Partnership Flashcards
General Partnership Definition
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
Tort Liability of Partners and Partnership
Agency principles apply
Rule: Gp is liable for each partner’s torts in the scope of business and for each partner’s authorized contracts.
Personal Liability of Partners
Rule: Each partner is PERSONALLY liable for all DEBTS of the partnership and for the TORTS of co-partners.
How does a partner withdraw so as not to be liable for future debts?
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.
GP Liability by Estoppel
Rule: One who represents to a third party that a GP exists will be liable as if one exists.
Partners’ Duties: Fiduciary Relationship
Rule: Partners have a fiduciary relationship with one another AND with the GP and therefore have:
- Duty of Loyalty
- Duty never to engage in self-dealing
- Duty not to usurp GP opportunities
- Duty to never make a secret profit at GP’s expense
What is the remedy among partners for breach of duty?
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.
What are assets specific to the Partnership?
Rule: Assets specific to the GP may not be individually transferred by partners
- Land, leases, equipment which are owned by GP itself
- Share in management
Ps’ profit shares are owned INDIVIDUALLY by each
What is a partner’s share in management of the GP?
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.
Default Salary Rule
Rule: Absent an agreement, partners get NO SALARY
Exception: Compensation for “winding up” the business
Partner’s share of Profits and Losses
Rule: Absent an agreement, profits are shared EQUALLY.
Rule: Absent an agreement, losses are shared LIKE PROFITS.
Dissolution
Rule: in the absence of an agreement, a GP dissolves upon notice of the express will of one of the partners to disassociate.
Termination
The REAL end of a GP.
Winding Up
The period from dissolution to termination, in which the remaining partners liquidate the GP’s assets and satisfy GP creditors.
Partner Liability in Dissolution
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.