Partnership Flashcards
General Partnership
Formation
Association of two or more persons to carry on as co-oqners of a business for profit.
subjective intent irrelevant
General Partnership
Factors for whether partnership exists
- sharing of profits – presumption
— reubttable with evidence of lack of co-ownership like no right to control or no sharing of losses - Right to participate in control
- Title/Property held in joint tenancy or in common
- Venture requires extensive activity
- Sharing of gross returns
General Partnership
Partnership by Estoppel
Person by words or conduct represents himself as a partner or consents to being represented as one, liable to third parties who extend credit in reliance on the representation
General Partnership
Voting
Equal rights, unless agreed otherwise.
- majority vote for ordinary course of business
- unanimous consent of all for matters outside
General Partnership
Profits
Assumption – equally among partners by number.
General Partnership
Losses
Shared the same way as profits.
General Partnership
Statement of Partnership Authority
Filed with Secretary of State
- grants/restrictions on partner auhtority to transfer real property are binding on third parties if recorded in county where property located
- - binding on partnership unless third party had actual knowledge of lack of authority for grants filed, not restrictions if not real property.
General Partnership
RUPA – Apparent Authority
Partner has apparent authority to bind to transactions within the ordinary course of the partnership’s business or business of the kind carried out by the partnership.
Not bound if person knew of or received notification of the lack of auth
General Partnership
Liability of Partners
Jointly and severally liable for all obligations of the partnership. Must exhaust partnership assets/funds before reaching partners’.
General Partnership
Fiduciary Duties
- Duty of Loyalty – must account to partnership for any befit derived by partner, refrain from dealing with partnership as party with adverse interest, and refrain from competing with partnership in business.
- Duty of Care – grossly negligent or reckless conduct
- Duty of Disclosure – to provide complete and accurate information concerning the partnership (RUPA says without demand if conerns affairs reasonably required for proper exercise of partner’s rights and duties
- Duty of obedience
General Partnership
Property
- Partnership’s if purchased with partnership’s funds regardless of name (presumed)
- Rebuttably partner’s if (1) held in name of one or more partners, (2) no sign they’re acting for a partnership, and (3) partnership funds not used.
General Partnership
Ownership Interest
Called partnership interest and is personal property of partners
General Partnership
Transfers
- Cannot transfer management rights, must make unanimous vote to add new partner
- Can transfer financial rights
General Partnership
Dissociation Events
- oral or written notice of voluntary dissociation
- happening of agreed event
- valid expulsion
- partner’s bankruptcy
- partner’s death or incapacity to perform duties
- decision of a court that incapable of performing duties
- termination of a business entity that is a partner
General Partnership
Wrongful Dissociation
- Breach of express terms of PA
- Before end of Term Partnership
Liable for damages caused by dissociation
General Partnership
Consequences of Dissociation
- partnership dissolved and business must be wound up
- Partnership continues and dissociated partner entitled to a buyout of interest
General Partnership
Dissolution
- Where partner dissociates by express-will in an at-will partnership
- In a term partnership, one dissociates wrongfully or because or death or bankruptcy, required only if on-half of remaining agree to wind-up within 90 days.
- Event agreed to in partnership agreement
- event making it unlawful
- judicial decree on application by partner that economic purpose likely frustrateed, partnered engaged in conduct making it not reasonable to carry on or business cannot practically be carried on
- judicial decree by trensferee of interest that it is equitable to wind up
- 90 consecutive days without at least two partners
General Partnership
Liability After Dissociation
Can be liable for two-yers after if:
1. other party reasonably believed partner was still a partner when entering the transaction; and
2. did not have notice of the partner’s dissociation
General Partnership
Dissolution Process
Winding up:
1. assets applied to liabilities (individual partners may be required to “pay in” if not sufficient)
- first, creditors (outside and inside - partners who loaned)
- second, capital contributions paid by partners
2. If excess, distributed to partners according to profit shares.
General Partnership
Notice of Dissolution
Filed with secretary of state, after notice filed all persons deemed to have knowledge after 90 days.
Limited Partnership
Definition
At least on general partner and at least one limited partner.
Limited Partnership
Creation
Must file a certificate of limited partnership, signed by all general partners
- name of partnership, names and addresses of agent for service of process, and names and addresses of each general partner
Limited Partnership
Limited Partner - Voting
Only when:
1. amending partnership agreement
2. converting partnership to limited liability limited partnership
3. disposing of all or substantially of property
4. admititng a new partner
5. compromising a partner’s obligation to make a contribution or to return an improper distribution.
