Partnerships

Question 1

When is a General Partnership formed?

Answer 1

Almost always. A Partnership is the association of to or more people for the purposes of carrying on as co-owners of a business for profit, irrespective of intent to form a partnership

Profit Sharing - creates a presumption of a partnership and that a person entitled to profit is a partner unless paid in satisfaction of a debt, rent to landlord, wages, etc.

Other Indicia - capital contributions and mutual agency

Needs no paperwork; failed LLP writing can make GP

Question 2

Role/Duties of Partners

Answer 2

Agents and comanagers of the partnership

Have equal rights in management of ordinary affairs even if profits are not shared equally. Majority vote wins if disagreement.

Extraordinary matters requires unanimous vote (new partner, sale of land)

Question 3

Liability of Partners

Answer 3

Joint and Several liability - no limited liability in GP

Incoming partners not liable for prior debts (capital contributions might be used to satisfy debts)

Outgoing partners are personally liable for debt incurred during their time as partner

Question 4

Fiduciary Duties of Partners

Answer 4

• Duty of Loyalty
  
  • May not usurp business opportunities, self deal, or compete with the partnership
• Duty of Care - Reasonable person standard (business judgment rule)
  
  • Duty to Account - account for any profits

Question 5

Ending a Partnership

Answer 5

Dissolution is not enough - must complete winding up process

1. Dissociation - Dissolution / change in the relation of partners.
   
   1. Creditors are entitled to notice of dissolution.
   2. Others are entitled to notice by newspaper to avoid third-party liability.
      
      1. At-will partners may withdraw by giving notice at any time triggering dissolution
2. Winding Up - partnership assets are liquidated and creditors are paid. Partners still liable for anything arising during this period
3. Termination - True end to the partnership