Partnership Flashcards
General partnership definition
An association of two or more persons who are carrying on as co-owners of a business for profit.
Voting
Absent an agreement each party gets one vote
Salary
Absent an agreement partners get no salary other than for winding up the business
Profits
absent an agreement Profits are shared equally
Losses
Absent an agreement losses are shared like profits.
Formation
There are no formalities to becoming a general partnership. Will be deemed by law as a general partnership by conduct alone.
Liability
each partner is personally liable for all debts and obligations and contracts entered into or torts committed within the scope of the partnership by partners
Incoming partners liability for past debts
there’s no direct personal liability for past debts but if an incoming partner contributes money or capital to the partnership the partnership can use that money to pay off past debts.
Dissociating partner liability on future debts
I dissociating partner is liable for future debts until actual notice of dissociation is given to creditors or until 90 days after filing of notice of disassociation with the state.
General partnership by estoppel
a person who represents to a third party that they are a partner in a partnership is liable to the third party as if they were a partner even if they are not.
Rights and liabilities of each partner to each other
Partners are fiduciaries to each other and the general partnership as such they have a duty of loyalty. May never engaged in self-dealing
May never usurp partnership opportunities
May never make secret undisclosed profits at the expense of the partnership.
Remedies for wrong doings of one partner buy another.
An action for an accounting:
the partner May recover losses caused by the breach and may disgorge profits made by the breacher as well
Partnership property owned by the partnership
Land leases and equipment. These assets may not be transferred by an individual partner without partnership authority.
Partnership property: share and management of the partnership.
Owned by the partnership. No individual partner May freely transfer their share of management to a third party.
Partnership property: share of the profits if any.
Share of the profits is personal property owned by the individual partner and may be transferred freely.
Partnership property tiebreaking rule
Whose money was used to buy the property.
Dissolution at will
An at will partnership, where there is no agreement, the partnership will be dissolved upon the express will of any single partner to disassociate.
Dissolution not at will
The partnership will be dissolved according to the terms of the agreement, or if any single partner disassociate and, the remaining partners by majority vote, vote to dissolve within 90 days of the partner leaving.
Winding up
winding up is a. Between dissolution and termination, in which the remaining partners liquidate the assets to satisfy the creditors.
Winding up compensation
Partners will receive a salary for helping wind-up the business.
Disassociation liability: liability to old creditors
The partnership and therefore each individual partner are still liable on transactions entered into to wind up the business with existing creditors during the wind up phase.
Dissolution liability: new business
The partnership and therefore each individual partner is liable for new business until actual notice of dissolution is given to creditors or, 90 days after filing a statement of dissolution with the state
Liquidation funds
Go to creditors first: all outside and inside creditors
Then to capital contributions by partners
Then profits and surplus if any are shared equally among the partners in absence of an agresement.
Terminations
The real end of the partnership
Limited partnership
A partner with at least one general partner and one limited partner.
Limited partnership formation
Must file with the state a limited partnership certificate including the name of all general partners.
Limited partnership liability
General partners: the same personal liability as a general partnership. They also have substantial managerial control.
Limited partners: not liable for debts and obligations must pay full consideration for their interest. Limited control: may not assert managerial control
Limited liability partnership formation
Must register with the state a statement of qualification and submit annual reports.
Limited liability partnership liability
No partner is personally liable for debts or obligations.
