Partnerships Flashcards
General Partnership - Defined
An association of two or more persons to carry on as co-owners in a business for profit.
Creation of a GP
May be formed for specific undertaking, a term, or at will.
May not be formed by one person, for non-profit.
Joint venture - association formed for a single transaction.
Fundamental Principles of Partnerships
1) Partners have equal rights to control the business, unless Pship agreement specificies. One partner, one vote.
2) All partners have unlimited personal liabilty for all partnership debts. Jointly and severally liable.
3) Tax-benefits: “pass-through” - partners taxed on their share of pship income. No tax paid at entity level.
Formation of a G-Partnership
No formal requirements. Just intent of 2 or more parties to create a profit. Sharing of profits is prima facie evidence of intent to form a partnership.
Factors to rebut prima-facie evidence where payment is:
1) as a debt by installments or otherwise
2) as wages of an employee or rent to a landlord
3) as an annuity to a widow or representative of a deceased partner
4) as interest on a loan through the amount of payment varies with the profits of the business AND
5) as the consideration for the sale of the good will of a business or other property by installments or otherwise
Property of the Partnership
1) All property brought in at creation is pship property, as is all property acquired with pship funds. Intent of partner is key.
2) Real property can be acquired in pship name - then conveyed only in pship name. And can be conveyd by any partner unless agreement limits it.
3) each partner has right to possess specific pship property for pship purposes, but no right to posses such property for personal purposes without consent of partners.
4) Partner’s right in specific property is not assinable and not subject to attachment or execution by personal creditors.
Rights of a Partner
Property rights of a partner are:
1) his rights in specific partnership property
2) his economic interest in the property or his shares of profit losses which is transferable through assignment
3) his right to participate in management, not transferable to non-partner, without unanimous consent of non-transferring partners.
Relationship Between Partners
Partner’s cant
1) assign partnership property to creditors
2) dispose of the good will of the business
3) do any other act which would make it impossible to carry on the ordinary business of a partnership
4) confess a judgment
5) submit a partnership claim or liability to arbitaration or reference
Partner’s Relationship Between Business
Can’t compete without consent of partners. If he does, must account for all profits he derives.
All partners have equal rights in management and conduct of partnership.
If partner’s disagree on business decision, then if matter is within ORDINARY course, then MAJORITY rules. Otherwise, UNANIMOUS
A partner who makes any payment/advance beyond amount of capital he agreed to contribute to pship, he gets interest from date of payment -it’s a loan.
Notice to partner = notice to pship
Authority to Bind Partnership
1) Every partner is an agent of the pship.
2) Act of a partner in apparently carrying on the business of the pship will bind the pship, unless the partner has no actual authority AND the person with whom the partner is dealing has actual knowledge of this lack of authority.
3) if partner does something outside of those acts related to carrying on pship business, pship only bound if other partners authorized the acting partner by granting him actual authority.
New Partners
1) New partners still J&s liable
2) Liable for debts existing before admission ONLY up to his capital contribution.
Wrongful Act of Partner
The Pship and partners are J/S liable for any wrongufl act if partner acting
1) in the ordinary course of pship business
2) with authority of his partners
NO RESPONDEAT SUPERIOR AGAINST PARTNERS because they are co-owerns.
Profits of the Pship
Partners share profits/losses per capita unless pship agreement provides otherwise.
Partners can assign their economic interest in pship, but can’t transfer his status as a partner without unanimous consent.
Dissolution of Pship
Dissolutino caused by any partner ceasing to be associated with the carrying on with the business - any time guest list changes, pship dissolves. Also caused by:
1) events that don’t violate pship agreement: pships for a term, pships at will, agreement of the parties, the expulsion of any partner as provided in the pship agreement.
2) events that are in contradiction of a pship agreement
3) events making it unlawful to carry on business
4) death, bankruptcy, or decree of course.
Dissolution results
1) Each partner has right to liquidate and get paid if there are net profits, or contribute if there are net losses.
2) After dissolution, a partner still has ability to bind the pships to engage in actions appropriate while winding up.
DISSOLUTION DOES NOT DISCHARGE EXISTING LIABILITY. LEAVING PSHIP DOES NOT DISCHARGE EXISTING LIABILITY ON DEBTS/THINGS ENTERED INTO BEFORE LEAVING
Winding Up
Process by which
1) pship assets are sold
2) pship debts are paid
3) balance is distributed to partners
