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right to receive a share of compensation deceased/ withdrawn partner would have received upon departure fr partnership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
