Partnership Flashcards
There _______ formalities to form a general partnership.
are no. This is the default rule of business forms.
A general partnership is defined as
an association of two or more persons who are carrying on as co-owners of a business for profit.
_________ is the key factor in determining whether a general partnership exists.
Sharing profits
The contribution of money, capital, or services, in return for a share of profits creates
a presumption that a general partnership exists.
Partners are _______ of the partnership for apparently ________ usual partnership _______.
agents; carrying on; business.
The general partnership _______ liable for each partner’s torts committed in the ______ of partnership business and for each partner’s _______ contracts.
is; scope; authorized.
Each general partner ________ liable for all ________ of the partnership and each co-partner’s _______.
is PERSONALLY; debts; torts.
A brand new incoming partner is generally _______ liable for pre-existing debts, but any money paid into the partnership by said partner ____________.
not; can be used to satisfy those prior debts.
**But still no direct, out of pocket liability.
A disassociating partner _______ liability on all future debts until _____________ or ____________.
retain; actual notice on disassociation is given to creditors or until 90 days after filing a notice of disassociation with the state.
Under ________________, one who represents to a third party that a general partnership exists will be _______ as if a general partnership exists.
general partnership by estoppel; liable.
As a rule, general partner’s are ________ liable for all obligations of the partnership, including each co-partner’s _________.
personally; torts committed within the scope of the partnership.
General partners are ________ towards each other.
fiduciaries.
General partners owe the three basic duties of
(1) loyalty
(2) to not usurping partnership opportunity
(3) to not make secret profits
When a general partnership sues a general partner for breach a duty it is called
an action for accounting.
A general partnership may recover from a breaching partner
(1) losses caused by the breach; and
(2) disgorge profits made from the breach
The three kinds of partnership property are
specific partnership assets
(2) share of profits
“Specific partnership assets” typically include __________ owned by the _____________.
land, leases, or equipment; partnership
“Specific partnership assets” _______ be transferred by individual partners without ___________.
may not; general partnership authority
“She of profits” constitutes ______ property owned by each partner.
personal
Share of profits _______ transferred by individual partners to ________
may be; third parties.
Share in the management is an ______ owned only by the __________.
asset; partnership itself.
Share in management _______ transferred by individual partners to __________.
may not be; third parties
In a close case, the difference between a partnership property and personal property is determined by
whose money was used to buy the property.
Absent an agreement, each partner is entitled to ________ control of the partnership.
equal
**Don’t be thrown off by asymmetric profit sharing, control agreements are wholly separate.
The control of ordinary matters require a ________ vote, but fundamental matters require ___________.
majority; unanimous consent.
Absent an agreement, partners get _____ salary.
no
Even though partners by default do not get a salary, they do get compensated for
helping to “wind up” the partnership businesses.
Absent an agreement, profits are shared ______.
equally
Absent an agreement, losses are shared _________.
like profits.
Absent an agreement that sets forth the events of dissolution, a general partnership dissolves upon
notice of express will of any SINGLE general partner to disassociate.
“Winding up” is the period between ________ during which the remaining partners
dissolution and termination; liquidate partnership assets to satisfy partnership creditors.
Determining liability on contracts entered into during winding up, you must distinguish between
old business and new business.
For old business, the partnership and its individual general partners are liable on _____ transactions entered into to wind up old business transactions to satisfy
all; creditors who existed when winding up began.
The partnership and its individual general partners ______ liability on new business transactions during winding up until ______________.
retain;
(1) notice of dissolution is given to creditors; or
(2) 90 days after filing with the state a Statement of Dissolution
The “priority of distribution” on dissolution is
(1) all creditors fully
(2) capital contributions fully
(3) leftover profits
Creditors with respect to priority of distribution are both all ______ trade creditors and all ____________.
outside; inside partners who have loaned money to the partnership and become creditors thereby.
“Capital contributions” are
money paid in for a share of profits, NOT as a loan.
The partnership and its individual general partners are liable to their own partners for the ______ repayment of their _______ contribution
full; capital.
If there are leftover profits after paying off creditors and capital contributions, they are shared _______ without an agreement, otherwise they are shared
equally; according to the agreement.
Each individual general partner during winding up is liable for
his or her share of losses.
Each general partner during winding up must receive any loans and capital, plus their share of profits if there are any, minus their share of losses.
That’s it!
A “limited partnership” is defined as a
a partnership with at least one general partner and at least one limited partner.
The requirements to form a limited partnership are
(1) file a limited partnership certificate with the state
(2) that includes the names of all GENERAL partners
General partners ______ liable for all limited partnership obligations.
liable.
General partners _______ the right to manage and control the business.
have
Limited partners have _______ liability and are _______ liable for the _____ and _______ of the partnership
limited
Although the law in most states is that limited partners ______ manage, under the newly revised Uniform Limited Partnership Act, limited partners _______ manage without forfeiting their __________.
cannot; may; limited liability.
A registered limited liability partnership is formed by
(1) registering with the state a statement of qualification;
(2) plus annual reports.
For a registered limited liability partnership, _____ partner is liable for the debts and obligations of a registered limited liability partnership.
no.
A limited liability company (LLC) is defined as a
hybrid between a corporation and partnership in which the owners, called members, have the same rights and limited liabilities of shareholders in a corporation and the benefits of tax treatment of a partnership.
A limited liability company (LLC) is formed by
(1) filing articles of organization;
(2) may adopt an operating agreement
The members/owners of an LLC ____ manage the business or _______ the control to a team who behaves just like a ______ of a corporation.
may; delegate; board of directors.
A full membership interest in an LLC may not be transferred without
(1) the unanimous consent of other members; or
(2) as provided for in the operating agreement
LLCs equal the four “limiteds”, which are
(1) limited liability
(2) limited liquidity
(3) limited life
(4) limited tax
