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NYS Bar > Partnership > Flashcards

Partnership Flashcards

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1
Q

What is a partnership?

A

(1) An association of two or more people
(2) carrying on a for-profit business
(3) as co-owners
Intent to form a partnership is not required.

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2
Q

What characteristics do partnerships share?

A

(1) sharing of profits

(2) joint ownership of property

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3
Q

When does sharing of profits not raise a prima facie case of partnership in New York? (5 times)

A

(1) profits used to pay off a debt
(2) profits linked to interest or loan charges
(3) profit-sharing is form of compensation
(4) profit-sharing is part of the good will payments from sale of a business
(5) profit-sharing is part of a retirement benefit

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4
Q

What elements are needed to recover from a purported partner (not an actual partner)? (4 elements)

A

(1) some representation that the particular person is a partner
(2) representation made by the purported partner or with her consent
(3) third-party reasonably relied on the representation
(4) third-party suffered damages as a result

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5
Q

Is a partner individually liable for debts of the partnership?

A

Yes. There is unlimited liability.

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6
Q

What profits is a partner entitled to? What losses?

A

Each partner is entitled to an equal share of partnership profits. And responsible for an equal amount of partnership losses.

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7
Q

Is a partner entitled to indemnification from the partnership?

A

Yes. To the extent each partner is sued because of conduct related to partnership business, that partner is entitled to indemnification.

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8
Q

Can a partner unilaterally assign away partnership property?

A

No.

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9
Q

What factors help determine whether a piece of property belongs to the partnership?

A

(1) use of the property
(2) whether partnership made improvements to the property
(3) whether property shares characteristics with other partnership property
(4) whether property is listed as an asset on the partnership books
(5) who pays property taxes on the property

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10
Q

What level of approval is needed by default to add a new partner?

A

Unanimous consent

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11
Q

What level of approval is needed for ordinary business decisions?

A

Majority

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12
Q

What level of approval is need for “special” business decisions?

A

Unanimous

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13
Q

What partnership business is considered “special”?

A

(1) admitting a new partner
(2) selling substantial portion of the partnership’s assets
(3) amending the partnership agreement

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14
Q

What is an “accounting” among partners?

A

Action in which all partners are joined and court determines the liabilities between each partner and the partnership as a whole.

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15
Q

When does a partner have standing to call for an accounting? (5 circumstances)

A

(1) partner is wrongfully excluded from partnership’s business
(2) partner is wrongfully excluded from possession and use of partnership property
(3) partner has improperly retained secret profits from partnership
(4) if partnership agreement allows accountings
(5) court finds that accounting action is “just and reasonable”

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16
Q

What are two situations where you don’t need an accounting?

A

(1) tort claim of negligence against a partner
(2) lawsuit against a partner for a “discrete and unrelated” matter that can be handled separately from the partnership’s business

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17
Q

If a partner transfers property without authority, when can the partnership get that property back.

A

Freely recoverable if the property was in the partnership’s name.

If not in partnership’s name, transferee takes it unless transferee knew or received notice that the property was owned by the partnership.

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18
Q

What does “notice” mean in partnerships?

A

A partnership has “notice” of information when:

(1) a partner is actually told
(2) information is delivered such that partnership is deemed to have know it.

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19
Q

What does “knowledge” mean in partnerships?

A

A partner knows it or should reasonably be able to know it.

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20
Q

When is a partnership deemed to have knowledge of one of its former or non-participating partners?

A

Only when the partner reasonably could have and should have communicated it to the partnership because of timeliness or importance.

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21
Q

Is a partnership liable for torts committed by partners?

A

Yes. Partnership is jointly and severally liable.

22
Q

What are the three exceptions to tort liability for the partnership?

A

(1) partner’s tort is fraud or crime against the partnership
(2) partner’s wrongdoing is outside the scope of the partner’s business
(3) partner commits a crime

23
Q

What debts is a new partner personally responsible for?

A

Only debts acquired after joining the partnership. For former debts, the new partner can only lose the amount of his/her capital contribution.

24
Q

Is a partner who leaves the partnership still liable for debts?

A

Yes. Still liable for everything that took place while he/she was there.

25
Q

What is “dissolution” of a partnership?

A

Change in rights and obligations among partnerships in the process of winding up. Corporation can only operate in dissolution to wind up.

26
Q

What is “winding up” of a partnership?

A

Finishing up the partnership

27
Q

What are the causes for dissolution? (8 causes)

A

“WE ME BAD”

(1) At-will: in at-will partnership, by choice of the partners
(2) Expires: for at-term partnership, when the term expires or its specific objective is accomplished
(3) Mutual consent: mutual consent to dissolution (any partnership)
(4) Expulsion: good faith expulsion of a partner for breach of partnership agreement
(5) Bankrupt: partner goes bankrupt
(6) Activities Illegal: partnership’s activities become illegal
(7) Death: death of a partner
(8) by court order

28
Q

When can a court order dissolution? (6 situations)

A

“BIG IPO”

(1) Breaches: partner willfully and persistently breaches duties, making it unreasonable for partnership to carry on
(2) Incompetence: partner is declared incompetent in judicial proceeding
(3) Guilt: partner found guilty of conduct that prejudicially affects the partnership
(4) Incapable: partner becomes incapable of fulfilling duties
(5) Profit: partnership can no longer make a profit
(6) Other: any equitable circumstance

29
Q

After dissolution, when will individual partners not be able to bind the partnership? (3 situations)

A

(1) partnership’s activities become illegal
(2) partner is personally bankrupt
(3) partner did not have authority to wind up affairs

30
Q

In what order are partnership assets distributed during winding up?

A

(1) outside creditors
(2) inside creditors (partners who made loans)
(3) remainder divided among partners

31
Q

Is a dissociating partner owed anything from the partnership?

A

Yes. Will be paid fair value for partnership stake, minus any damages from wrongful dissociation.

32
Q

What is a limited liability partnership (LLP)?

A

Partnership that is:

(1) limited liability
(2) available only to licensed professionals

33
Q

What is a limited partnership (LP)?

A

Partnership with general and limited partners. Limited partners are given limited liability, unless (1) liability arises out of that partners actions, OR (2) the activities of someone under that partners direct supervision.

34
Q

How are profits, losses, and distributions allocated in a limited partnership?

A

By default, on basis of each partners capital contribution

35
Q

What are “joint ventures”?

A

Type of organization sometimes recognized by courts. Virtually indistinguishable from partnerships.

36
Q

Can a partner earn special compensation for “extraordinary services”?

A

Yes. Partners do not always have equal interests or equal liabilities for partnership business. Partners who do provide “extraordinary services” are entitled to additional compensation.

37
Q

Is extra compensation permitted for partners who provide services in winding up a partnership’s affairs?

A

Yes.

38
Q

Can a partner assign his partnership interest to another? What is the effect of an assignment?

A

Yes. Assignment merely entitles the assignee to receive the profits towards the assigning partner would otherwise be entitled. Cannot assign managerial duties.

39
Q

What effect does the death of a partner have on the that partner or the other partners’ interests?

A

His rights and specific property vests in the surviving partner or partners. If it is the last living partner, his property vests and his legal representative.

40
Q

Is a partnership right in partnership property subject to allowances like surviving spouses airs or next of kin?

A

No.

41
Q

In general, can partners two the partnership or other partners?

A

No. Can only bring an accounting action.
Exceptions: can bring a lawsuit when…
(1) partner acts as a third-party representative of business outside the partnership in a transaction.
(2) negligence action
(3) the transaction involved will not require an examination of partnership accounts

42
Q

When can a partner’s actions find the partnership despite lacking actual authority?

A

If partner has apparent authority. Only lacks apparent authority if the third-party has “actual knowledge” of the partners lack of actual authority.

43
Q

Does a partner have authority to transfer partnership property held in the partnership’s name?

A

Yes. Must only execute an instrument of transfer in the partnerships name.

44
Q

Does a partnership have authority to transfer partnership property held in one or more partners names?

A

Yes. Partners need not be identified as part of the partnership.

45
Q

Can a judgment against the partnership be satisfied from individual partners personal property?

A

No. Unless there has also been a judgment against the partner, a judgment against a partnership cannot be satisfied from the partners assets. Creditor must exhaust partners assets first.

46
Q

Can a partner bind the partnership after the partnership has been dissolved?

A

Yes, by

(1) action appropriate for winding up the partnerships affairs or
(2) completing transactions unfinished at dissolution.

47
Q

What is a statement of dissolution?

A

A partner can file a statement of dissolution which is deemed to give third parties notice of dissolution as of 90 days after the statement is filed.

48
Q

What does a limited partner doing a limited partnership?

A

Acts like a shareholder in a corporation. Takes no part in control of the partnership.

49
Q

Is a general partner personally liable for limited partnership liabilities?

A

Yes. A general partner is personally liable to third parties for obligations of the limited partnership.

50
Q

When may general partner withdraw from the limited partnership?

A

At any time after giving written notice to other partners. But may be liable for breach of partnership agreement.

NYS Bar (24 decks)

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