Partnerships

Question 1

Partnership Formation requirements

Answer 1

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.

Question 2

Partner by Estoppel

Answer 2

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

Question 3

When there is a formal partnership agreement

Answer 3

it governs when there is a conflict between the agreement and a VA statue

Question 4

What are 3 fiduciary duties of a partner

Answer 4

1) Duty of loyalty
2) Duty of Care
3) Good faith

Question 5

Duty of loyalty

Answer 5

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

Question 6

Duty of Care

Answer 6

Duty to refrain from engaging in grossly negligent or reckless conduct, or violating law

P cannot unreasonably reduce this duty

Question 7

Duty of Good faith

Answer 7

PA cannot eliminate this agreement but can prescribe reasonable standards.

Question 8

Profits and losses

Answer 8

Unless PA says otherwise, each partner gets an equal share of profits and losses

Question 9

Distributions

Answer 9

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

Question 10

Transfer of Partnership interest

Answer 10

A partner can transfer all or part of the P interest. However, the transferor partner retains all rights and duties of a partner.

Question 11

Transferee rights

Answer 11

Right to receive distributions, seek a judicial order for dissolution and to an accounting upon dissolution

Question 12

Property ownership

Answer 12

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

Question 13

New Partner

Answer 13

A person must secure the consent of all existing partners.

Question 14

Management rights

Answer 14

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

Question 15

reimbursement

Answer 15

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

Question 16

Use of property

Answer 16

Partner cannot derive personal benefit from the use of partnership property and must compensate the partnership

Question 17

Access to records

Answer 17

P must permit its partners and agents to access all p records

Question 18

lawsuits

Answer 18

P can sue a partner for breach of the PA or a P duty

Question 19

Events causing dissociation

Answer 19

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

Question 20

Wrongful dissociation

Answer 20

A Partner is liable to the P and other partners for damages caused by wrongful dissociation

Question 21

If a P is unlimited by time or by undertaking

Answer 21

A partners dissociation is wrongful only when it is in breach of an express provision of the PA

Question 22

If P is for a definite time or undertaking

Answer 22

Partner’s dissociation is wrongful if before the expiration of the term of completion of the undertaking
1) that partner withdraws
2) files BK

Question 23

Effect of Dissociation

Answer 23

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

Question 24

Partner as a agent of P - power to bind P

Answer 24

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

Question 25

Partner has authority to transfer P title property when

Answer 25

1) Property held in partnerships name

2) Property held in partners hame

Question 26

P can recovery property from the transferee if

Answer 26

it was transferred without authority

Question 27

Statements of a Partner’s authority

Answer 27

To clarify the existence and scope of a Partners authority, statements of P’s authority may be filed with the VSCC

Question 28

Tortious acts

Answer 28

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

Question 29

Conversion of P to limited LP

Answer 29

All general partners and a majority of limited partners must agree - former general partners remain liable for pre-conversion obligations

Question 30

Conversion of LP to P

Answer 30

All general partners and a majority of LPs must approve, LP’s remain limited liability for pre conversion obligations

Question 31

Termination of Partnership at will

Answer 31

dissolved when a dissociating partner gives notice

Question 32

Termination of P for a term or undertaking

Answer 32

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

Question 33

Winding up

Answer 33

P is liable for any act by a partner that would have bound P before dissolution

Creditors have priority over partnerships assets

Question 34

continuation of P after dissolution

Answer 34

before winding up is complete, P may resume carrying out its business as if dissolution never occurred

Question 35

LLP

Answer 35

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.

Question 36

Formation of LLP

Answer 36

Must be at least one LP and one GP

Statement of qualification must be filed

Question 37

General partner

Answer 37

can only be admitted by written by written consent of all partners after LLP creation

Question 38

LPP termination

Answer 38

1) occurence of specified event, withdrawal of GP

General parters wind up