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MEE GMW > Partnerships > Flashcards

Partnerships Flashcards

1
Q

What is a general partnership?

A

An association of 2 or more persons to carry on as co-owners a business for profit.

**no formalities, subjective intent irrelevant

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2
Q

Do you need a written agreement to form a general partnership?

A

No, but the SOF may require (ie. if for more than 1 year).

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3
Q

Profit sharing in a general partnership creates

A

a presumption of partnership, unless the profits are for: payment of a debt, rent, wages for services.

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4
Q

What is a partnership by estoppel?

A

When no partnership is formed in fact, persons can be liable as partners to protect reasonable reliance by third parties.

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5
Q

All partners have ________ rights and ________ votes in a general partnership.

A

Equal

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6
Q

General partners owe the fiduciary duties of:

A
  • Loyalty - to the partnership and partners
    • account for benefits, not adverse, not compete
  • Care - refrain from gross negligence, recklessness, intentional misconduct, knowing violations of the law (negligent behavior is excused)
  • Disclosure - provide complete and accurate information regarding the partnership
  • Obedience
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7
Q

A partner can unilaterally transfer his or her _________ rights in the general partnership.

A

Financial rights, NOT management rights.

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8
Q

Property purchased with general partnership funds is presumed to belong to. . .

A

The partnership

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9
Q

A new partner must get the consent of ________ the existing partners.

A

All

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10
Q

T/F: A partner is liable to the general partnership for damages caused by wrongful dissociation.

A

True

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11
Q

Partners are ____________ for all general partnership obligations?

A

Jointly and severally liable

The plaintiff must exhaust the partnership resources before seeking to collect individual partner’s assets. A partner is entitled to indemnification.

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12
Q

An express dissociation from a general partnership at will causes. . .

A

The partnership to dissolve.

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13
Q

A general partnership _________ after dissolution until it is wound up.

A

Continues

And partners retain the apparent authority to bind the partnership to third parties on new business even after the an event requiring winding up.

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14
Q

A limited partnership has

A

at least one general partner and one limited partner.

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15
Q

Decisions within the ordinary courses of business require a __________ vote.

A

Majority

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16
Q

Decisions outside of the ordinary course of business require _________ vote.

A

Unanimous

17
Q

General partner’s financial rights (in general partnership)

A

To share in profits and losses

  • profits are shared equally among partners by number (default)
  • losses are shared the same as profits
18
Q

Partner’s tort liability to third parties (in general partnership)

A

Partnership is liable for loss/injury caused to a person as a result of tortious conduct of a partner/employee acting in the ordinary course of the business of the partnership or with the authority of the partnership

19
Q

Partner’s contract liability to third parties (in general partnership)

A

Partnership is liable for all contracts entered into by a partner in the scope of the partnership with actual or apparent authority.

  • Actual: partnership agreement, vote, statement of partnership authority
  • Apparent: a partner is an agent of the partnership and can bind the partnership within the ordinary course of partnership business
20
Q

Can the duties of loyalty and care be eliminated in a general partnership?

A

No.

21
Q

Dissociation in a general partnership occurs when

A

a partner withdraws.

Can occur by express notice, the happening of an event, expulsion, partner’s bankruptcy, or partner’s death/incapacity.

22
Q

When does wrongful dissociation occur (in a general partnership)?

A

When a partner dissociates in breach of express terms of the partnership agreement.

In a term partnership, dissocation occurs if the partner withdraws, is expelled, or bankrupt before the agreed end.

23
Q

What are the consequences of dissociation in a general partnership?

A
  1. Partnership is dissolved and liquidated
  2. Partnership continues and the dissociated partner entitled to a buyout of interest
24
Q

A dissociated general partner remains liable for pre-dissociated partnership obligations and post-dissociation liabilities within ________.

A

2 years

25
Q

When does dissolution occur in a general partnership?

A
  • Partner dissociates by express will in an at will partnership
  • One partner dissociates wrongfully or by death/bankruptcy in a term partnership AND ½ of the remaining partners agree to dissolve within 90 days of dissociation
26
Q

Priority of general partnership assets in dissolution

A

Creditors (outside and inside) → capital contributions → profits and losses

27
Q

How is a limited partnership formed?

A

by filing a certification of formation with the Secretary of State

Include: the name of the partnership, name and address of an agent for service, and the name and address of each general partner.

28
Q

How is a limited partnership managed?

A

By the general partners. Each have equal rights.

Limited partners have no management rights.

29
Q

What are the financial rights in a limited partnership?

A

Distributions are made on the basis of partner’s contributions.

30
Q

Who is liable in a limited partnership?

A

General partners are jointly and severally liable.

Limited partners can only lose the value of their investment.

31
Q

What fiduciary duties are owed in a limited partnership?

A
  • General partners: duties of loyalty and care
  • Limited partners: none
32
Q

What is a limited liability partnership?

A

A general partnership where all partners have limited liability.

Formation: file a statement of qualification with the Secretary of State.

33
Q

How is a limited liability company formed?

A

By filing a certificate of organization with the Secretary of State that states: the name and address of the LLC, the name and address of a registered agent.

34
Q

What are the options for LLC management?

A
  • member-managed: managed by all members
  • manager-managed: managed by outside managers

Each member/manager has equal rights.

35
Q

How are profits and losses distributed in an LLC?

A

Based on contributions.

36
Q

Are LLC members personally liable?

A

No.

37
Q

What fiduciary duties are owed in an LLC?

A

Members/managers owe to the LLC AND members:

  • Duty of care
    • business judgment rule applies
  • Duty of loyalty
38
Q

When do dissociation and dissolution occur in an LLC?

A
  • dissociation: at any time by express withdrawal
  • dissolution: by an event. stated in the operating agreement, by consent of all members, or after 90 days with no members.

MEE GMW (8 decks)

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