Partnership pt 2

Question 1

most important indicator of a partner status

Answer 1

agreement to share profits

Question 2

Capital accounts keep track of

Answer 2

contributions, profits, and draw along the way

Question 3

When the business is sold or dissolved

Answer 3

• the capital accounts will be
  settled out first
• Whatever gain is left over will be
  split – default equally

Question 4

The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:

Answer 4

• (a) Each partner shall be repaid his contributions, whether by way of
  capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to partners, are satisfied;
• and must contribute towards the losses, whether of capital or otherwise, sustained by the partnership according
  to his share in the profits.
• (f) No partner is entitled to remuneration for acting in the partnership
  business, except that a surviving partner is entitled to reasonable
  compensation for his services in winding up the partnership affairs.

Question 5

A partner who in aid of the partnership makes any payment or advance beyond the amount of capital which he agreed to contribute, shall

Answer 5

be paid interest from the date of payment or adance

Question 6

A partner shall recieve interest on capital contributed by him only from the date when

Answer 6

repayment should be made

Question 7

The statutory test for partnership by estoppel requires that

Answer 7

1. credit must have been extended on the basis of partnership representation
2. that the alledged partner must have made or consented to representations being made in a public manner or not such representations were actually communicated to the person extending credit

Question 8

The foundation of estoppel is that one is bound by saying or doing something upon which another

Answer 8

relies to his or her detriment

Question 9

estoppel

public representation does not eliminate the requirement of

Answer 9

reliance

Question 10

A dissolution occurs and a new partnership is formed whenever a partner

Answer 10

retires or a new partner is admitted

Question 11

any change in membership

Answer 11

dissolves a partnership and creates a new partnership

Question 12

A partner may convey his interest without dissolving the partnership, enables a partner to

Answer 12

transfer some, and not all, of his partnership rights without transferring managemnet rights and without dissolving the partnership

Question 13

Those who forbid a change must

Answer 13

have their way

Question 14

business differences must be decided by a

Answer 14

majority of the partners provided no other agreement between the partners speaks to the issues

Question 15

In the absense of an agreement to the contrary, if the business were sold for cash, each partner would be entitled to recieve

Answer 15

an amount equal to his or her capital account, if available
- any excess or deficit would be shared in accordance with each partners share of gain and loss

Question 16

A partners share of profit can be thought of as something that he or she has

Answer 16

earned and reinvested in the firm

Question 17

If have a deficit in the capital account when sold, he would be required to

Answer 17

contribute thtat amount to the total funds available so that the other partners could recover the amounts to which they were entitled

Question 18

General rule of a partner only contributing personal services

Answer 18

absense of an agreement, a partner contributing only personal services is ordinarily not entitled to any share of partnership capital pursuant to dissolution

Question 19

Default rules of partnership to know

Answer 19

1. management and voting
2. profits and losses
3. admission of new partners
4. fiduciary duties
5. majority vs. unanimous
6. indemnification

Question 20

if you are the one left to wrap things up, you can get

Answer 20

compensation

Question 21

Partnership is liable for contracts entered into by partners acting with

Answer 21

actual or apparent authority
- looks at the ordinary course of business in the industry as well as that partnership

Question 22

Partnership is liable to 3rd parties, non-partners, in tort for

Answer 22

wrongful acts or ommisions of partners acting with authority in the ordinary course of the partnership

Question 23

Liability for Contracts and Torts (Partners)

Answer 23

Partners are personally liable
to third parties for liabilities of
the partnership

Question 24

liabilites of incoming partners

Answer 24

• Not personally liable for obligations
  incurred prior to joining.
• Could lose everything put into the
  partnership.

Question 25

A person admitted as a partner into an existing partnership is liable for

Answer 25

all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred, - except that this liability shall be satisfied only out of partnership property.

Question 26

# Partnership liability Partnership is liable for intentional torts:

Answer 26

* committed in the ordinary course of the partnership; OR * with actual authority

Question 27

Partnership is liable for a Partner misapplying money or property if

Answer 27

done in the course of the partnership’s business or while acting with authority

Question 28

Suing Under Contract and Tort

Answer 28

Tort: can sue partners jointly and severally Contracts: can sue partners jointly

Question 29

# Suing the Partnership and Partners RUPA 1997 treats a partnership as an entity distinct from its owners that can

Answer 29

sue on its own behalf and be sued

Question 30

# Suing the Partnership and Partners Partners are jointly and severally liable for obligation of the partnership that happened

Answer 30

while they are a partner | unless otherwise agreed

Question 31

# Suing the Partnership and Partners in the same action you can

Answer 31

sue the partnership and the partner

Question 32

# Suing the Partnership and Partners 3rd parties have to obtain a judgement against the partner (not just the partnership) before

Answer 32

they can collect from the partner

Question 33

# Suing the Partnership and Partners 3rd parties have to show that they tried to collect from the partnership itself

Answer 33

* Attempt unsuccessfully to enforce the judgment against the partnership (the ”exhaustion requirement”) * the partnership is in bankruptcy * the partner waived the exhaustion requirement by contract * a court waives the exhaustion requirement * Partner is independently liable, not just through the partner

Question 34

f a partner pays for an obligation or incurs personal liability in the ordinary conduct of business, the partnership must

Answer 34

- reimburse the partner - adds in reasonably requirement for liabilities incurred and throws in proper along with ordinary conduct.

Question 35

If a partner pays for an obligation or incurs personal liability to preserve the business or its property, the partner is entitled to

Answer 35

indemnification even if not in the ordinary course. (default rule) - UPA 1914 adds in reasonably requirement for liabilities incurred and throws in proper along with ordinary conduct.

Question 36

The partnership must indemnify every partner in respect of

Answer 36

payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its business or property.

Question 37

# Contribution If the partnership doesn't have the money to reimburse a partner, the partners have to

Answer 37

pay their share of the loss to that partner

Question 38

Partners may be required to make a contribution to satisfy

Answer 38

creditors on dissolution

Question 39

In a dissolution senerio, partners who do contrinute have to contribute to cover

Answer 39

shares of the loss of partners who don't

Question 40

From a 3rd party’s perspective, if a loss was caused by the wrongful act of one of the partners

Answer 40

* Go after the partnership * Go after wrong-doing partner * Go after innocent partners after going after the partnership