Partnerships Flashcards
What is a partnership?
When two or more persons or entities intend to carry on a for-profit business as co-owners.
Do NOT need the intent to form a partnership.
* generally this is inferred through sharing of profits
- this is an objective determination, we are not concerned about parties’ subjective intent.
Do you need a written agreement to form a partnership?
No.
What is the profit sharing test?
If there is profit sharing, there is a presumption that there is a partnership.
What is a partner by estoppel
A person will be treated as a partner if: there is a representation that the person is a partner, the person makes or consents to the representation, a third party reasonably relies on the representation, and the third party suffers damages as a result.
* detrimental reliance on a partnership’s existence.
Partners are ___ of the partnership
Agents
Partners owe duties of ____ and ___
Loyalty and Care.
Loyalty– must not compete, usurp, or advance an adverse interest
Care—
* required to act as a reasonable partner, cannot engage in grossly negligent/reckless conduct, or knowing violation of the law.
A partner ___ transfer his or her rights in the partnership
Can. This does not cause dissolution or dissociation.
Property acquired by partners or partnership is presumed to belong to the ____
Partnership.
A new partner must get the consent of __ the existing partners.
All.
A ____ of partners must approve ordinary business decisions while ___ partners must approve matters outside the ordinary course.
Majority; all.
A partner ___ derive a personal benefit from the use or possession of partnership property.
Cannot.
A partner is ___ to the partnership for damages caused by wrongful dissociation.
Liable. A dissociation is wrongful only if in breach of provision of the partnership agreement or before the completion of the undertaking.
A partnership must indemnify a dissociated partner against all partnership liability incurred when?
Before or after the dissociation.
A partnership is ____ for a partner’s torts in the course of the partnership business or when acting with partnership authority
Liable– this is what distinguishes a general partnership form an LLC.
Partners are ____________ for all partnership obligations?
Jointly and severally liable. A judgment is first satisfied from the partnerhsips assets then the partners assets.
A dissociation from a partnership at will causes?
The partnership to dissolve.
Before winding up is complete, a partnership ____ resume carrying on its business as if dissolution had never occurred.
May.
At formation, an LP must have
at least one general partner and one l**imited partner.
***
the general partner will be fully liable, whereas the LP will not be. Chiefs and Indians.
⇢ but look out for a LP acting as a general partner, this can create liability by estoppel (provided that the belief is reasonable).
When is a partner liable for a contract entered into by another partner?
As partners are agents of the partnership, a partner will be bound if that agent (co-partner) acted within the scope of agency created by the partnership.
- Actual Express authority- created by the partnership agreement, or partner authorization (meeting, etc) P⇢P
- Actual Implied: Partner reasonably believes that an action is necessary to carry out his express authority. P⇢P
-
Apparent authority: when a partner acts in the ordinary course of the partnership business and 3rd party reasonably believes the partner has authority to act.
p⇢3rd party
