Partnership1

Question 1

Partnerships.

FIVE ISSUE AREAS:

Answer 1

1) GP FORMATION
2) General Partners’ LIABILITIES of to 3Ps !
3) Rights & Liabilities BETWEEN GPs
4) GPship DISSOLUTION
5) OTHER UNincorporated Biz Orgs

Question 2

*GENERAL PARTNERSHIP (GPship):

DEFIN., PRESUMPTION, & FORMATION +CA:

Answer 2

1) Defin.:*GPship is an ASSOCIATION of 2+ PERSONS [=any entity] WHO CARRY on as Co-OWNERS a biz for PROFIT!!!
2) NO FORMAL AGT is required.
[CA: SOF; filing]
REBUT: No INT b/c no (expr /impl) CONSENT /WAGES /Loan
3)**RECEIPT of PROFITS (!!) is p.f. ev. that a Pship exists.

Question 3

*Are Ps PERSONALLY liable to 3Ps …+CA?

[In RUPA States:
Partners are SECONDARILY Liable if PS assets are EXHAUSTED [bankrupt].]

Answer 3

PARTNERS are J&S Liable.
EACH PARTNER is PERS. & INDIVIDUALLY liable 4ENTIRE Amount of ANY TORT & CONTRACT Obligation.
Judgm.: Binding on a P IFF pers. SERVED.
CA: CONTRIBUTION: if P pays more than his share of PS Debt.

Question 4

*Agency Principles apply to PShips: …
[Cf: Auth. of corp. Officers is gov’d by rules of Agency. => O has Power to BIND the Co if he acted w/ Actual or Apparent auth.
CA: O Liable 4 breach of IMPL. WARR. that he acted w/ auth.]

Answer 4

Partners are AGENTS & Principals of the PShip. They may have ACTUAL or *APPARENT AUTH. to BIND the Pship biz. w.r.t. Authorized Ks & TORTs committed by Ps in the SCOPE of CARRYING ON the PS Biz.

Question 5

**INCOMING GENERAL partner’s liability to 3Ps vs. OUTGOING: +CA:

Answer 5

1) INCOMING GP is NOT liable to 3Ps for PRE-existing debt.
CA: BUT his Contribution (=Capital) may be used to satisfy prior debts.
2) OUTGOING (=Dissociating) GP: REMAINS liable 4PRE-existing & FUTURE Debts. CA: UNTIL
a) C’ors Receive NOTICE of DISSOCIATION or
b) 90d after Filing it w/ SoS.)

Question 6

LIABILITY of GP to 3P by ESTOPPEL:

Answer 6

One who REPRESENTS to a 3P that a GPship Exists

[thereby inducing 3P’s RELIANCE]

will be PERSONALLY liable as if a PS does exists.

Question 7

Hypo: Paula convinced her friend Peter to start a sailing school & agreed to lend him money to purchase a boat. At a party, Paula told a wealthy friend: “My partner Peter & I are starting a sailing school & we need a boat.” Wealthy friend offered to sell Paula & Peter a boat & agreed to allow Peter to take it for a test ride the next day. Later that night, however Peter & Paula fight & decide to drop the sailing school idea. Then Peter takes the boat for a ride & tortiously destroys it. May Wealthy friend sue Paula for the loss?

Answer 7

GPs ARE liable for all Pship DEBTS, incl. co-partners’ TORTS.
However Paula & Peter NEVER FORMED a GPship b/c they never agreed to SHARE PROFITS. Rather, it’s a LENDING agt. Nevertheless, under Estoppel, Paula is liable b/c she HELD OUT to Friend that she’s Peter’s partner.
=> Estopped from denying the existence of a PS.
=> Liable for her co-partner’s Tort.
Think: 3 Issues: Formation, Liability, & Estoppel.

Question 8

PARTNER’S DoL +REMEDY for BREACH:

[Note: To REACH a Partner’s ASSETS:
You need a JUDGMENT against that INDIVIDUAL Partner.]

Answer 8

GPs are FIDUCIARIES of Each Other AND the PS (CA: LP)
=>Ps owe a DoL =must Avoid:
1) SELF-DEALING
2) SECRET Profits &
3) USURPING [/Compete]
REMEDY: Action for ACCOUNTING: PS may recover LOSSES CAUSED by the breach & DISGORGE Profits.

Question 9

*Specific Pship Assets: Land leases & EQUIP. are:

[ RUPA's SEPARATE Pr. PRES. if:
1) TITLE is NOT in PS Alone, 
2) +doesNOT say HOLDER =PS
3) +NO PS FUNDS were used.
CA: Else Presume PS Pr.
(Cf. If UNtitled Pr: Use CL factors.)]

Answer 9

OWNED Only by the PS =>P mayNOT Transfer Pr to 3P (b/c P is NOT Co-owner) &
**P has NO right to USE Pship Pr for other than the BENEFIT of the PS! (Note: Can’t Recover from BFP).
CA: AUTH’d /PROFITS: ARE indiv. Ps’ pers. Pr.
=>Transferable & Attachable.
SHARE in MGT: Ps canNOT SELL their Partner STATUS (=make 3P a P) w/o UNANIMOUS CONSENT.

Question 10

When is Property
PS Property vs.
PERSONAL Pr owned by an individual Partner?

Answer 10

1) INTENT of the P is the CONTROLLING Factor.
2) Else, if Pers. FUNDS were USED to buy the Pr, it’s Pers. Pr.
[=1 of RUPA’s separate Pr. PRESUMPTIONs]

Question 11

Hypo: John buys a car in John’s own name with John’s money which he uses in a PS business. John dies. Does John’s spouse Yoko get the car or is it a specific asset of the partnership?

Answer 11

If bought with personal $$, it is pers. Pr and vice versa.
Here, b/c John bought the car with his funds +there’s no ev. of contrary INT, the car was his Pr, therefore, it is Yoko’s.

Question 12

General PS: ABSENT AGT to the CONTRARY …(Mgt +VOTING):

[+Each Partner can INSPECT & Copy the PS Books]
+Hypo: A, B and C agree to contribute money & share profits 60-30-10. How do they vote?

Answer 12

each Partner has EQUAL right to Participate in the MGT [vote].
A MAJ. VOTE is req’d to AUTHORIZE ORDINARY PS Biz.
CA: But UNANIMOUS Consent to Authorize EXTRAORDINARY biz matters.
Hypo: Absent AGT on CONTROL: Votes=EQUAL: (1 P=1 vote).

Question 13

General Partnerships. SALARY: +CA:

+Hypo: A and B are partners. A works 96 hours a week. B sleeps all day. Does A get any salary?

Answer 13

Absent AGT, Partners get NO SALARY.
CA: The ONLY Compensation is for:
WINDING UP the Pships biz.

[HYPO: NO, ONLY profit sharing.]

Question 14

GPs Share in Profits and Losses: +Hypos:

a) If an AGT states “profits are shared 60/40” but is silent on losses, how are losses shared?
b) If an AGT states “losses are shared 60/40” but is silent on profits, how are profits shared?
c) Partner A puts up all of the money. B does all of the work. C gives the partnership its fine name. D does nothing. How are profits shared?

Answer 14

Absent AGT: 1) PROFITS SHARED EQUALLY

2) LOSSES SHARED LIKE PROFITS.
a) Even if Ps have an AGT on Profits, absent AGT on Losses, losses are shared like profits (60/40).
b) absent AGT on Profits, they are shared EQUALLY.
c) EQUALLY absent a AGT.

Question 15

Pship DISSOLUTION:

[Cf. LIMITED PS:
If, w/in 90d of a GP’s withdrawal, ALL Remaining Ps AGREE in WRITING, PS CONTINUES.]

Answer 15

PS (at will) AUTOM. DISSOLVES when ONE Partner gives NOTICE of his INTENT (express will) to WITHDRAW.
[+Death /INcapacity].
[CA: Liable for PREMATURE (=w/o MAJ VOTE) w/drawal from a PS for a Defined TERM or Particular UNDERTAKING]

Question 16

What happens before the Real End of the Partnership =TERMINATION ?

Answer 16

Winding Up is the period b/w Dissolution & Termination, where REMAINING Partners GATHER & LIQUIDATE PS ASSETS to satisfy CREDITORS.

Question 17

Winding up LIABILITY for Old vs. New biz of GENERAL PS:

[Cf. Pship is liable for TORT that occur during winding up if committed w/in SCOPE of PShip biz.]

Answer 17

OLD Biz: PS, thus, individual GPs REMAIN liable on all transactions entered into to WIND up OLD biz.
NEW Biz.: Each P has Power to BIND (=liability) the GPship during winding up, UNLESS
1) Creditors receive PERS. NOTICE of Dissol. +Public Notice to Others
2) OR until 90d after filing a NOTICE of DISSOLUTION w/ SoS.

Question 18

Priority of DISTRIBUTION after DISSOLUTION: The Pship must use liquidated (=cash) assets to pay:

Answer 18

First: All CREDITORS, incl. Ps who are C’ors. (=loaned $ to PS).
Second: EACH(!) Partner ACCOUNT (MUST repay all CAPITAL Contributions paid by Ps. =>Loans + capital Contrib. + share of Profits – share of Losses]
Third: PROFITS & SURPLUS if any.

Question 19

1) A and B dissolve the AyeBee Pship. In winding up, they liquidate the Pship assets and have a total of $1 million to distribute. How should that amount be distributed if 1) Pship owes $600k to Creditors 2) Partner A loaned the Pship $100k & 3) Partner B made capital contributions of $200k?”
2) Suppose AyeBee Pship has only $700k to distribute?

Answer 19

1) Upon PS Dissolution, PS must 1st repay fully its non-partner & P Creditors. Next repay Ps’ Contrib. Lastly, if Profits: Ps take equally absent agt. Here, C’ors get 600k, A gets 100k, then B gets 200k and they split the remaining 100k 50/50.
2) 1st, C’ors & A get Total 700k. 2nd, PS is still liable to B for FULL Repayment of his 200k CAPITAL amount (it’s a MUST. This is a Loss). Since INDIVIDUAL Ps are liable Lossess of the PS, absent agt, A&B will share the Loss equally => A(“&B”) must pay (new) $100k into the PS.

Question 20

A LIMITED PS has min. 1Gen.P & 1 Ltd.Partner.
1) Formation:
2) Liability:
3) Control:
4) Transfer of interest:
[Note: LPs owe No FD =>OK to Compete! w/ the Ltd. PS
& INSPECT +Copy records]

Answer 20

1) File: Ltd.PS CERTIFICATE w/ SoS, SIGNED by All *GPs +”LP.”
2) (If properly formed) LP liable ONLY 4CONTRIB., while *GPs: Pers.LIAB. for ALL Ltd. PS’s Oblig. (T+K), but may Seek INDEMNIF.
3) GPs MANAGE w/ FD to LPs.
In CALIF., LPs MAY Manage w/o Losing LL Status.
4) Iff Unanim. Consent.
(CA: Right to Distributions)

Question 21

• Other forms of PSs: (Registered) Limited Liability Partnerships (RLLP, LLP)
  1) Formation:
  2) Liability:

Answer 21

1) Min. 2 Ps +STATEM. of QUALIFICATION.
2) *Partners NOT PERS. Liable for LLP’s Oblig.
=>NOT pers. liab. for OTHER Ps’ Tort/K.!
CA: MALPRACTICE <=No Shield for OWN Wrongdoing.

Question 22

LLC (hybrid b/w a Co & PS):
LLC MEMBERS are OWNERS who ..: 
1) Formation:
2) Liability:
3) Control:
4) Transfer of Membership interest:
5) Dissociation:

Answer 22

… have LL like SHs & the BENEFIT of PS TAX Status.
1) File: AoORGANIZATION +Name LLC …
2) Members NOT pers. liable for LLC’s Debts & Oblig. (like LLP)
3) Members may DELEGATE to Mgrs
4) Transfer iff: UNANIM. Consent
[CA: Rights to Profits].
5) DISSOCIATION: causes Dissolution.