Partnership Flashcards
General Partnership formation
- No formalities required
- An association of two or more persons who are carrying on as co-owners of a business for profit
- Contribution of money or services in return for a share of profits creates a presumption that a General partnership exists
Each General Partner is Personally Liable for
All debts of the partnership and for each co-partners torts
Incoming partners liability for pre-existing debts
Incoming partners are NOT liable for prior debts BUT any capital paid in to parnterhsip by incoming partner can be used by partnership to satisfy those prior bad debts
Dissociating (withdrawing) partner’s liability for subsequent debts
In VA, dissociating partners retain liability on future debts UNTIL
- actual notice of their dissassociation is given to creditors OR
- until 90 days after filing a notice of disassociation with the state.
General Partnership Liability by Estoppel
One who represents to a third party that a general partnership exists will be liable as if a general partnership exists
As fiduciaries, general partners
- owe each other and partnership duty of loyalty: self dealing, usurp opportunities, secret profits
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Action for accounting
- The partnership may recover losses that are caused by the breach and the partnership may disgorge profits made by the breaching partner
Partnership Property and Liability
- Specific Parntership Assets and Share in management can’t be transferred w/o parntership authority whereas Share of Profits is liquid
- In order to determine parntership or personal property, the test is: who’s money was used to buy the property
General parntership management
- Absent an agreement, each partner is entitled to EQUAL control (vote)
- Majority vote governs ordinary matters
- Unanimous consent is required for FUNDAMENTAL partnership matters
General Partnership Salary
Absent an agreement partners get no salary
EXCEPTION: to wind up the business
Partner’s share of Profits and Losses
- Absent an agreement, profits shared equally
- Absent an agreement, losses share like profits
General Partnership dissolution
- Dissolution: in the absence of an agreement that sets forth events of dissolution or that limits the partnership’s length or undertaking, a GP dissolves upon notice of the express will of any one General Parnter to dissociate.
- Real end of the parntership is called termination
- The period in between is winding up: remaining parnters liquidate the parntership’s assets to satisfy the parntership’s creditors
GP dissolution
Partnership’s liability
- Old business: partnership and GPS retain liability on all transactions entered into to wind up old business by staifsying creditors who existend when winding up began
- New business. Partnership and GPS retian liability on brand new transactions during winding up until: actual notice of dissolution is given to creditors or until 90 days after filing a statement of dissolution
Priority of distribution (each level must be fully satisfied)
- Partnership must pay all creditors: outside non-partner creditors + partners who loaned to partnershiop
- Parnership must repay all capital contributions paid into the partnershipo by partners
- Profits, if any are shared equally without agreement. **at this stage might have to pay in parntership share of loss**
Limited Partnerships
- partnership with at least one general partner and at least one limited partners
- You must file w/ the state a limited partnership certificate that includes nae of partnership and names of all general partners
Limited Partnerships
Liability and control:
- General partners are liable for all limited parntership obligations. They have the right to manage the business.
- Limited Parnters: have limited liabilty and therefore are not liable for debts and obligations of the partnership itself
- Limited partners become liable if they manage the business to third parties who believe reaosnabel they were general partners
