Partnership Flashcards
Formation of Partnerships
Association of Two or more persons with the intent to carry on a for-profit business as** co-owners**
Presumption of partnershpi
there is a presumption of a partnershp if there is the sharing of profits,
excpetions: payments of a loan, rent, wages, retirement or health benefits
General partnership
is a separate legal entity that can hold property, sue, and be sued
there is no limited liability, the partners are personally liable for partnership obligations
Partnership agreement
none required but if one is made it is subjec tto SOF, will control but cannot get rid of fiduciary duties
Partnership by estoppel
case 1: partnership does not exist, but a person is treated as a partner of a purported partnership
case 2: Partnership exists and a person who is not a partner is treated as a partner
elements of purported partner:
representation that a person is a partner
the person makes or consents to the representation
a third party reasonably relied on the representation
3P suffered damages
Partnership duties
to the partnership and each other: duty of loyalty (don’t compete, self-deal), duty of care (don’t violate the law), duty of good faith and fair dealing
to third parties: a partner is jointly and severally liable for all partnership obligations, incoming partners liability for pre-existing obligations is limited to capital contribution
Partner rights
Equal management and control, unless otherwise in partnership agreement
Ordinary business: requires approval by a majority of the partners
Special business: requires approval by all partners
Right to inspect and copy
Indemnification is required if a partner incurs liability while preserving partnershp property
Profits and losses
default is profits and losses are shared equally
losses are shared like profits unless agreement says otherwise
Distributions: no right to a distribution
Transfer
transfer of partnership interest: a partner can transfer their interest (right to share profits, losses, distributions) and it does not cause a dissolution or dissociation
transfer of partnership property: transfer without authority can be recovered unless transferee was without notice
Ownership of property
property is presumed to be partnership property if purchased with Partnershp assets
Can be rebutted with title, type of funds used, and intent of the partners
a partner does not have the right to use partnership property for personal ues
Addition of a partner
requires assent of all partners
Dissociation
voluntary or involuntary withdrawal of a partner
can withdraw by providing notice, or may be expelled per the agreement, by a unanimous vote if it is unlawful to carry on business with the partner, or death, bankruptcy, incapacity, or termination of an entity
Partnershp must purchase back partner’s interst, will only trigger dissolution if at will partnership
Post dissociation action
a dissociated partner can still bind the partnershp if the other party reasonable believes the dissociated partner is still a partner, does not have notice of the dissociation, and does not know of the lack of authroity.
Power to bind the partnership
a partner can contractually bind the partnershp if the partner acts wtih actual or apparent authority
actual authority
express: arises from the partnership agreement, authorization of the partners, or statement of authority filed with the state
Implied: basedon a partners reasonable belief that an action is necessary to carry out his express authority