Partnership Flashcards
What is a partnership and what are the types?
An association of two or more persons who have agreed to co-own an on-going business for profit.
General partnerships
Limited partnerships
Limited liability partnerships
What’s the difference between a limited partnership and a limited liability partnership?
Limited partner - one general partner, one limited partner
Limited liability partner - can come from a general partnership
- general partners are not exposed to personal liability risks they would normally be
What is a limited partner?
Only in limited partnerships
Passive investors. Not agents, do not participate in management, not exposed to personal liability.
When is a general partnership formed?
An objective agreement between two or more people to co-own an ongoing business for profit.
Can one oral, written, or implicitly.
When is the sharing of profits proof that a partnership exists?
Under the Revised Uniform Partnership Act - earning a salary doesn’t count.
How is a limited partnership created?
Under the ULPA, filing of a certificate of limited partnership with the Sec of State’s office.
Must be signed by all general partners.
Must contain LP or equivalent in name.
How is a limited liability partnership created?
From a general partnership. Vote of majority interest. Filing with Secretary of State, registration executed by partner, payment of fee.
Name must include LLP or equivalent.
What are the 4 basic characteristics of a general partnership?
- General partner’s right to co-manage business
- General partner’s fiduciary duties to other partners and partnership
- Sharing of profits and losses
- Unlimited liability of general partners for all partnership debts
What rights to general partners have?
- equal right to manage and conduct partnership business
- authorized agent
- reasonable access to books and records
When does a general partner’s act bind the partership?
- when conducted in the ordinary course of business
- unless not authorized and other party knows that - when not in the ordinary course of business, only if all general partners agree
What rights to limited partners have?
- do not have right to co-manage
- are not authorized agents
- do have right to seek information for a purpose reasonably related to their interest
What duties do partners have?
- duty of dare
- duty of loyalty
- duty to disclose
Can partners transfer their partnership interest?
Yes, unless provided otherwise.
Transfer includes only financial interest, not right to participate in management or access records.
What is a general partner’s liability to 3rd parties?
- liable for torts when committed by partner with authorization or ordinary course of business
- all obligations of partnership
Not liable for anything before they were a partner.
What are limited partner’s liabilities to 3rd parties?
Generally not personally liable. Liability limited to capital contribution.
What are limited liability partner’s liabilities to 3rd parties?
Any obligations are solely obligations of partnership, not the parties.
Remain liable for partner’s own wrongful acts.
When can a partner dissociate from a partnership?
At any time, with notice to partnership.
But may be liable for damages if dissociates against provision of partnership agreement.
What events cause a partner’s dissociation?
- death
- bankruptcy
- appointment of guardian for the partner
- judicial determination of incapacity
- event specified in partnership agreement
When can a partner dissociate from a limited partnership?
- general partners: wrongfully
- limited partner - no right to dissociate before termination of partnership
What happens once a partnership dissolves?
Continues only for the purpose of winding up - discharging its debts and distributing its assets.
What happens during the winding up process?
- discharge obligations of creditors, including partners who are creditors
- reimburse partners for capital contributions
- allocate any profits to partners
- partners are jointly and severally liable for outstanding debt
When can a transferee file an application to have a partnership dissolved?
At any time if at will partnership.
If for a definite term or undertaking, only after the completion of the definite term or undertaking.
When will a court grant an application to dissolve a partnership?
- economic purpose of partnerships is likely to be unreasonably frustrated
- carrying out the business in conformity with the partnership agreement is not reasonably practicable
- a partner’s conduct has made it not reasonably practicable to continue working with them
When will a partnership at will dissolve?
- application to the court
- unlawful to carry on business
- occurrence of event in partnership agreement
- when the partnership has notice of a partner’s express will to withdraw
When does a partnership for a definite term or particular undertaking dissolve?
- 90 days after a partner wrongfully dissolves, unless a majority of the partners agree otherwise
- expiration of the term o the completion of the undertaking, with consent of all partners
When does a limited partnership dissolve?
- 90 days after withdrawal of only general partner, unless a majority of remaining partners agree to continue and appoint new general partner
- 90 days after withdrawal of any general partner, unless majority of remaining partners don’t consent to dissolution
- 90 days after withdrawal of sole limited partner, unless a new limited partner is admitted.
Or
- an event specified in partnership agreement
- consent from all general partners and a majority of limited partners
- application to the court
