Partnership Law Flashcards
Liability of incoming and outgoing partners in a general partnership?
For incoming partners, the rules surrounding liability depends on whether it is a civil law country or a common law country
- In Civil law countries (Italy, France, etc), the incoming partner is also liable for past debt.
- In common law countries (USA, etc), the partner is only liable for debts that have occurred from the time they join.
For outgoing partners the rules are the same in every country. The outgoing partner is liable for debts and payments existing when they went out of the partnership. The contract with creditors will stay in place for 10 years for the outgoing partner if creditors don’t choose to release him. If you want to remove your liabilities before exiting, you have to pay a release.
Please explain the concept of limited liability and how it applies in partnerships and corporations.
The concept of limited liability states that member of partnerships or companies are only liable to debts to the extent of their contributed capital. Limited liability is a legal status that protects business shareholders/partners from personal financial responsibility. This concept can be applied to corporations and limited liability partnerships. Therefore, the firm is a separate entity from all its members. The company is suable and can sue third parties itself. It has contractual capacity and can own assets and properties that are separated from the properties of its members.
Please explain the concept of majority and unanimity and how they apply in partnership.
In a partnership any decision about the business and the organization is taken by the majority, so the partners are called to vote and the willing of the majority wins. The unanimity, the positive vote of all the partners, however, is required to approve a change about the partnership agreement.
What are the contributions from the partners to the partnership?
In a partnership everything of value is considered contribution: a real estate, money, goodwill, personal property, patents or also a performance (acting in the partnership’s interest). If a partner has a specific role that requires his tasks or his performance then he is equal to contributors and this partner is not necessarily required to invest money.
What can be contributed in a corporation and in a partnership?
In a corporation the only form of contribution is investing money, through the acquirement of shares. In companies, business assets are owned by the company itself and, therefore, are not subject to claims based on the ownership rights of its members.
In a partnership everything of value is considered contribution: a real estate, money, goodwill, personal property, patents or also a performance (acting in the partnership’s interest). If a partner has a specific role that requires his tasks or his performance then he is equal to contributors and this partner is not necessarily required to invest money.
