Partnership Flashcards
What statute governs general partnerships?
Revised Uniform Partnership Act
A general partnership is:
an association of two or more persons who intend to carry on and manage a business for profit as co-owners.
What is presumptive evidence of the existence of a partnership?
receipt of a share of profits
What filing requirements are there for a general partnership?
None, except if a fictitious name is used then the name must be registered
What provisions cannot be included in a partnership agreement?
- restrictions on access to financial records or inspection of books
- elimination of good faith and fair dealing between partners
- restrictions on the rights of third parties
What does the Statute of Frauds require for partnerships?
If the partnership is for a specified term exceeding one year then there must be a written partnership agreement. However, if a partnership is at-will then an oral agreement is permitted.
In addition to share of profits, what other factors are evidence of the existence of a partnership?
- share in control and management
- capital contributions
What is partnership by estoppel?
If a person refers to himself as a partner, uses partnership in the trade name of the business, then the person may be estopped from denying the existence of a partnership and will personally liable.
What is the implication of making a representation as to the existence of a partnership in a public manner?
If in a public manner, then a partnership by estoppel claim extends to creditors who did not actually receive the communication.
What presumptions apply to acquisition of property by partners?
(1) If acquired with partnership assets it is presumed to be property of the partnership, even if held in one partner’s name.
(2) If acquired with personal assets and in one partner’s name, then the property is presumed to be separate, even if used for the partnership.
* look for a creditor going after assets in one partner’s name – were partnership assets used to acquire or improve the property?
If a partner conveys his ownership interest without approval of the partners what happens?
Under the common law, the conveyance would dissolve the partnership
Under the Revised Uniform Partnership Act: (1) transferee is entitled to the share of profits and losses
(2) transferee has no right to participate in management, unless all other general partners agree
(3) transferor, but not transferee, has inspection and account rights
Can a creditor of an individual partner go after partnership assets?
The creditor can place a charging order on the partnership, charging that partner’s interest. Distributions due the partner are then paid directly to the creditor.
What duties of loyalty issues are there for partnerships?
Partners must not:
- compete with the partnership
- have adverse interests, or deal with parties having adverse interests to the partnership
- usurp partnership profit opportunities
What claims can partners bring against one another?
- breach of partnership agreement
- breach of fiduciary duty
What rights does a partner have if his own money was expended for the business?
- reimbursement of expenses and
- indemnification for liabilities incurred “in the ordinary and proper conduct of its business”
How is management authority handled in a partnership?
- all general partners have equal rights in day-to-day management
- ordinary decisions are determined by a majority vote
In a partnership, what decisions must be approved unanimously by all partners?
- admission and expulsion of general partners must be unanimous
- changing the partnership agreement must be unanimous
- decisions “outside the ordinary course” of business may require unanimous approval
What are examples of partnership activity “outside the ordinary course” of business that might require unanimous approval?
Under the old UPA:
- confessing judgment
- submitting a claim for arbitration
- assignment for the benefit of creditors
- bulk sale of assets
- sale of goodwill
*Under the RUPA, the court will now decide what is outside the ordinary course.
What conditions are there on a partner’s right to inspect and copy records?
- in a reasonable manner
- during business hours
- with prior notice
- copying fees allowed
In a general partnerships, what is the liability of partners?
All partners are joint and severally liable for obligations and torts incurred in the ordinary course of partnership business.
What is different about a new partner’s liability?
For contract and tort claims incurred prior to the new partner’s admission into the partnership, the new partner is only liable to the extent of his contribution, unless there is an express assumption of liability.
What rules apply if a partner improperly transfers partnership assets to a third party.
(1) If the transfer violated the partnership agreement or lacked authority AND the third party knew of the lack of authority, then the partnership can recover the property.
(2) If the third party re-conveyed to a subsequent transferee without knowledge that the original conveyance was unauthorized, then the property cannot be recovered.
How can the partnership protect real estate from being improperly conveyed by a rouge partner?
by filing a Statement of Partnership Authority, specifying which partners have authority to sell real estate, which will be binding constructive notice on all transferees of the real property
What is a disassociating partner entitled to?
the current value of her ownership interest
