Competing with the partnership;
(ii) Advancing an interest adverse to the partnership; and
(iii) Usurping a partnership opportunity
Partnership decisions
ordinary course
outside ordinary course
Absent partnership agreement:
ordinary course - majority
outside - ALL partners
Partnerships liability for torts of other partners
torts committed while partner acting within the scope of the partnership
or done with authority
Partnership liability for K of other partners
If entered with authority, liable
Partnership criminal liability
can be liable for crimes committed by another partner, resulting in a penalty or levied assets
Acceptance of new partner
generally, all other partners must consent
Partner’s transfer of financial interest
Partner can transfer rights to receive distributions
Transferee does not become a partner and partner is not relieved of partner rights and duties
transferee can seek dissolution though
Creditor’s rights vis a vis partners
Can attach to partner’s financial interest in partnership
CANNOT attach to partnership real property
When will a limited partner be liable for partnership obligations?
Only if they are acting like a general partner - participate in control of partnership.
Only liable to third parties who reasonably believed LP was a GP.
Dissolution
Any partner can choose to dissociate at ANY time, even if wrongful. It will be wrongful only if it violates express agreement or if it is limited in time or undertaking.
Does not necessarily cause dissolution, but can if only two partners in at-will general partnership
