Partnership Flashcards
What formalities are required to form a general partnership?
None
What is the key factor in the existence of a partnership?
Sharing of profits- contribution of money or services in return for profits is prima facie evidence of general partnership
Each general partner is personally liable for:
All debts of the partnership and co-partners torts
Incoming partner’s liability for pre-existing debts
Generally not liable for prior debts but capital contribution paid in by the new partner can be used to satisfy those debts
Dissociating partner’s liability for subsequent debts
Retains liability until actual notice is give to known creditors and publication notice is given to potential creditors
Partnership by estoppel
One who represents to a third party that a general partnership exists will be liable as if a general partnership exists
Action for accounting
Generally the only way partners can sue each other. Equitable remedy allowing partners to recover losses caused by breach and may disgorge profits?
When is the only time partners can sue each other?
When no complex accounting is required
Who owns the share in management?
The partnership itself, so it cannot be transferred
In order to determine whether the fact pattern involves specific partnership assets or personal property, look at
Whose money was used to buy the property
How many votes is each partner entitled to?
Absent agreement, each partner is entitled to equal control
How much salary do partners get? (Rule and exception)
Absent agreement, partners get no salary
Exception- compensation for helping to wind up the partnership business
Profit and loss sharing rules
Absent agreement, profits shared equally.
Losses follow profits
Dissolution
GP dissolves upon any material change caused by death or withdrawal of any single partner
End of the partnership is called:
Termination
Winding up
Period between dissolution and termination during which remaining partners liquidate assets to satisfy creditors
During winding up, partnership retains liability on new business until
Actual notice of dissolution given to known creditors and publication notice to potential creditors
Priority of distribution
1) Outside creditors
2) Inside creditors
3) Capital contributions repaid
4) Profits and surplus, if any
Formation of limited partnerships
Must file a limited partnership certificate with names of all general partners
Liability and control for limited partnership
General partners- Liable for all limited partnership obligations but have the right to manage the business
Limited partners- may not manage the business without giving up limited liability
RLLP used for
Professional services parntership
Features of limited liability company
1) Limited liability
2) Limited liquidity- full membership interest cannot be transferred without majority consent of the membership interest or as provided in operating agreement
3) Limited duration
4) Limited tax - taxed as partnership
