Partnership Flashcards
what is the effect of dissolution on partnership authority?
terminated all authority of any partner to act for the partnership
*except authority necessary to wind-up partnership affairs/ unfinished business
what are the 3 levels of priority that must be satisfied during “winding-up” phase?
- 1st: creditors (including paying off internal loans fr partners)
- 2nd: full re-payment to its own partners for capital contributions
- 3rd: profits & surplus, if any, shared equally among partners (unless partners agree otherwise)
How long does a partnership retain liability on new business during dissolution/ winding-up phase?
until notice of dissolution is given to all known & potential creditors
what is the winding up period of partnership dissolution?
period b/w dissolution & termination where remaining partners liquidate partnership assets to satisfy creditors
what are examples of material changes a court will use to justify dissolution of a partnership?
- partners withdrawal/ death
- partners incompetency
- partners bankruptcy
- violation of partnership agreement
When will a GENERAL PARTNERSHIP be automatically dissolved?
any MATERIAL change in the partnership caused by DEATH or WITHDRAWAL of any single GENERAL PARTNER
When may an assignee become a LIMITED partner?
if assignor gives assignee that right according to agreement OR ALL partners consent in WRITING
If a SUCCESSOR decides not to join partnership, what are her rights?
right to receive a share of compensation deceased/ withdrawn partner would have received upon departure fr partnership
When will a SUCCESSOR have a right to JOIN a partnership? (2)
- prescribed by partnership agreement
- all partners CONSENT in WRITING
*usually occurs upon death or withdrawal of existing partner
What are the 3 general rules for the ASSIGNMENT of partnership INTERESTS to 3 rd parties?
- specific P assets (land, equip.) may not transfer w/o partnership authority
- Profits & surplus (may transfer to 3rd parties)
- Share in Management (cant transfer to 3rd party)
What are a partner’s fiduciary responsibilities?
- fiduciaries of each other
- Owe a duty of loyalty
- no self-dealing
- no usurping partnership opps
- no secret profits
*an action for accounting is the only form of action that 1 partner can bring against other for breach of duty
How long do OUTGOING partners retain liability of future debts?
until notice of withdrawal is given to all known & potential creditors
- death of outgoing P terminates all liability
Are incoming partners liable fr prior debts?
NO, but $ incoming partners pay into partnership maybe be used to pay prior debts
What are the 3 general rules for partners liability?
Every General Partner is liable for
- own actions
- actions of other partners when w/in scope of partnership
- actions of employees w/in scope
How are partnership profits handled?
Shared equally
How are partnership losses handled?
Shared like profits (equally)
How are partnership salaries handled?
Partners get NO salary. They receive compensation for winding-up partnership business (dissolution)
What 3 types of K’s are partnerships bound by?
- K’s entered by partners w/ authority
- K’s for usual business of partnership (w/in scope)
- K’s for business outside partnership scope that ALL partners ratify
What torts are partnerships bound by?
Torts committed by partners in the scope of the partnerships business
In a LIMITED PARTNERSHIP, what are GENERAL partners personally liable for?
Personally liable for ALL partnership obligations
- also has right to manage
- *limited P’s NOT liable for partnership obligations & NO right to manage
What are the 3 types of partnerships?
- General P- 2 or more ppl as co-owners for profit
- Limited P- at least 1 general P & 1 limited P
- Limited liability P- no partner liable for debts/ obligations of partnership; partners liable for PERSONAL wrongdoing
