Partnerships Flashcards
General Partnership
An association of two or more persons carrying on as co-oweners of a business.
Profit-Sharing Presumption
Presumption:When two or more parties share in profits, there is a presumption of a general partnership.
Rebutting the Profit Sharing Presumption
The profit-sharing presumption can be rebutted with evidence indicating no intent to create a partnership.
Exceptions: exceptions to the profit-sharing presumption include profits received as payment:
- of debt
- for services as an independent contractor
- of rent
- of an annuity
- of wages or compensation to another employee
Formalities of Forming a General Partnership
NONE.
A GP can be formed by actions or circumstances.
GP Rights and Duties in Share of Profits
Partners share profits and losses equally, unless the partnership agreement states otherwise.
GP Rights and Duties of Reimbursement
The partnership must reimburse a partner for payments made and liabilities incurred in the ordinary course of business or for the preservation of its business or property.
The partnership must reimburse a partner for an advance to the partnership beyond the amount of capital the partner agreed to contri
Addition of New Partners
Unanimous consent is required for new partners, unless an agreement says otherwise.
Liability of Incoming Partners
A new partner is not personally liable for obligations incurred before they joined the partnership, however their investment/capital contributions is at risk for existing partnership debts.
Liability of Dissociated Partners
A dissociated partner remains liable for partnership obligations incurred before their dissociation.
A dissociated partner is also liable for transactions entered into by the partnership within 2 years of departure, if:
- The other party does not have notice of the partner’s dissociation, and
- The other party reasonably believes that the dissociated partner is still a partner.
Limited Partnership
Definition
LP = exists when two or more partners go into business together, but the limited partners are only liable up to the amount of their investment.
* An LP is defined as having limited partners and a general partner, which has unlimited liability.
- Limited partners are only liable for the contributions they made to the partnership (e.g., if Jenni is an LP and invested $50k, she will only lose up to $50k if shit hits the fan).
Formation of a Limited Partnership
Formed by __written certification__ that is filed with the State
Required Contents
1. Signature of each GP
2. The name of the LP, AND
3. The name and address of: (a) each GP, (b) the initial designated office, (c) the initial agent for service of process
Tort Liability of the Partnership
A general partnership, LP, or LLP is liable for the wrongful acts or omissions of ANY partner acting:
- Within the ordinary course of the partnership’s business, OR
- With the authority of ALL other partners.
Tort Liability of General Partners
General Partners: GPs are jointly and severally liable for ALL obligations of the partnership arising from any wrongful act/omission of any partner:
- Acting within the ordinary course of the partnership’s business, OR
- Acting with the authority of all other partners.
Tort Liability of Limited Partners
Rule: Except for their own misconduct, LPs are not personally liable for the obligations of the partnership arising from wrongful acts or omissions of other partners.
Contract Liability of the Partnership
Each partner is an agent of the partnership, therefore, the actions of every partner made in the ordinary course of the partnership’s business binds the partnership UNLESS the partner taking action:
- Has no authority to act on behalf of the partnership, AND
- The other side has knowledge or notice that the partner lacks authority.
