Partnership

Question 1

What is a partnership?

Answer 1

Association of two or more persons to carry on as co-owners for profits.
Profit sharing creates an assumption. losses are shared like profits. profits shared equally.

Question 2

How do partnership voting rights work for comanaging affairs? (2)

Answer 2

1. Affirmative vote of all partners for extraordinary matters (admitting a new partner, etc)
2. Majority vote needed for ordinary matters.

Question 3

What is the authority of a partner to bind the partnership?

Answer 3

1. A partner has authority to bind the partnership as to USUAL and CUSTOMARY dealings with third parties and does not need approval of the other partners.

Question 4

What kind of liability do the partners have for partnership debts?

Answer 4

1. Partners are jointly and severally liable for all debts incurred by partnership;
   a. Incoming partners are not liable for debts
   b. outgoing partners retain liability on future debts until actual notice of their association is given to creditors or 90 days after filing notice of disassociation.

Question 5

What three fiduciary duties do partners have?

Answer 5

1. Duty of loyalty - not usurp corporate opportunities for personal advantage, engage in self dealing, or compete with the partnership.
2. duty to account - account for any profit and hold any profits in trustee for partnership.
3. Duty of care - act with ordinary care.

Question 6

What is the process of partnership dissolution?

Answer 6

1. a partner disassociates with the partnership, which causes dissolution;
2. partners only have authority to do what is needed to wind up partnership;
3. Dissolution does not terminate partnership, but triggers winding up of partnership.

winding up then occurs, then termination

Question 7

What are the differences between rightful and wrongful withdrawal?

Answer 7

A. wrongful withdrawal - other partners can choose to buy shares and not wind up, and if winding up occurs, withdrawing partner cannot participate.
B. rightful withdrawal - winding up occurs, withdrawing partner can participate.

Question 8

How do you distribute assets during windup?

Answer 8

1. third party creditors first
2. partners paid back for loans
3. partners paid back for capital contributions.
4. partners are paid profits.

Question 9

How to determine what is partnership property?

Answer 9

1. Whether it was acquired with partnership funds,
2. Use and upkeep,
3. agreement,
4. title

Question 10

What are partnership creditor rights?

Answer 10

A. if creditor has claim against partner, can get interest in partnership (but can’t vote or manage)
B. If creditor has claim against partnership, creditor can collect from individual partners.