Partnership - Rights and Liabilities between General Partners

Question 1

Because general partners owe a fiduciary duty to each other partner and the partnership, what duties attach?

Answer 1

The duty of loyalty requires that the general partners may never engage in self-dealing; may never usurp partnership opportunities; and may never make a secret profit at the partnerships expense.

Question 2

What is an action for accounting?

Answer 2

Partners may recover losses that are caused by the breach of the duty of loyalty including indemnity and the partnership may disgorge profits due to the breach.

Question 3

What are the following right in partnership property and liquidity?

1. Specific Partnership Assets
2. Share of Profits
3. Share in Management

Answer 3

1. Specific Partnership Assets - Land, leases, or equipment which are owned only by the partnership itself. Therefore they may not be transfered by individual partners without partnership authorization;
2. Share of profits - is personal property owened by individual partners. Therefore, it may be transferred by individual partners without authorization;
3. Share in Management - Considered an asset, owned only by the partnership itself. Therefore, it may not be transferred by individual partners to third parties.

Question 4

What is the test to determine whether property is owned by the partnership or an individual person?

Answer 4

Whose money was used to buy the property? If partnership money was used, it becomes partnerships. If individual money used, it becomes individual property.

Question 5

What is the division of management between partners?

Answer 5

Absent a different agreement, each partner is entitled to equal control and management.

Question 6

Are partners entitled to a salary? Is there an exception?

Answer 6

Absent an agreement to the contrary, partners get no salary. Partners can get a salary for helping to wind up the partnership before termination of the partnership.

Question 7

Absent an agreement to the contrary, how are profits and losses divided?

Answer 7

1. Profits are shared equally;

2. Losses are also shared equally.