Partnership Characteristics

Question 1

What six kinds of payments can be used to rebut the presumption that a partnership was intended and created even when the payments appear to be the sharing of profits?

Answer 1

1. A debt (including installment payments)
2. Interest on a loan
3. Rent
4. Wages or other compensation paid to an employee or independent contractor
5. Goodwill payments stemming from the sale of a business (including installment payments)
6. Annuities (or other retirement or health benefits) paid to a surviving spouse or beneficiary, representative, or designee of a deceased or retired partner

Question 2

Partner By Estoppel

Answer 2

When a person represents himself either orally, in writing, or implied by conduct as a partner (or consents to or allows another to represent himself as a partner), he will be a partner by estoppel, and he will be liable to third parties if the third party reasonably relied on the representation and suffered damages as a result.

Question 3

An exception to the general rule that a partner’s knowledge or notice of fact is immediately imputed to the partnership exists

Answer 3

when a fraud on the partnership is committed by or with the consent of the partner.

Question 4

While generally a judgment against a partnership must first be satisfied by partnership assets, exceptions exist when (6)

Answer 4

(i) The partnership is a debtor in bankruptcy;
(ii) The partner consented;
(iii) The partner is liable independently of the partnership (ex. partner was primary tortfeasor);
(iv) The partnership’s assets are clearly insufficient;
(v) Exhaustion of partnership assets would be excessively burdensome; or
(vi) It is otherwise equitable to do so

Question 5

A partnership is required to repay

Answer 5

a loan or reimburse a partner for advances, including interest from the date of the loan or advance.

Question 6

How can a limited partner become a limited partner

Answer 6

Once a limited partnership is created, a person may become a limited partner upon written consent of all partners, unless the partnership agreement provides otherwise.