Partnership Flashcards
Two Types of Partnerships
GENERAL–Personal L. A limited L pertnership is a general type of partnership.
LIMITED–Limited L
General Partnership
LIMITED LIABILITY COMPANY and LIMITED LIABILITY PARTNERSHIP
NY permits the formation of an LLC, Professional LLC, and a Limited L Partnership (LLP). These business orgs are formed by filing a CERTIFICATE with the Dept of State.
Limited Liability Company (LLC)
is an unincorporated org of one or more members, formed for any general business purpose. It is treated as a regular private corp in most areas, especially liability.
The member of an LLC are L for the company’s debts only to the extent of their initial investment, UNLESS the organizational agreement states otherwise. Treated as partnership for TAX PURPOSES.
Professional Limited Liability Co (PLLC)
PLLC similar to a regular LLC except it may be used only by those offering professional services. Its L is similar to a Professional Corp.
Limited Liability Partnership
an LLP may only be formed by partnerships operating as a general partnership. An LLP is treated the same as a regular partnership, except that the liability standard is similar to a PLLC
Liability standard of PLLC and LLP
in the event of a K action, only the assets of the PLLC/LLP will be available to the creditors. For Malpractice, however, the members/partners will remain personally L for their own Neg and for the Neg under their direct supervision.
They will not, however, have any personal L for the Neg of another member/partner, unless the organizational agreement states otherwise.
General Partners
1) all gen partners SHARE in mgmt
2) NEW gen partners must be approved by ALL gen partners–ASSIGNMENT does not cause dissolution of partnership and is generally permissible, but the assignee does not become a partner rather an assignee.
3) LIABILITY–Gen partners have unlimited L
4) WITHDRAWAL–withdrawing partner must give notice to persons who had prior dealings with the old partnership to avoid L on a NEW partnership debt.
- ACTUAL notice–must be given to creditors
- CONSTRUCTIVE notice–(eg in newspaper) is sufficient for creditors who knew of or dealtw the partnership but do not extend credit.
5) PRESUMPTION–all partnerships presumed to be “gen “ unless stated otherwise.
Limited Partners–FORMATION
- an LP is formed by a WRITTEN AGREEMENT btw two or more persons having as members at least one gen partner and one limited partner.
- a CERTIFICATE of limited partnership must be filed with the Dept of State, setting forth the name of the LP, name and address of the Gen partners, the county the partnership is located, and various other requirements in PL 121-201.
- LPs controlled by either ULPA or RULPA which was revised effective July 1, 1991.
Limited Partners–LIABILITY
limited partners are not L for torts, breaches of trust, debt, breach of K, etc. Their L is personally limited to the amount of their investment.
-Partnership Name–a limited partners surname cant appear in the partnership name UNLESS: (1) it is also the surname of a Gen partner OR (2) the business had previously been carried on w that surname prior to the time he became an LP.
RULE: a limited partner who lends his name is L to creditors who do not have actual knowledge he is NOT a gen partner
Limited Partners–MGMT
Limited partners must not share in the mgmt to the extent that they control the partnership
ACTIVE PARTICIPATION–may participate in the affairs of the LP but cannot have an active vote in mgmt of LP. He may:
(1) be an employee, agent, contractor of LP
(2) be an adviser to the LP
(3) act as a surety
(4) participate in derivative actions involving the LP
(5) vote in areas of LP actions
(6) consult/advise or be an officer or fiduciary of the LP
(7) wind up the affairs of the LP
Limited Partners–PARTNER APPEARANCE
a limited partner will lose their status and become personally L to 3rd parties who deal with the limited partner and believe she was a general partner
Secret Partners
(1) are not know to be partners to the public
(2) may be active in conducting the business
(3) L same as gen partner, EXCEPT on withdrawal
(4) WITHDRAWAL - secret gen partners do not have to give notice of withdrawal to creditors/persons dealing w LP.
Silent Partners
(1) Are known to the public but have no voice in mgmt or business
(2) L is the same as Gen partner
Creation of Partnership–By K (oral or written)
no particular formalities are essential for a partnership K. Since the partnership is an agreement, it is governed by the general rules of K.
Creation of Partnership–Implied from Party Acts
NY–law states that receipt by a person of a share of the profits is prima facie evid that the person is a partner. It creates an inference that the person receiving a share of the profits is a partner. inference is rebuttable.
(1) in payment of a debt by installments, or otherwise,
(2) as wages of an employee,
(3) as rent to a landlord,
(4) as an annuity to a widow or rep of a deceased partner,
(5) as interest on a loan, though the amt of payment may vary w the profits of the business
(6) As consideration for the sale of good will of a business or other property by installments or otherwise.
Creation of Partnership–Partnership by Estoppel
The P asserting the claim must merely prove the following:
(1) a representation by one partner, action or stmts indicating the D was a partner,
(2) reliance by the P
(3) reasonableness of the reliance, AND
(detriment to P
Partnership Property Rights
Partners have a personal property interest in the tenancy of the partnership. They DO NOT have rights in specific partnership property.
Lawsuits and the Partnership
in K ACTIONS, partnership assets must be exhausted before an individual partner’s assets can be attached if partners are individually names in the summons and complaint.
in TORT or BREACH OF TRUST actions, the partnership is NOT a necessary party. The P can proceed under a respondeat superior theory against any partner.
Partnership Profits and Losses
Unless partnership agreement provides otherwise, profits and losses are shared equally. Losses are shared in the same ratio as profits UNLESS the partnership agreement states otherwise.
Indemnification
Unless partnership agreement provides otherwise, the partnership must indemnify every partner for payments made or personal liabilities incurred by him in the ordinary and proper conduct of partnership business or for the preservation of its property.
Advance Payments
Unless partnership agreement provides otherwise, a partner who, in aid of the partnership, makes any payment or advance beyond beyond the amt of capital which he agreed to contribute, shall be paid interest from the date of the payment or advance.
Interest on Capital Contributions
Unless partnership agreement provides otherwise, a partner shall receive interest on the capital contributed by him only from the date when REPAYMENT should be made.
Mgmt of Partnership
Unless partnership agreement provides otherwise, mgmt is equal among all the partners and is not contingent on capital contribution or partner’s right to share in the profits.
Remuneration
Unless partnership agreement provides otherwise, no partner is entitled to remuneration for acting in the partnership business, with the exception that a surviving partner is entitled to reasonable compensation for his services in winding up the partnership affairs.
