Partnerships Flashcards
What is a partnership?
A partnership is an association of two or more persons to carry on a for-profit business as co-owners
What is the key test for ascertaining whether a business arrangement is a partnership?
Whether there is a sharing of profits from the business; if so, such an arrangement generally is presumed to be a partnership, and person who share in the profits are partners.
It is not necessary that such persons have the specific intent to form a partnership.
This agreement may even be implied by the conduct of the parties when they have not entered into a written or oral agreement.
What isn’t profit sharing?
A partnership does not exist between persons when one person receives profits in payment of a debt.
Are partnership interests transferable?
Yes. A partner may transfer the right to share in the profits and losses of the partnership and receive distributions, but cannot transfer the right to manage the partnership.
Are partners entitled to inspect the books and records of the partnership?
A partnership must provide its partners and their agents with access to all its records.
However, it need not provide transferees of partnership interests with access to books and records.
Does transfer of a partnership interest make the transferee a partner?
A transfer of a partner’s partnership interest does not make the transferee a partner unless the other partner or partners consent to making the transferee a partner.
What is partnership property?
Property is partnership property if it is acquired in the name of the partnership.
It is property of the partnership and not of the partners individually.
Can a partner use partnership property for personal use?
A partner may use or possess partnership property only on behalf of the partnership.
E.g. You cannot use the partnership’s delivery truck to drive kids to soccer on Sundays
How is an LLP created?
By filing a statement of qualification into an LLP
What is an LLP?
An LLP is a partnership in which a partner’s personal liability for obligations of the partnership is eliminated.
In other respects, an LLP is governed by the same rules as a partnership.
Are partners jointly and severally liable for partnership obligations?
Yes
When is the LLP created?
On the date the statement of qualification is filed
Are new partners liable for preexisting partnership obligations?
A person admitted as a partner into an existing partnership is not personally liable for any prior partnership obligations.
However, any capital contribution made by an incoming partner to the partnership is at risk for the satisfaction of such partnership obligations.
Can partners bind the partnership?
Yes, partners are agents of the partnership and have actual, implied, and apparent authority to commit the partnership to usual and customary matters, unless the partner has reason to know that other partners might disagree.
On the other hand, each partner has equal rights in the management and conduct of the partnership’s business.
If there is a decision as to a matter outside the ordinary course of the partnership’s business, the decision requires the consent of all partners.
How can express authority arise in a partnership?
Express authority can arise from the partnership agreement itself, an authorization of the partners, or a statement of authority filed with the state.
