Partnerships 10-18 Flashcards
When can a judgment creditor levy execution of a judgment against a partner’s personal assets for a partnership debt?
When a judgment has been rendered against the partner;
AND
The partnership assets have been exhausted or are insufficient.
*A judgment against the partnership is NOT itself a judgment against the individual partners.
Priority: HIGH
Who is responsible for an obligation incurred by a Limited Liability Partnership (LLP)?
The obligation is SOLEY the obligation of the LLP.
*Under RUPA, a partner in an LLP is NOT liable for partnership obligations.
Priority: Medium
What are the three exceptions in which Limited Partners ARE personally liable for the obligations of the Limited Liability Partnership (LLP)?
They are ALWAYS liable for their own misconduct (or if they sign a PERSONAL guarantee).
Always at risk for losing any capital contributions made to the partnership.
Obligations incurred before the partnership became a LLP are treated as obligations of the prior entity. (i.e. general or limited partnership).
Priority: Medium
What aspects of Partnership Ownership can be transferred to another?
The interest in the share of the profits and losses;
AND
The right to receive distributions.
*ALL other incidents of partnership ownership CANNOT be transferred (unless all partners agree or an agreement states otherwise).
Priority: Low
When does a partner
breach his Duty of Care?
When he engages in:
Grossly negligent or reckless conduct;
Intentional misconduct; OR
A knowing violation of law.
Examples include: violating a partnership policy; failing to thoroughly investigate facts before entering into a contract; and acting outside the scope of the business without consent from the other partners.
Priority: Low
What acts constitute a violation of a partner’s
Duty of Loyalty?
Engaging in self dealing;
Usurping a business opportunity; OR
Competing against the partnership.
* When this duty is breached, a partner’s profits may be disgorged, and any contracts may be revoked or rescinded.
Priority: Low
What is “winding up”?
When does termination of a partnership occur?
The process of settling of partnership affairs after dissolution.
The partnership is only terminated when the winding up of its business is completed.
Priority: Low
During the winding up process, partnership assets are converted to cash and distributed in what order?
Outside creditors;
Insider creditors (i.e. partners who made loans);
Partners’ capital contributions; AND
Profits (if any) to be distributed among the partners.
*If assets are insufficient, the loss will be divided among the partners.
Priority: Low
