Partnership Flashcards

1
Q

General Partnership Definition

A

A general partnership is an association of two or more persons who are carrying on as co-owners of a business for profit.

NO FORMALITIES REQ’D

Presumption raised by SHARING OF PROFITS

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2
Q

Tort Liability of Partners and Partnership

A

Agency principles apply

Rule: Gp is liable for each partner’s torts in the scope of business and for each partner’s authorized contracts.

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3
Q

Personal Liability of Partners

A

Rule: Each partner is PERSONALLY liable for all DEBTS of the partnership and for the TORTS of co-partners.

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4
Q

How does a partner withdraw so as not to be liable for future debts?

A

Rule: A disassociating partner remains liable for debts until NOTICE of their disassociation is given to creditors OR until 90 days after filing NOTICE OF DISASSOCIATION with state.

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5
Q

GP Liability by Estoppel

A

Rule: One who represents to a third party that a GP exists will be liable as if one exists.

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6
Q

Partners’ Duties: Fiduciary Relationship

A

Rule: Partners have a fiduciary relationship with one another AND with the GP and therefore have:

  1. Duty of Loyalty
  2. Duty never to engage in self-dealing
  3. Duty not to usurp GP opportunities
  4. Duty to never make a secret profit at GP’s expense
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7
Q

What is the remedy among partners for breach of duty?

A

Remedy: An Action for Accounting

The GP may recover losses caused by a partner’s breach of duty and may DISGORGE the profits made by the breaching partner.

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8
Q

What are assets specific to the Partnership?

A

Rule: Assets specific to the GP may not be individually transferred by partners

  1. Land, leases, equipment which are owned by GP itself
  2. Share in management

Ps’ profit shares are owned INDIVIDUALLY by each

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9
Q

What is a partner’s share in management of the GP?

A

Rule: Without an agreement otherwise, each partner is entitled to EQUAL control.

Rule: Majority vote governs ORDINARY matters, but UNANIMOUS vote needed for FUNDAMENTAL CHANGES.

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10
Q

Default Salary Rule

A

Rule: Absent an agreement, partners get NO SALARY

Exception: Compensation for “winding up” the business

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11
Q

Partner’s share of Profits and Losses

A

Rule: Absent an agreement, profits are shared EQUALLY.

Rule: Absent an agreement, losses are shared LIKE PROFITS.

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12
Q

Dissolution

A

Rule: in the absence of an agreement, a GP dissolves upon notice of the express will of one of the partners to disassociate.

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13
Q

Termination

A

The REAL end of a GP.

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14
Q

Winding Up

A

The period from dissolution to termination, in which the remaining partners liquidate the GP’s assets and satisfy GP creditors.

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15
Q

Partner Liability in Dissolution

A

Rule: Ps retain liability on OLD BUSINESS necessary to wind up by satisfying existing creditors.

Rule: Ps liable on NEW BUSINESS until notice to creditors or until 90 days after filing notice of dissolution with state.

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16
Q

Priority of Distribution in Dissolution

A

Each level fully satisfied before next:

  1. All creditors
  2. Repay capital contribution to individual partners
  3. Profits, if any
17
Q

Limited Partnership

A

A LP is a P with at least one general partners and at least one limited partner.

limited partners receive limited liability.

18
Q

Formation of Limited Partnership

A

Must file a limited partnership certificate including names of all GPs.

19
Q

Limited Partnership: Liability and Control

A

GPs: Liable for all obligations and have right to manage business

Limited partner: can’t manage, and aren’t liable

20
Q

Registered Limited Liability Partnerships

A

Formation: Must register by filing a statement of qualification and annual reports.

No partner is liable for debts and obligations

21
Q

Limited Liability Companies (LLC)

A

Definition: Hybrid b/w corporation and partnership in which owners have same liability as of corp. stockholders and also benefits of partnership.

22
Q

Formation of Limited Liability Companies (LLC)

A

Organizers MUST file the articles of organization and MAY adopt an operating agreement.