Partnership - Mark Flashcards
Partnership Partnership formation - Definition - Prima facie evidence of formation
A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Intent to specifically create a partnership is not required (daily conduct of business activities strongly supports person being partner). - Prima facie - The receipt of a share of the profits of a business is prima facie evidence that the person receiving is a partner. - No inference drawn if profits received to pay debts (loans, rent) or salary.
Partnership Partnership formation - Definition - Prima facie evidence of formation
A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Intent to specifically create a partnership is not required (daily conduct of business activities strongly supports person being partner). - Prima facie - The receipt of a share of the profits of a business is prima facie evidence that the person receiving is a partner. - No inference drawn if profits received to pay debts (loans, rent) or salary.
Partnership - Formation - Elements
- Association fitting definition - No formalities required, could be oral or implied. Associations not seeking profits not partnerships. 2. Two or more persons - Does not have to be individuals (business entity can be partner). 3. Co-owners - There must be sharing of profits and sharing of management control. Could be unequal in agreement.
Partnership - At will partnership - Term partnership - Implication of the status
- At Will - Partnership with no specified or definite term or particular undertaking of or for the partnership - Term - Partnership where partners have agreed, either explicitly or implicitly that the partnership shall have a definite tremor undertaking. - Implicit term - All businesses are not required to continue until profitable, if clear evidence is fount that reflects that agreement, court will find a term partnership. - Implication - If term partnership found, a dissolution could be wrongful, giving rise to liability for damages.
Partnership - Partnership by estoppel - Individual liability - Partnership liability
- When person represents himself or consents to being represented as a partner in partnership he is liable to there person to whom representation made if: - The Other person relied on the representation in good faith. - If Representation was made publicly, good faith reliance can exist without personal representation. - When actual partners consent to non-partner representation as partner, he becomes an agent to partnership and binds them as if partner.
Partnership - Liability of Partnership - Indemnification
- Every partner is an agent of partnership - Partnership liable for debts and obligations if made while acting for apparently carrying on in the ordinary course of partnership business. - Partnership must indemnify partners for payments made and personal liabilities incurred in the ordinary and proper conduct of business or preservation of partnership property.
Partnership - Partner liability - Joint Liability - Joint and severally liable - Two situations
- All partners are jointly liable for all debts and obligations of the partnership. After indemnification, partners generally liable equally, but a partner may enter a separate obligation upon agreement. - Joint and several liability (partnership also liable) - Partners are jointly and severally liable when: 1. Wrongful act or omission of partner (i) acting in ordinary course of business (ii) with actual authority (iii) causes injury to third party. 2. Breach of trust - A partner or the partnership receives money or property and it is misapplied by a partner (i) acting in the course of business or (ii) acting with apparent authority.
Partnership - Sharing of profits or losses
- Profits - Each partner shall share in the profits equally and is entitled to have his contributions repaid. - Profit sharing is subject to agreement. - Losses - Partner must contribute toward the losses sustained by partnership according to share of profits. If not covered in agreement, share equally.
Partnership - Indemnification and partnership obligation
- Partner suffers indemnification to the extent of his profit share. - Obligations are first paid from partnership property, and shortfalls are paid by partners according to loss obligation.
Partnership - Exception to partnership liability for partner transactions.
- Partnership generally bound for partner transactions. - Exceptions 1. Partner acting had no authority to act in the matter, and third party with whom dealing had knowledge of the lack of authority. 2. Act of partner was not apparently carrying on business, partnership not liable unless partner’s later authorize the action.
Partnership - Management and conducting business
- All partners have equal rights in management and conduct of partnership business
Partnership - Settling partner differences with regard to what is conducting business. 1. Acting where no agreement covers matter. 2. Acting where agreement covers matter
- Any difference as to ordinary partnership business decisions or matters may be decided by majority vote. If act against vote, partner will not be indemnified for related obligations. 2. No act done in contravention to any partner agreement is rightful without consent of all partners. Partner acting in contravention will not be indemnified for related obligations.
Partnership - Fiduciary Relationship
- Partners are accountable as fiduciaries to the partners and partnership. - Partners must account for benefit and hold as trustee, any benefit derived without consent from any transaction connected with partnership business or use of its property.
Partnership - Partnership Property - Categories
- Property can be owned by the partnership itself. 1. All property originally brought into partnership or subsequently acquired on account of partnership. 2. Unless contrary intention appears, property acquired with partnership funds. 3. Real property acquired in partnership name.
Partnership - Property rights of partners - Interest in Partnership definition
- Right to participate in management 2. Right to share of specific partnership property 3. Interest in the partnership. - Interest in the partnership - Is partner share of profits and surplus. This is only property right that can be transferred or is subject to charging order.
