partnerships Flashcards
a partner owes the partnership and other partners two fiduciary duties
duty of loyalty
duty of care
under the duty of loyalty, a partner is required to refrain from
1) competing with the partnership business
2) advancing an interest adverse to the partnership
3) usurping a partnership opportunity, or otherwise using partnership property or business to derive a personal benefit without notifying the partnership
Under the duty of care, a partner is required to refrain from engaging in
1) grossly negligent or reckless conduct,
2) intentional misconduct, or
3) a knowing violation of the law
a partnership agreemen may not reduce
the duty of of care, unreasonably
a general partner of a limited partnership owes the other partners and the partnership duties of
loyalty and care
a partner is not entitled to renumeration for
services performed for the partnership, except when the partner renders services in the winding up of the business of the partnership
a majority of the partners must approve a decision as to a matter
in the ordinary course of business, such as distribution of partnership profits
where a partner receives a distribution without majority approval of the partners this constitutes
deriving personal benefit from partnership assets without notifying the partnership, violating the duty of loyalty
a transferee of a limited partnership interest has the power to
exercise all of the transferors rights, including voting on partnership term extension
consent of all the partners is required for
a decision as to a matter outside the ordinary course of the partnership’s business, such as an amendment to the partnership agreement; unless otherwise provided in the agreement
in general, a partnership interest in a limited partnership is
personal property that can be assigned in whole or in part
upon assignment of a partnership interest, the original partner assignor
ceases to be a partner in the partnership and the assignee generally has rights only to receive the distribution to which the assignor partner would otherwise be entitled
An assignee of a limited partnership interest, including a general partnership interest, may become a limited partner if
the partnership agreement permits it or if all partners agree.
A partnership is
an association of two or more persons to carry on a for-profit business as co-owners.
The key test applied to ascertain whether a business arrangement is a partnership is whether
there is a sharing of the profits from the business
if there is a sharing of profits arrangement
such an arrangement is generally presumed to be a partnership and the persons who share in the profits are partners.
A partnership is liable for
a partner’s tortious acts, including fraud, committed in the ordinary course of the partnership business or with partnership authority, whether actual or apparent.
each partner is jointly and severally liable for
all partnership obligations.
even though a partner is personally liable for a partnership obligation, a partnership creditor generally must
exhaust the partnership’s assets before levying on the partners’ personal assets
General partners in a limited partnership have the same liabilities as partners in a general partnership, and are therefore
personally and individually liable for the entire amount of the partnership’s obligations, whether those obligations arise under contract or tort.
When a general partner disassociates, they are liable for all obligations
incurred while he was a member of the partnership and until 90 days after he has filed a notice of dissociation with the state corporation commission
Limited partners are generally not personally liable
for partnership obligations
Limited partners are only liable for
their agreed upon capital contributions to the partnership
A limited partner who participates in the control of the business is liable as a general partner to
persons who transact business with the partnership, who reasonably believe that the limited partner is a general partner, based on the limited partner’s conduct
A partner is liable for their full contribution unless
the partnership agreement provides otherwise, or all partners consent to settling that partners outstanding obligation.
a partner’s withdrawal does not affect their
liability for their contribution.
A substitute limited partner is not liable for the assignor’s unpaid capital contribution unless
he knew of the unpaid capital contribution at the time, he became a substitute limited partner.
Unless a partnership agreement provides otherwise, a partner cannot compel
a distribution of partnership profits.
even though a partner may have been primarily responsible for the partnership earning profits in the past calendar year, he is not entitled to
demand a distribution of those profits (unless provides for in the phsip agreement)
a partnership is not required to distribute its profits annually among its partners unless
the partnership agreement provides otherwise.
regardless of a partner’s participation or lack thereof in the partnership business, a partner cannot compel
a distribution of partnership profits.
A dissociated partner of an ongoing partnership, as a former agent of the partnership, has
apparent authority to bind the partnership.
apparent authority of a dissociated partner exists when
1) the other party to the transaction reasonably believes that the dissociated partner is a partner,
2) does not have notice of the partner’s dissociation, and
3) is not deemed to have knowledge of the dissociated partner’s lack of authority.
the existence of a dissociated partner’s apparent authority does not depend on
whether the partner’s partnership interest has been bought out.
a dissociated partners apparent authority terminates after 90 days when
a statement of dissociation is filed
unless a statement of dissociation is filed
a dissociated partner’s apparent authority continues for one year after dissociation.
A partner is an agent of the partnership for the purpose of
its business
a partner, as an agent of the partnership can contractually bind the partnership when
the partner acts with either actual or apparent authority.
A partner acts with apparent authority when
1) an unauthorized act is performed
2) in the ordinary course of apparently carrying on partnership business
3) in the geographic area where the partnership typically acts.
apparent authority is sufficient to
bind the partnership
Implied authority applies when a partner
takes actions based on a reasonable belief that those actions are necessary to carry out the partner’s express actual authority
a partner will act without express authority when such a grant is not provided in
1) the partnership agreement itself,
2) an authorization of the partners, or
3) a statement of authority filed with the state.
cant have implied authority without
express authority
Each partner has equal rights in
the management and conduct of the partnership.
each partner has equal management rights, regardless of their respective
capital contributions to the partnership.
each partner has equal management rights even if the partners do not share equally in
the partnership’s profits.
The only agreement necessary to create a partnership is
the agreement to conduct a for-profit business as co-owners.
The key test applied to ascertain whether a business arrangement is a partnership is whether
there is a sharing of the profits from the business.
such an arrangement to share profits of the business is
generally presumed to be a partnership and persons who share in the profits are partners.
The sharing of profits from a business does not create a rebuttable presumption that the arrangement is a partnership in
six statutorily enumerated circumstances.
A partnership is not presumed when the profits are shared to pay
(i) a debt,
(ii) interest or other loan charges,
(iii) rent,
(iv) wages or other compensation to an employee or independent contractor,
(v) goodwill payments stemming from the sale of the business, or
(vi) an annuity or other retirement or health benefit.
It is difficult to construe an agreement as an employment agreement when the employee begins the employment by
paying her employer $10,000.
To form a partnership, at least two persons must intend to carry on a business for profit as co-owners, but it is not necessary that
such persons have the specific intent to form a partnership.
The partnership agreement controls
a partner’s rights to share in the partnership’s profits and losses.
The agreement may specify a percentage for sharing profits that
differs from the percentage for sharing losses;
neither profits nor losses are required to be shared on a
per capita basis
When the agreement only addresses the division of partnership profits, a partner is chargeable with
a share of the partnership losses in proportion to his share of the profits.
because the agreement is silent on the issue, any losses would be distributed
in the same percentage as the profits
Under the duty of loyalty, a partner is required to refrain from activities that
(i) compete with the partnership business,
(ii) advance an interest adverse to the partnership, and
(iii) usurp a partnership opportunity, or otherwise use partnership property or business to derive a personal benefit (without notifying the partnership.)
A partner may pursue a legal action against another partner to
enforce the partner’s rights under the partnership agreement or the Virginia code.
