Partnerships Flashcards
What is a general partnership?
Priority: High
A partnership is an association of TWO OR MORE PERSONS to carry on a FOR-PROFIT BUSINESS as CO-OWNERS.
When is a general partnership created, and what is required?
Priority: High
A general partnership is created when (1) TWO OR MORE PERSONS, (2) as CO-OWNERS, (3) carry on a BUSINESS FOR PROFIT.
No written agreement or formalities are required.
A person’s intent to form a partnership or be partners is not required.
How can you tell if a business arrangement is a partnership?
Priority: High
The key test applied to ascertain whether a business arrangement is a partnership is whether there is a sharing of the profits from the business; if so, such an arrangement generally is presumed to be a partnership, and persons who share in the profit are partners.
In what scenarios does someone share profit from a business without being presumed to be a partner?
Priority: High
Typically, a person who receives a share of the profits of the partnership business is presumed to be a partner unless the profits were received in payment of a DEBT, for WAGES as an employee or independent contractor, of RENT, of an annuity or other RETIREMENT BENEFIT, of INTEREST/LOAN CHARGES, or for the SALE OF THE GOODWILL OF A BUSINESS.
What rights can a partner transfer to another?
Priority: Medium
A partner may transfer the right to share in the profits and losses of the partnership and to receive distributions.
The transfer of that partnership interest creates in the transferee a right to receive distributions to which the transferor would otherwise be entitled.
Does a transferee have the right to access partnership records or participate in the partnership?
Priority: Medium
A partnership must provide its partners and their agents with access to all its records but a transferee is not entitled to participate in the management or conduct of the partnership business or access partnership records.
How can a transferee become a partner?
Priority: Medium
Unless a written partnership agreement states otherwise, ALL PARTNERS MUST CONSENT for a transferee of a partnership interest to become a partner in the business.
What is considered partnership property?
Priority: Medium
All property ACQUIRED BY A PARTNERSHIP (in the name of the partnership) or WITH PARTNERSHIP ASSETS is owned by the partnership and not the partners individually.
How can a partner use partnership property?
Priority: Medium
Generally, a partner may use or possess partnership property only on behalf of the partnership.
Any personal use of the property requires the consent of the other partners.
How may a partner withdraw from a partnership?
Priority: High
A partner has the power to dissociate from the partnership at any time, even if the dissociation is wrongful.
When is a partner’s dissocaition wrongful in an at will partnership?
Priority: High
For a partnership that is unlimited by time or undertaking, a partner’s dissociation is wrongful only when it is in breach of an express provision of the partnership agreement.
What is a partnership at will?
Priority: High
A partnership at will is an open ended partnership that does not have a fixed termination based on a period of time or particular undertaking.
When is a partnership at will dissolved?
Priority: High
A partnership at will is dissolved when a partner chooses to dissociate from the partnership by giving notice of withdrawal.
What rights does a dissociated partner have?
Priority: High
A dissociated partner generally does not have the right to participate in the management or conduct of the partnership business.
What happens to a partners duties after dissociation?
Priority: High
A partner’s duty not to compete terminates upon dissocation.
The dissociated partner’s other duties of loyalty and care terminate with respect to post-dissociation events, unless the partner participates in winding up the partnership’s business if the partnership itself dissolves.
What duties are owed by a partner?
Priority: High
A partner owes the partnership and the other partners two fiduciary duties–the duty of loyalty and the duty of care.
A partner must perform their duties consistently with the contractual obligation of good faith and fair dealing.
What is the duty of loyalty?
Priority: High
Under the duty of loyalty, a partner is required to refrain from (1) competing with the partnership business, (2) advancing an interest adverse to the partnership, and (3) usurping a partnership opportunity or otherwise using partnership property or business to derive a personal benefit, without notifying the partnership.
What is the duty of loyalty?
Priority: High
Under the duty of loyalty, a partner is required to refrain from (1) competing with the partnership business, (2) advancing an interest adverse to the partnership, and (3) usurping a partnership opportunity or otherwise using partnership property or business to derive a personal benefit, without notifying the partnership.
A partner is also required to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.
What is the duty of care?
Priority: High
A partner is required to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.
What does a statement of qualification do?
Priority: Medium
The filing of a statement of qualification, which transforms a partnership into an LLP, does not create a new partnership.
What is an LLP?
Priority: High
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.
What is a partners personal liability?
Priority: High
A partner is jointly and severally liable for all partnership obligations.
What is a limited partner’s personal liability and when is that status effective?
Priority: High
Though a limited partner in an LLP is not personally liable for an obligation of an LLP, limited liability partnership status is generally only effective on the date that the statement of qualification is filed with the state and not before.
What is an incoming partners liability?
Priority: High
A person admitted as a partner into an existing partnership is not personally liable for any prior partnershpi obligations.
However, any capital contribution made by an incoming partner to the partnership is at risk for the satisfaction of such partnership obligations.
