Partnerships Flashcards
How is a general partnership created?
When:
- Two or more persons;
- As co-owners;
- Carry on a business for profit.
*No written agreement or intent is needed.
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 what?
- of a debt;
- for wages (as an employee/independent contractor);
- of rent;
- of an annuity or retirement benefit;
- of loan or interest charges;
- for the sale of the goodwill of the business.
What is a limited partnership?
- There is at least one general partner;
- There is at least one limited partner;
- The general partner(s) has unlimited personal liability;
- The limited partner(s) has limited personal liability;
- Formed by filing a Certificate of Limited Partnership with the Secretary of State
What is the default voting requirement for a partnership to amend its Partnership Agreement?
A unanimous vote of ALL partners.
How does any type of partnership become a limited liability partnership?
- Approval by the same vote that is necessary to amend the partnership agreement (default rule is unanimous vote of all partners);
AND
- By filing a Statement of Qualification with the Secretary of State.
What is a limited liability partnership?
- No distinction between general and limited partners
- All partners have limited personal liability;
- Formed by filing a Statement of Qualification with the Secretary of State
What information must a
Statement of Qualification include?
- The name and address of the partnership;
- A statement that the partnership elects to become an LLP;
AND
- A deferred effective date (if any).
What information must a Certificate of Limited Partnership include?
- Name of the partnership;
- Address of the partnership’s principal office;
- Name & address of partnership’s registered agent;
- Name and address of each general partner;
- Whether it’s a Limited Liability Limited Partnership (LLLP);
AND
- Signature of every general partner.
When does a partner have Express Actual Authority to bind the partnership?
A partner with Apparent Authority will NOT bind the partnership during what circumstance?
A partner has Apparent Authority to bind the partnership, even after dissolution, in what circumstance?
How are debts and obligations of a partnership shared among partners?
What is the liability of a general partner?
Personally liable for ALL obligations of the partnership AND jointly and severally liable.
When can a judgment creditor levy execution of a judgment against a partner’s personal assets for a partnership debt?
- When a judgment has been rendered against an individual partner;
AND
- The partnership assets have been exhausted or are insufficient.
What is the liability of an incoming partner who joins a partnership that has already been formed?
NOT liable for obligations incurred prior to their admission, but still at risk for losing capital contributions made to satisfy partnership obligations.
When are limited partners personally liable for the obligations of the Limited Partnership (LP)?
When they participate in the management and control of the business.
How are profits and losses shared
amongst the partners?
Profits are shared EQUALLY, and losses will be shared in the same ratio as profits UNLESS there is an agreement to the contrary.
Under default partnership rules, what elements of partnership ownership can a partner transfer to another person?
- His interest in the share of the profits and losses;
AND
- His right to receive distributions.
When is property acquired in the name of a partner presumed to be separate property?
- When no partnership assets are used to acquire the property;
AND
- No written title instrument for the property references the partnership or that the person is a partner.
When is a partner entitled to remuneration for services performed for the partnership?
Generally, never. UNLESS:
- There is an agreement;
OR
- It is for the reasonable compensation of services rendered in winding up the business.
What is the difference between role of general and limited partners in a Limited Partnership?
General partners: have FULL management rights and control.
Limited partners: have NO say or control, and DO NOT have the right to manage day-to-day business (generally passive with limited voting rights).
Under RULPA, what records does a limited partner have the right to inspect and copy?
Any records the limited partnership is legally required to keep.
Under RULPA, what records does a limited partner have the right to obtain?
- True & full information regarding the state of the business and financial condition.
- Copies of the LP’s tax returns.
- Any other information that is just and reasonable.
Under RULPA, what records does a limited partner have the a right to only after a formal demand is made?
- True & full information regarding the state of the business and financial condition.
- Copies of the LP’s tax returns.
- Any other information that is just and reasonable.
