Partnerships Flashcards
What are the 3 types of Partnerships?
(1) General Partnership
(2) Limited Liability Partnerships
(3) Limited Partnerships
Define Partnership
A partnership is formed when 2 or more people
associate to carry on a for-profit business
as co-owners
What formalities are needed to create a Partnership?
No formal agreement is needed. Parties only need to intend to associate as co-owners
Can be inferred from their conduct.
Where Parties’ intent is unclear, what 3 factors do Courts look at?
(1) Profit Sharing - (not debts, but profits).
(2) Sharing control
(3) Capital Investment
Do individual Partners have an interest in Partnership property?
No
What duties do Partners owe the Partnership and fellow Partners?
Loyalty - must refrain from competing w/ Partnership and dealing with adverse party
Obedience
Care
Complete and accurate information
Remember, L.O.C.C
Do Partners have a right to check books and information?
Yes, each Partner has a right to inspect and copy partnership financial information
Who/what is liable for contract liability?
All Partners are liable for Ks they expressly authorize and
Ks made by a Partner in the scope of the Partnership.
Can Partners be liable for Torts committed by the other Partner?
Yes, if the tort was committed in the ordinary course of the Partnership
Or, with authority of the Partnership
What is the nature and extent of liability?
All Partners are jointly and severally liable.
An action can be brought against any one or several of the Partners as individuals or against the Partnership.
What is Dissociation?
Any Partner ceasing to be associated
in carrying on the Partnership business
What is the effect on the Partnership as a result of Dissociation?
Terminates dissociated Partner’s legal relationship with Partnership, including rights to profits and management
Upon a Partner’s dissociation from the Partnership, what happens to his shares?
If the Partnership continues, it must buy-out and purchase the dissociated Partner’s interest
What is Dissolution?
Termination of Partnership
Once a Dissolution is determined, what is the next phase?
Upon dissolution, Partnership must wind up business activities and distribute assets
When can dissolution occur in an At-Will Partnership?
Any Partner can dissolve at any time by providing a notice of dissolution
Does a Partnership continue while winding up?
Yes, it continues until winding up is complete
What is the distribution of asset ordering upon dissolution of the Partnership?
Once assets are reduced to cash, liabilities are paid first to Creditors
Then, Partners individually
Define LLP
A LLP limits a Partners personal liability for the Partnership’s obligation and actions
How do you form an LLP?
Any Partnership can become an LLP upon:
Approval by Partners by vote; and
Filing a statement of qualification which contains Partner names, addresses, LLP election, effective date
What is the liability of Partners in an LLP
A Partner in an LLP is not personally liable for Partnership obligations of any sort.
However, every Partner remains liable for her own acts or acts that she supervises or directs.
Define LP
An LP contains 2 types of Partners - General and Limited Partners - and contains 1 or more of each type.
In an LP, what are the rights, obligations, and duties of GP and LPs?
General P - manage and control day-to-day operations
Limited P - usually passive investors with limited authority
In an LP, what are the liabilities of GP and LPs?
General LP - personally, jointly, and severally liable for all Partnership obligations
Limited LP - liable only to the extent of their investment
How do you form a Limited Partnership?
Filing a Certificate of Limited Partnership with the State.
Cert. must contain names and addresses of each GP and their signatures.
