Partnerships Flashcards
Partnership Formation requirements
1) Two persons must intent to carry on a business for profit
2) Profit sharing test- If there is profit sharing, it is presumed to be a P
No writing is required, unless it falls in within the SIOF.
Partner by Estoppel
When no P exists, a person may be treated as a purported partner if there is
1) an oral of written, or implied by conduct representation that a person is a partner,
2) the person makes or consents to the representation,
3) a third party reasonably relied on the representation,
4) and the third party suffered damages as a result
When there is a formal partnership agreement
it governs when there is a conflict between the agreement and a VA statue
What are 3 fiduciary duties of a partner
1) Duty of loyalty
2) Duty of Care
3) Good faith
Duty of loyalty
No competing with the P, advancing an interest that is adverse to the P, or usurping a P opportunity
Unless the agreement provides otherwise or the partnership agreement ratify the transaction after a full disclosure of facts
Duty of Care
Duty to refrain from engaging in grossly negligent or reckless conduct, or violating law
P cannot unreasonably reduce this duty
Duty of Good faith
PA cannot eliminate this agreement but can prescribe reasonable standards.
Profits and losses
Unless PA says otherwise, each partner gets an equal share of profits and losses
Distributions
A partner cannot demand a profit distribution, but is entitled to have her account credited with her share of the profits
A partner’s account contains a partner’s contributions and share of profits
Transfer of Partnership interest
A partner can transfer all or part of the P interest. However, the transferor partner retains all rights and duties of a partner.
Transferee rights
Right to receive distributions, seek a judicial order for dissolution and to an accounting upon dissolution
Property ownership
all property acquired by the P belongs to the P and not the individual partners
Property is presumed to be partnership property if it was purchased with P assets or P credit
if unclear, then factors about the property’s use will be used
New Partner
A person must secure the consent of all existing partners.
Management rights
each partner has equal management rights in general
A majority of partners is required to make ordinary P business decisions
Consent of all partners is required for matters outside the ordinary course of business
reimbursement
partnership must reimburse a partner for loans in furtherance of P’s business and is required to idenmnify partners for personal liability incurred in the ordinary course of P’s business
Use of property
Partner cannot derive personal benefit from the use of partnership property and must compensate the partnership
Access to records
P must permit its partners and agents to access all p records
lawsuits
P can sue a partner for breach of the PA or a P duty
Events causing dissociation
1) Partners notice to the P of express intent to withdraw
2) the occurence of an event specified in the PA
3) the partner’s expulsion pursuant to the PA
Wrongful dissociation
A Partner is liable to the P and other partners for damages caused by wrongful dissociation
If a P is unlimited by time or by undertaking
A partners dissociation is wrongful only when it is in breach of an express provision of the PA
If P is for a definite time or undertaking
Partner’s dissociation is wrongful if before the expiration of the term of completion of the undertaking
1) that partner withdraws
2) files BK
Effect of Dissociation
Partner cannot participate in P and P must buy out the Partners interest
1) A partners duty to not compete terminates upon dissociation
2) When P buys partners interest, it must idenmnify a dissociate parter against all liabilities
3) Partner remains liable for obligations incurred before dissociation
4) Dissociated partner can still bind the P to a transaction if other party reasonably believes that he is still a partner.
Liability is limited to transactions of within 1 year
Partner as a agent of P - power to bind P
Actual authority- acting pursuant to PA
implied authority- partners reasonable belief he can do it
apparent authority- must occur in ordinary course of
business and 3rd party has no notice
Partner has authority to transfer P title property when
1) Property held in partnerships name
2) Property held in partners hame
P can recovery property from the transferee if
it was transferred without authority
Statements of a Partner’s authority
To clarify the existence and scope of a Partners authority, statements of P’s authority may be filed with the VSCC
Tortious acts
P is liable for a partner’s actions committed in the ordinary course of P’s business
Partners are jointly and severally liable, a judgement against P is satisfied from P’s assets first then partners personal assets
Conversion of P to limited LP
All general partners and a majority of limited partners must agree - former general partners remain liable for pre-conversion obligations
Conversion of LP to P
All general partners and a majority of LPs must approve, LP’s remain limited liability for pre conversion obligations
Termination of Partnership at will
dissolved when a dissociating partner gives notice
Termination of P for a term or undertaking
1) Dissolves when term expires of undertaking completed
2) all partners agree to dissolve
3) a partner dies or files for BK and at least half of partners agree to dissolve for 90 days
Winding up
P is liable for any act by a partner that would have bound P before dissolution
Creditors have priority over partnerships assets
continuation of P after dissolution
before winding up is complete, P may resume carrying out its business as if dissolution never occurred
LLP
a LP is not liable for his own personal misconduct, revocation of the state’s qualification will have the same effect as cancellation,
An LP’s liability is limited to her capital contribution to the P.
can only be admitted by written consent of all partners after creation, has a right to to vote as permitted under PA and right to inspect records, can transact business like non partner with LP.
Formation of LLP
Must be at least one LP and one GP
Statement of qualification must be filed
General partner
can only be admitted by written by written consent of all partners after LLP creation
LPP termination
1) occurence of specified event, withdrawal of GP
General parters wind up
