Partnership

Question 1

Formalities of formation of general parnership

Answer 1

None

Question 2

Definition: general partnership

Answer 2

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 is prima facie evidence of general partnership

Question 3

Liabilities of general partners to third parties

Answer 3

(1) agency principals apply

(2) generally liable for each co-partners torts

Question 4

Incoming partner’s liability for pre-existing debts

Answer 4

(1) generally not liable for prior debts (pre-investment)

(2) can use money to pay prior debt

Question 5

Disassociating partner’s liability for subsequent debts

Answer 5

(1) retain liability until actual notice of dissociation is given to known creditors and publication notice is given to potential creditors

Question 6

General partnership liability by estoppel

Answer 6

One who represents to a third party that a general partnership exists will be liable as if the general partnership exists

Question 7

Duties of general partners

Answer 7

(1) loyalty: (i) self-dealing; (ii) no usurping; (iii) secret profit

Question 8

Remedy for partner’s breach of duty

Answer 8

(1) Action for accounting: losses caused by breach and disgorge profits

Question 9

Partners’ rights in partnership property

Answer 9

(1) specific partnership assets: may not be transferred without partnership’s authority
(2) share of profits and surplus: personal property owned by each individual partner and may be transferred by individual partners
(3) share in management: may not be transferred by individual partners

Question 10

Management (who controls?)

Answer 10

Absent agreement each partner entitled to equal control

Question 11

Salary

Answer 11

absent an agreement partners get no salary

Question 12

Profits and losses

Answer 12

(1) absent agreement, profits are shared equally

(2) absent agreement, losses are shared like profits

Question 13

Dissolution

Answer 13

Automatically upon any material change in partnership caused by death or withdrawal of any single general partner

Question 14

Termination

Answer 14

Real end of partnership

Question 15

Winding up

Answer 15

period between dissolution and termination where remaining partners liquidate partnership’s assets to satisfy creditors

Question 16

Liability for old business (pre-dissolution)

Answer 16

Individual partners are liable on all transactions entered into to wind up old business by satisfying creditors who existed when winding up began

Question 17

Liability for new business

Answer 17

liable until actual notice of dissolution is given to known creditors and publication to potential creditors

Question 18

Priority of distribution

Answer 18

(1) outside creditors must be paid
(2) inside creditors must be paid
(3) capital contributions by partners must be paid
(4) profits and losses are shared equally

Question 19

Limited partnership

Answer 19

(1) at least one general partner and at least one limited partner
(2) must file a limited partnership certificate that includes names of all general partners
(3) general partners are liable for all obligations; limited partners have limited liability and may not manage

Question 20

Registered limited liability (RLLP)

Answer 20

(1) formed by filing a certificate of registration with label of RLLP
(2) no partner is liable for debts and obligations of this partnership

Question 21

Limited liability company (LLC)

Answer 21

(1) hybrid between corporation and partnership (corporation liability, partnership tax)
(2) must file articles of organization and must publish a summary of articles in at least 2 newspapers; may adopt operating agreement
(3) owners may control, but can also delegate to managers
(4) limited liquidity: full membership interest may not be transferred w/o majority consent of membership interest or as provided in op agreement
(5) limited life: company will dissolve upon majority vote of membership interest or as provided in operating agreement