Partnership Flashcards
Define partnership.
An association of 2+ persons to carry on as co-owners a business for profit.
How are the debts of a partnership treated re: the individual partners of a partnership?
The debts of the partnership are the debts of the individual partners.
May title of land be held in the partnership’s name and not the individual partners?
Yes.
What rules govern partnership agreements?
Contract rules.
What are the rules re: forming a partnership?
No formalities are required.
The partnership agreement can be express or implied.
A writing is required only if the partnership agreement cannot be performed within a year. If it is greater than 1 year and not in writing, it will be treated as an “at will” partnership.
What are the factors to consider when determining if there is a partnership?
(1) Title to property (in partnership’s name or individual’s name),
(2) How the parties refer to the entity,
(3) Amount of activity involved (the more activity, the more likely it is a partnership),
(4) Sharing of gross returns,
(5) Sharing of profits (= prima facie evidence of a partnership), and
(6) Sharing of losses (absence of an agreement to share losses is evidence the parties did not intend to form a partnership).
What is partnership by estoppel?
Where there is no formal agreement re: partnership, but the parties are held liable to 3rd parties as if they were:
(1) When a person represents herself or permits another to represent her as a partner, she will be liable to 3rd parties who extend credit to the actual or apparent partnership in reliance on the representation; or
(2) When a person holds another out as a partner, he thereby makes that person his agent to bind him to 3rd parties.
*The knowing partners are liable.
What is partnership capital?
The property or money contributed by each of the partners for the purpose of carrying on the partnership’s business.
What are the factors to determine whether property is of the partnership?
The controlling factor: the partners’ intent to devote the property to the partnership purposes.
(1) The source of the funds for the acquisition (weighted),
(2) The use of the property,
(3) Improvement of the property by the partnership,
(4) The relation of the property to the business,
(5) Title to the property,
(6) Treatment of the property in partnership books, and
(7) Payment of maintenance costs and expenses by the partnership.
What are the characteristics of a tenancy in partnership?
(1) Right of possession for partnership purposes,
(2) Not assignable, mortgageable, attachable, or subject to any individual claims on a partner, and
(3) Right of ownership vests in surviving partners.
*A partner has no right to use partnership property other than for the benefit of the partnership.
How is a partner’s interest (i.e. his profits and surplus) in the partnership treated?
(1) As personal property,
(2) Assignable without dissolving the partnership, and
(3) Attachable.
What are the rights of a partner?
(1) Management (an equal right unless otherwise stated in the agreement),
(2) Distributions of profit (shared equally unless otherwise stated in the agreement),
(3) Renumeration (no right to payment for services to the partnership, unless winding up),
(4) Indemnification,
(5) Contribution,
(6) Inspection, and
(7) Lawsuits (generally no right to sue the partnership).
The authority of a partner to bind the partnership when dealing with 3rd parties is governed by the law of?
Agency.
When is unanimous consent required by the partners?
(1) To authorize a submission to arbitration,
(2) Assignment for the benefit of the creditors,
(3) Confession of judgment,
(4) Disposition of the partnership’s goodwill, and
(5) To engage in business other than that contemplated by the partnership agreement.
How is title of real property conveyed in a partnership?
If title is held in the partnership name, title may be conveyed in the partnership name by any one partner.
If title is held in the name of some, but not all, of the partners, conveyance by the titleholders in their own names is effective.
If title is held in the name of all partners, only a conveyance by all of the partners is legally allowed.
When is a partnership held liable for a partner’s fraud on a 3rd party?
When a partner, acting within the scope of a partnership, defrauds a 3rd party.
If the fraudulent act involves a transaction outside the scope of partnership, the partnership will not be held liable.
