Partnership

Question 1

Fiduciary duties of partners

Answer 1

1) Duty of loyalty (no competition, advancing adverse interests, or usurping a partnership opportunity)
2) Duty of care (gross negligence or recklessness, intentional misconduct or knowing violations of law)

Question 2

COF of an LLC

Answer 2

1) Name
2) Duration
3) Purpose
4) Address and Registered Office of Agent
5) Name and address of organizers (must be a natural person of at least 18)
6) Management structure (list manager if there is one)

Question 3

Taxation of an LLC

Answer 3

Pass-through

Question 4

Rights of transferees of a partnership

Answer 4

Until admitted by the consent of the other partners, a transferee is ordinarily only entitled to the share of profits of the transferor and to inspect the books and records.

Question 5

Limits on partnership agreement

Answer 5

1) liability to third-parties
2) denying access to books and records
3) elimination of fiduciary duties

Question 6

Taxation of partnership

Answer 6

Pass-through

Question 7

Liability of partners

Answer 7

Personally liable

Question 8

“Limited Partnerships”

Answer 8

Have at least one limited partner, with limited liability (usually the amount of the amount), and one GP with general liability.

Question 9

Default involuntary termination of a partner

Answer 9

1) Court order
2) bankruptcy or dissolution of the partner
3) death
4) incapacity

Question 10

Who may wind up the partnership

Answer 10

1) Partner that has not withdrawn
2) legal representative of the last surviving partner
3) judicial supervision

Question 11

Requirements of partnership

Answer 11

1) Co-ownership (sharing profits carries a presumption)

2) Division of control

Question 12

Restrictions of transfer

Answer 12

A partnership agreement can eliminate the partners’ ability to transfer to any third party.

Question 13

COF of an LP

Answer 13

1) Name of LP
2) Name and address of in-state agent
3) Name and address of each general partner
4) Address of principal office where records are kept
5) Signatures of all general partners

Question 14

Property of the partnership

Answer 14

• Property is deemed partnership property if it is acquired in the partnership name, or in the name of one or more partners with an indication in the conveying instrument that either the partner is acting in her capacity as a partner or that a partnership exists
• If the property is acquired with partnership cash, credit, or other property of the partnership, it is presumed to be partnership property.
• If a partner acquires property and the transferring instrument does not indicate the person’s capacity as a partner or the existence of a partnership, and partnership property is not used to purchase the property, then that property is presumed to be that partner’s separate property, even if it is used in the partnership.

Question 15

Intent required for partnership

Answer 15

Only the intent to carry on the for-profit business as co-owners.

Question 16

Relationship of partners to partnership

Answer 16

They are agents of the partnership.

Question 17

“Limited liability partnerships”

Answer 17

A partner’s personal liability is eliminated, and requires filing with the state. Limited partner still personally liable for his own personal misconduct and other partners are not liable for negligent supervision.

Question 18

“Partnership”

Answer 18

An association of two or more persons who carry on a for-profit business as co-owners.

Question 19

Default rules for profits and losses

Answer 19

Profits divided equally and losses follow profits

Question 20

Presumption of due care

Answer 20

A partner is presumed to have met the standard of care if he acted on an informed basis, in good faith, and in a manner reasonably believed to be in the best interests of the partnership.

Question 21

Default rule for new partners

Answer 21

Requires consent from all existing partners.

Question 22

Winding up the partnership

Answer 22

1) Cease to carry on business of any kind except any business that is required for the process of winding up.
2) Collect and sell the property of the partnership.
3) Use the proceeds and any remaining funds of the partnership to discharge obligations to creditors, including partners who are creditors.
4) Distribute remaining funds to the partners after all creditors have been paid.

Any partner who has not withdrawn may wind up the partnership.