Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

LA100 > Partnerships > Flashcards

Partnerships Flashcards

1
Q

General Partnership

A

an association of 2+ people who are co-owners and co-managers of the business who share in the profits of their ongoing business; a pass-through entity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

joint-and-several liability

A

general partners’ personal assets are at risk together 9jointly) and separately (severally) for all debts/liabilities of the partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Does a general partnership require an agreement or form to be created?

A

no; in absence of agreement, RUPA governs a general partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

RUPA

A

a model statute drafted and occasionally revised by the National Conference of Commissioners on uniform State Laws

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the rights RUPA/UPA spells out when an agreement is absent amongst partners?

A

right to share profits and losses equally, right to partnership property, right to co-manage, right to indemnity, right to vote, and right to be informed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How is a general partnership formed according to the law?

A

when 2+ individuals demonstrate an intent to carry on as co-owners of a business for profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

True/False: The rules governing third parties cannot be altered by a partnership agreement.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How do partners split profits and losses regardless of the amount of involvement?

A

equally

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

How can partners utilize partnership property?

A

can use any to conduct business, but NOT for individual purposes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

co-management components…

A

right to be involved in conducting operations, ability to sign contracts on behalf of the partnership, and authorized to enter reasonable agreements when a partnership agreement is absent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Are partners entitled to a salary?

A

no, because their compensation is limited to an equal share

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

ordinary

A

an act that is WITHIN the course of the business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

extraordinary

A

an act that is OUTSIDE the course of the business
requires an unanimous consent of all partners in order to implement and is an act that substantially changes the nature of the partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

indemnity

A

where a partnership must reimburse a partner when they incur a payment or liability within the ordinary course

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

the duties of partners…

A

duty of loyalty, duty of care, duty of good faith

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

duty of loyalty

A

prohibits a general partner from engaging in competition with the interests of the partnership, using the partnership for personal gain, and personally taking advantage of a business opportunity that would have benefited the partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

duty of care

A

partners must exercise “due care” in handling affairs and treat affairs with diligence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

True/False: Partners are liable if a decision results in harm due to an ordinary mistake of judgement.

A

False
(Partners are NOT liable if a decision results in harm due to an ordinary mistake of judgement)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

duty of good faith

A

partners are required to exercise appropriate discretion with other partners and third parties; partners owe full disclosure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What items are included in a partnership agreement?

A

(1) capital contributions
(2) property provision
(3) profits and losses
(4) salary
(5) management rights
(6) buy-sell agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

capital contributions

A

lists how much value each partner contributed to their individual capital accounts
represents the initial equity and must be returned to each partner when partnership assets are liquidated by law

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

property provision

A

partners decide whether their individual property will become partnership property or capital contribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

profits and losses

A

partners can structure profits and losses to reflect their capital contributions or level of work in a partnership agreement

24
Q

True/False: Under a partnership agreement, partners can receive a guaranteed salary for the work performed on behalf of the partnership.

25
What is a critique when all partners have equal management rights and may sign contracts on behalf of the partnership when within the ordinary course?
it can be risky and frustrating
26
danger of a general partnership...
general partners face potential liability for acts of other partners and the debts/liabilities of the partnership
27
buy-sell agreement
allows remaining partners to purchase partnership interest of a withdrawing partner ensures continuity of partnership and can avoid legal disputes if valuation methodology is provided
28
Limited Partnership
entity that exists by virtue of a state statute that recognizes one or more partners as managing business while other partners participate only in terms of contributing capital or property; a pass-through entity
29
the persons of a limited partnership
at least one general partner and one limited partner
30
general partners
(1) personally liable for all partnership debts and liabilities (2) manages the business (3) permitted to legally bind the partnership
31
limited partners
(1) contributes investment (2) limited to only their investment contribution (3) cannot participate in daily management or to bind partnership (4) can engage in consulting and contribute expertise (5) can access partnership information (6) passive and "silent"
32
Do limited partnerships have to file for a certificate to form?
yes, they MUST
33
certificate of limited partnership
a form filed with the state by a general partner to create a limited partnership straightforward; details rights, obligations, and relationships
34
Revised Uniform Limited Partnership Act
a model partnership statute that governs limited partnerships in absence of an agreement
35
blue sky laws
strict federal and state security laws a limited partnership is subjected to if interests are sold to the public
36
limited partnership capitalization
can be funded through debt or sale of equity, but cannot sell ownership rights through the public market
37
How do partners share profits and losses in a limited partnership?
proportional to the value of contributions made by each
38
Family Limited Partnership
a limited partnership that is used for estate planning for families of considerable wealth
39
purpose of a family limited partnership
enables wealthy members of one generation to distribute their assets to heirs using a method that allows the distributing generation to claim a much lower market value than the actual market value of the gift
40
Limited Liability Partnerships
provides general partnerships with right to convert their entity and gain the protective shield ordinarily afforded only to limited partners or corporate shareholders used to handle issues unique to the transition from one generation to another
41
statement of qualification
the document filed to convert a general partnership to a LLP must be approved by a majority of ownership; once approved it becomes apart of the public record
42
True/False: LLPs have the greatest variance of liability protection depending on the state.
True
43
What type of taxation does a Limited Liability Partnership face?
pass-through taxation income is only taxed when it is distributed to partners and is reported based on partners' individual tax returns
44
LLP capitalization...
(1) debt via private lenders (2) debt via commercial lenders (3) sale of partnership equity for ownership
45
capital call
a process that controls the amount and methods of capitalizing a business and the procedures for collecting additional contributions from partners
46
dissociation
term used by RUPA when a partner no longer wishes to be a principal and chooses to leave the partnership
47
How does dissociation happen under RUPA?
(1) voluntary separation (2) expulsion by an unanimous vote (3) partner's inability to carry out duties
48
rightful dissociation
a partner no longer is liable for debts/liabilities incurred by the partnership; they are still liable for pre-dissociation liability
49
wrongful dissociation
a partner violates partnership agreement or leaves before the expiration of a previously agreed upon term or before completion of partnership's undertaking
50
withdrawal
term used by RULPA when a partner no longer wishes to be a principal and chooses to leave the partnership
51
Can a general partner withdraw if there's still one general partner remaining and all partners agree to it in writing?
yes
52
Can a limited partner with draw before the partnership termination time that was agreed upon?
no
53
the similarity and difference of dissociations and withdrawals...
similarity = gives room for partners to govern their withdrawal difference = acts differently when an agreement is absent
54
partnerships can dissolve when...
(1) a partnership has reached its agreed upon term (2) dissolution is mandated by court order (3) agreed to by unanimous consent of partners (only for general partnerships; limited partnerships don't need unanimous consent)
55
Waddell v. Rustin
Appellant = Waddell Appellee = Rustin State law The "business relationship" according to Waddell was an implied partnership with her little expertise in the construction industry Court's reasoning... - there was no written partnership agreement - Waddell didn't contribute capital, equipment, or experience - "equal contribution" doesn't indicate an implied partnership

LA100 (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions