Partnership Flashcards
Formalities of formation of general parnership
None
Definition: general partnership
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
Liabilities of general partners to third parties
(1) agency principals apply
(2) generally liable for each co-partners torts
Incoming partner’s liability for pre-existing debts
(1) generally not liable for prior debts (pre-investment)
(2) can use money to pay prior debt
Disassociating partner’s liability for subsequent debts
(1) retain liability until actual notice of dissociation is given to known creditors and publication notice is given to potential creditors
General partnership liability by estoppel
One who represents to a third party that a general partnership exists will be liable as if the general partnership exists
Duties of general partners
(1) loyalty: (i) self-dealing; (ii) no usurping; (iii) secret profit
Remedy for partner’s breach of duty
(1) Action for accounting: losses caused by breach and disgorge profits
Partners’ rights in partnership property
(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
Management (who controls?)
Absent agreement each partner entitled to equal control
Salary
absent an agreement partners get no salary
Profits and losses
(1) absent agreement, profits are shared equally
(2) absent agreement, losses are shared like profits
Dissolution
Automatically upon any material change in partnership caused by death or withdrawal of any single general partner
Termination
Real end of partnership
Winding up
period between dissolution and termination where remaining partners liquidate partnership’s assets to satisfy creditors