Partnerships

Question 1

Limited partners, who only have a role in limited partnerships, are passive investors in the partnership business. What are the characteristics of a limited partner?

Answer 1

they are not agents of the partnership,

do not participate in the management of the partnership business,

and are not generally exposed to personal liability for the debts and obligations of the partnership.

Question 2

General characteristics of General partners

Answer 2

General partners are agents of the partnership,

co-manage the partnership business,

share in the profits and losses of the business, and

are generally exposed to personal liability for partnership debts and obligations.

Question 3

1. General Partnerships: consist only of two or more general partners)
2. Limited Partnerships: consist of?
3. Limited Liability Partnerships
   o Any partnership other than a limited partnership is eligible to become a limited liability partnership.
   What is the difference between an LLP and a GP in terms of liability

Answer 3

2. at least one general partner and one limited partner`
   In an LLP, general partners are not exposed to the personal liability risks that would ordinarily attach to their status as a partner in a business.

Question 4

Define partnership

Answer 4

A partnership is an association of two or more “persons” to carry on as co-owners of a business for profit.

Question 5

A general partnership is formed by:

Answer 5

objective agreement among those who would co-own an on-going business for profit.

Note: This agreement can be made: expressly (by oral or written agreement) or implicitly (from the conduct of the parties). There are no other formal or statutory requirements to creating a general partnership.

Question 6

The association of two or more persons to carry on as co-owners of
a business for profit will form a partnership regardless of:

Answer 6

what these persons subjectively intended.

Question 7

Under the Revised Uniform Partnership Act (RUPA), the sharing of profits is generally treated as:
prima facie evidence that?

Answer 7

that a partnership exists; in other words, a person who receives a share of the profits of a business is presumed to be a partner in the business.

Question 8

The following, even if paid “out of profits,” are not deemed to be a “sharing of profits”:

Answer 8

• receiving payment of a loan;
• collecting rent; and
• earning a salary.

Question 9

According to the Uniform Limited Partnership Act (ULPA), the formation of a limited partnership requires compliance with statutory requirements, including:
the filing of a

Answer 9

certificate of limited partnership with the secretary of state’s office.

Question 10

To be effective under ULPA, a certificate of limited partnership must be:

Answer 10

signed by ALL general partners listed in the certificate of limited partnership.

Question 11

A failed attempt to form a limited partnership will in all likelihood mean that the parties have formed or continued as a _______ ________. Note: dont assume do the analysis

Answer 11

general partnership.

Question 12

Eligibility to Become a Limited Liability Partnership a.General partnerships—but not _______ partnerships—are eligible to become a limited liability partnership

Answer 12

limited

Question 13

Unless a different vote is required by the partnership agreement, a general partnership other than a limited partnership may convert to a limited liability partnership by:

Answer 13

the vote of the partners holding a majority interest in the partnership.

Question 14

To become a registered limited liability partnership, a partnership must comply with the statutory requirements, including:

Answer 14

the filing of a certificate of limited liability partnership with the secretary of state’s office, and

the payment of the required fee.

According to statute, the name of a registered limited liability partnership must contain as the last words or letters of its name one of the following: ‘Registered Limited Liability Partnership,’ ‘Limited Liability Partnership,’ “R.L.L.P.” “RLLP,” ‘L.L.P.,’ or ‘LLP,’

Question 15

In general, relations among the partners and between the partners and the partnership are:
governed by

Answer 15

the partnership agreement or, when the partnership agreement does not otherwise provide, by the Uniform Partnership Act [UPA].

Question 16

T or F No partnership agreement may unreasonably restrict a partner’s access to the books and records of the partnership. This right is non-waivable!

Answer 16

True

Question 17

T or F UPA provisions concerning such things as a partner’s duty of loyalty, duty of care, and right to dissociate are also non-waivable. While these rights and duties can be limited (e.g., the partnership agreement can require that the notice of a partner’s will to dissociate be provided in writing), they cannot be eliminated entirely.

Answer 17

True

Question 18

(1) Absent a contrary provision in the partnership agreement, each general partner has:
(2) Each general partner is:
(3) If taken outside the ordinary course of the partnership business, a partner’s action constitutes partnership business conducted on the partnership’s behalf ONLY IF:

Answer 18

an equal right to manage and conduct the partnership’s business.

an agent of the partnership in the conduct of its business.

ALL general partners consent to the action.

Question 19

One implication of each partner’s right to participate equally in the management of the general partnership’s business is that, when the partners are in disagreement about a course of action to be taken in the ordinary course of the partnership’s business, the matter is resolved by?

Unanimity among the general partners would be required, however, if the proposed action was in contravention of the partnership agreement.

Answer 19

majority vote.

Question 20

(1) Limited partners do not have a right to:

(2) Limited partners are not:
authorized agents of the LP they do not have the right to?
(3) Limited partners have the right to seek information for a purpose reasonably related to their interest as a limited partner, including the right to:

Answer 20

1. co-manage the partnership business along with the general partners.
2. do not have the right to act on its behalf and so do not have the power to bind the LP to contracts they might enter into.
3. have the right to: (a) inspect and copy the required partnership records and tax returns, and (b) obtain true and full information as to the financial condition and state of the business of the partnership.

Question 21

Each partner owes to the partnership and the other partners a duty of care in the conduct (and winding up) of the partnership business.
(a) Partners must not engage in:

Answer 21

grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.

Question 22

Each partner owes to the partnership and the other partners a duty of loyalty. To comply with this duty partners must?

Answer 22

must not compete with the partnership in the conduct of its business OR appropriate a partnership opportunity.

(b) Partners must not engage in:
dealings with the partnership IF dealings are adverse to the partnership’s interest.

(c) Partners must account for any benefit, and hold as trustee any profit derived from:
any transaction connected with the partnership’s business OR the use of partnership property.

Question 23

The Duty to Disclose

Disclosures to general partners
Both partners and the partnership have a duty to furnish to a partner, without demand, any information that:

Both partners and the partnership have a duty to furnish to a partner, on demand, any information that:

Answer 23

is related to the partnership business and reasonably required for the proper exercise of a partner’s rights and duties under the partnership agreement.

concerns the partnership business so long as the demand is not unreasonable or improper in the circumstances.

Question 24

Given a limited partner’s right to inspect, general partners and the partnership have a duty to provide limited partners with the opportunity to

Answer 24

inspect the company’s financial and tax records and any other information reasonably related to the finances of the business and their interests therein.

Question 25

the duty of loyalty and the duty of care are duties of general partners but not duties of _______ partners

Answer 25

limited

Question 26

For limited partners, their duty is the less burdensome obligation of

Answer 26

good faith and fair dealing

Question 27

Absent an agreement to the contrary:
each partner is entitled to share ______ in the profits generated by the partnership business.

In the absence of a contrary agreement:
the partners share loses in proportion to their share of the profits.

Answer 27

equally

Question 28

A partner’s personal property includes his partnership interest, which consists of:

(2) Unless otherwise provided in the partnership agreement, a partner may:
transfer to another party his partnership interest (i.e., his financial interest in the partnership and right to receive distributions).

Answer 28

(a) his financial interest in his share of the partnership’s profits and losses, and
(b) his right to receive distributions from the partnership.

Question 29

While a transferee of a partner’s transferable partnership interest is entitled to those disbursements or distributions that the transferring partner would otherwise have been entitled, a transferee of a partner’s partnership interest acquires:

Answer 29

NO right to participate in the management and control of the business and no right to require access to partnership information, books, or records .

Question 30

T or F A partner’s personal property does not include partnership property (property acquired on behalf of or given to the partnership). A partner’s rightful use of partnership property is limited to uses on behalf of the partnership.

Answer 30

True

Question 31

A partnership is liable for torts committed by a partner when: the partner’s tortious act is committed?

All general partners are: liable jointly and severally for

Answer 31

in the ordinary course of business or with the authority of the partnership.

all obligations of the partnership, whether arising under tort, contract, or otherwise.

Question 32

General partners have unlimited liability. However, whenever partners are required to pay more than their share of the partnership debts, they may compel other partners to pay their___ ____ share by suing them for contribution.

Answer 32

pro rata

Question 33

is An incoming partner personally liable for partnership obligations arising from activity that occurred before his admission as a partner?

Answer 33

An incoming partner is:

NOT personally liable for partnership obligations arising from activity that occurred before his admission as a partner.

Question 34

In general, a limited partner is:

NOT personally liable for the obligations of the partnership; his liability will be limited to his?

Answer 34

capital contribution.

Question 35

Solely by reason of being a limited partner, a limited partner will NOT be personally liable for the obligations of the partnership beyond that limited partner’s capital contributions, EVEN IF

Answer 35

the limited partner participates in the management and control of the limited partnership.

Note: Limited partners cannot bind the partnership nor do the have the right to conduct business in the partnership.

Question 36

a partner’s power to dissociate—or withdraw—from a partnership is: exercisable at any time; it is a non-waivable right of every partner (general or limited).
c. For a partner to exercise this power, the partnership must:

d. But while a partner always has the power to withdraw, a partner may not have the right to do so and may be liable

Answer 36

have notice of the partner’s express will to withdraw from the partnership.

for damages caused by wrongful dissociation.

Question 37

Even in the absence of an express provision, when a partner withdraws by express will from a partnership that is for a definite term or undertaking, this is generally going to be considered a wrongful dissociation if it occurs before the completion of the term or undertaking.
Events Causing a Partner’s Dissociation

Answer 37

• partner’s death
• partner’s bankruptcy
• the appointment of a guardian for a partner
• a judicial determination that a partner is incapable of performing the duties of a partner
• the occurrence of an event specified in the partnership as triggering a partner’s dissociation.

Question 38

Dissociation can also occur upon a partner’s expulsion from the partnership. A partner may be expelled from a partnership by what means?

Answer 38

1) a provision in a partnership agreement,
(2) a unanimous vote of the other partners, or
(3) a judicial determination made upon application by another partner.

Question 39

When a general partner withdraws from a limited partnership by express will, the partner:
dissociates wrongfully if

A limited partner has: no right to dissociate before the termination of the limited partnership.

Answer 39

it occurs before the termination of the limited partnership.

Question 40

General partners of a limited partnership do not have the same right to dissociate as general partners of a general partnership. In a general partnership, general partners can dissociate by

Answer 40

express will prior to the termination of the general partnership. Specifically, they have a right to dissociate by express will when the general partnership is at will.

Question 41

Consequences of Dissociation
a. In general, dissociation terminates: the dissociated partner’s right to:

b. Except with respect to events or matters occurring before dissociation, dissociation also terminates: a partner’s duties of

c. A partner who has dissociated is permitted to:
_______with the partnership business.

d. A partner who dissociates does not:
thereby discharge?

e. In certain circumstances, a partner’s dissociation will:
cause the __________of the partnership.

Answer 41

a. co-manage and conduct partnership business.
b. loyalty and duty of care.
c. compete
d. liability for partnership obligations incurred before the dissociation.
e. dissolution

Question 42

An individual partner may file an application with a court to have a partnership dissolved.
(2) An application to dissolve a partnership will be granted if a court determines that:

Answer 42

court determines that:
• the economic purpose of the partnership is: likely to be unreasonably frustrated;

• the carrying on of the business in conformity with the partnership agreement would: not be reasonably practicable; or
• the carrying on of the business in partnership with a particular partner is: no longer reasonably practicable in light of that partner’s conduct relating to the partnership’s business.

Question 43

Even though a transferee of a partner’s transferable interest in
a partnership does not thereby become a partner, such a transferee—not unlike a partner—can file an application with a court to have the partnership dissolved.
(a) If the partnership is at will, the transferee can:
file the application at any time.
(b)However, if the partnership is for a definite term or undertaking, the transferee can:

Answer 43

only file the application AFTER the completion of the term or undertaking.

Question 44

If a court hears an application to dissolve presented by a transferee of a partnership interest, the court’s determination to dissolve the partnership must be on the ground that it is equitable (fair) to?

Answer 44

to wind up the partnership business.

Question 45

1. Generally, partnerships dissolve under what circumstances?
2. In a partnership at will, dissolution will also occur when:

Answer 45

1. a judicial determination is made upon application by a partner,
2. if it becomes unlawful to carry on the partnership’s business, or

3, the occurrence of an event specified in the partnership agreement happens in favor dissolution

the partnership has notice of a partner’s express will to WITHDRAW (dissociate) from the partnership.

Question 46

In a partnership for a definite term or particular undertaking, the partnership will dissolve 90 days after the wrongful dissociation of one of its partners UNLESS:

Answer 46

A MAJORITY of the partners agree to continue the partnership within 90 days after the wrongful dissociation of one of its partners .

Question 47

T or F In a partnership for a definite term or undertaking, if a partner dissociates by death or by becoming bankrupt, the analysis above would be unchanged. The partnership would dissolve after 90 days unless a majority of the remaining partners agree to continue the business.

Answer 47

True

Question 48

Upon the withdrawal of its lone general partner, a limited partnership dissolves unless:

Answer 48

before 90 days passes a majority of the limited partners consent to continue the business and admit one or more general partners to replace the dissociating general partner.

Question 49

If one of multiple general partners dissociates, the limited partnership will dissolve if, within 90 days of the dissociation, a majority of the remaining partners (general and limited) consent to

Answer 49

to its dissolution.

Question 50

A limited partnership dissolves upon the withdrawal of its sole limited partner unless:

Answer 50

another limited partner is admitted within 90 days.

Question 51

1. In the winding up process, to the extent further contributions are required from the partners in order for the partnership to meet all its obligations, each partner will be:

(2) To the extent partners pay more than their share of the outstanding debt, what remedy may they seek from those partners who have not paid their share of the debt?
(3) Unless provided otherwise in the partnership agreement, in winding up a partnership, partners share:

Answer 51

1. jointly and severally liable for the entire amount of the outstanding debt.
2. they may seek contribution from those partners who have not paid their share of the debt.
3. equally in the surplus, if any, or otherwise share the outstanding debt in the same proportion.

Question 52

1. In the winding up process, to the extent further contributions are required from the partners in order for the partnership to meet all its obligations, each partner will be:

(2) To the extent partners pay more than their share of the outstanding debt, they may seek contribution from those partners who have not paid their share of the debt.
(3) Unless provided otherwise in the partnership agreement, in winding up a partnership, partners share:

Answer 52

1. jointly and severally liable for the entire amount of the outstanding debt.
2. share equally in the surplus or the outstanding debt.

Question 53

What are partner’s rights in general with respect management of the business.

Answer 53

Partners are agents and comanagers of a business. Partners have equal rights to comanage ordinary affairs (e.g., signing a lease) (even if profits are not
shared equally). A majority vote wins if there’s disagreement.

Extraordinary matters require a unanimous vote (e.g., admitting a new partner or selling land)

Question 54

what is a general partners’ liability for partnership debts

Answer 54

in a general partnership, partners are jointly and severally liable for the partnership debts.

Question 55

T or F An incoming partner is not personally liable for prior debts of the partnership (although his capital contributions can be used to satisfy such debts). Outgoing partners are personally liable for debts
incurred during their time at the partnership.

Answer 55

True

Question 56

what fiduciary duties do partners owe the partnership?

Answer 56

Partners are in a fiduciary relationship with one another and must act in good faith.

They are charged with the duty of loyalty (i.e., they may not usurp corporate opportunities for a personal advantage, engage in self-dealing, or compete with the partnership),

the duty of care, and

the duty to account (they must account for any profits).

and the duty of disclosure

Question 57

Explain the steps to end a partnership

1st step: dissociation

2nd step: winding up

3rd step: termination

Answer 57

1. dissociation- The dissolution of a partnership is the change in the relation of the partners.
   Prior creditors are entitled to personal notice of the dissolution of the partnership. Others who knew of
   the partnership are entitled to newspaper notice. Note that a partner can withdraw from a partnership
   by giving notice at any time. This will trigger dissolution in an at will partnership.
2. winding up- This is where partnership assets are liquidated and creditors are paid. Note that partners are still liable for any liabilities that occur during the winding up phase.
3. termination true end of partnership.

Question 58

T or F If a creditor has a claim against a partner, the creditor can obtain an interest in the partnership.
This includes profits but not management or voting rights. If a creditor has a claim against the partnership, the creditor can try to collect from the individual partners. These principles are heavily tested!

Answer 58

True

Question 59

explain a partner’s joint and several liability for the obligations of the partnership.

Answer 59

Partners are jointly and severally liable for the obligations of the partnership. Even if a partner enters into a contract without actual authority to do so, the partnership and the partners are bound (so long as the partner had apparent authority). The creditor must obtain a judgment against the partners personally to go after each partner’s personal assets. The creditor should attempt to collect from the partnership before seeking the partners’ personal assets

Question 60

what happens to a general partnership after it becomes an LLP? Is it considered a new partnership explains.

Answer 60

An LLP continues to be the same entity that existed prior to the filing of a statement of qualification as an LLP. Id. § 201(b). “[T]he filing of a statement of qualification does not create
29
Family Law/Conflict of Laws Analysis
a ‘new’ partnership. The filing partnership continues to be the same partnership entity that existed before the filing.” Id. § 201 cmt.