partnerships Flashcards
1
Q
a partner owes the partnership and other partners two fiduciary duties
A
duty of loyalty
duty of care
2
Q
under the duty of loyalty, a partner is required to refrain from
A
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
3
Q
Under the duty of care, a partner is required to refrain from engaging in
A
1) grossly negligent or reckless conduct,
2) intentional misconduct, or
3) a knowing violation of the law
4
Q
a partnership agreemen may not reduce
A
the duty of of care, unreasonably
5
Q
a general partner of a limited partnership owes the other partners and the partnership duties of
A
loyalty and care
6
Q
a partner is not entitled to renumeration for
A
services performed for the partnership, except when the partner renders services in the winding up of the business of the partnership
7
Q
a majority of the partners must approve a decision as to a matter
A
in the ordinary course of business, such as distribution of partnership profits
8
Q
where a partner receives a distribution without majority approval of the partners this constitutes
A
deriving personal benefit from partnership assets without notifying the partnership, violating the duty of loyalty
9
Q
a transferee of a limited partnership interest has the power to
A
exercise all of the transferors rights, including voting on partnership term extension
10
Q
consent of all the partners is required for
A
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
11
Q
in general, a partnership interest in a limited partnership is
A
personal property that can be assigned in whole or in part
12
Q
upon assignment of a partnership interest, the original partner assignor
A
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
13
Q
An assignee of a limited partnership interest, including a general partnership interest, may become a limited partner if
A
the partnership agreement permits it or if all partners agree.
14
Q
A partnership is
A
an association of two or more persons to carry on a for-profit business as co-owners.
15
Q
The key test applied to ascertain whether a business arrangement is a partnership is whether
A
there is a sharing of the profits from the business
16
Q
if there is a sharing of profits arrangement
A
such an arrangement is generally presumed to be a partnership and the persons who share in the profits are partners.
17
Q
A partnership is liable for
A
a partner’s tortious acts, including fraud, committed in the ordinary course of the partnership business or with partnership authority, whether actual or apparent.
18
Q
each partner is jointly and severally liable for
A
all partnership obligations.
19
Q
even though a partner is personally liable for a partnership obligation, a partnership creditor generally must
A
exhaust the partnership’s assets before levying on the partners’ personal assets
20
Q
General partners in a limited partnership have the same liabilities as partners in a general partnership, and are therefore
A
personally and individually liable for the entire amount of the partnership’s obligations, whether those obligations arise under contract or tort.
21
Q
When a general partner disassociates, they are liable for all obligations
A
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
22
Q
Limited partners are generally not personally liable
A
for partnership obligations
23
Q
Limited partners are only liable for
A
their agreed upon capital contributions to the partnership
24
Q
A limited partner who participates in the control of the business is liable as a general partner to
A
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
25
A partner is liable for their full contribution unless
the partnership agreement provides otherwise, or all partners consent to settling that partners outstanding obligation.
26
a partner’s withdrawal does not affect their
liability for their contribution.
27
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.
28
Unless a partnership agreement provides otherwise, a partner cannot compel
a distribution of partnership profits.
29
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)
30
a partnership is not required to distribute its profits annually among its partners unless
the partnership agreement provides otherwise.
31
regardless of a partner’s participation or lack thereof in the partnership business, a partner cannot compel
a distribution of partnership profits.
32
A dissociated partner of an ongoing partnership, as a former agent of the partnership, has
apparent authority to bind the partnership.
33
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.
34
the existence of a dissociated partner’s apparent authority does not depend on
whether the partner’s partnership interest has been bought out.
35
a dissociated partners apparent authority terminates after 90 days when
a statement of dissociation is filed
36
unless a statement of dissociation is filed
a dissociated partner’s apparent authority continues for one year after dissociation.
37
A partner is an agent of the partnership for the purpose of
its business
38
a partner, as an agent of the partnership can contractually bind the partnership when
the partner acts with either actual or apparent authority.
39
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.
40
apparent authority is sufficient to
bind the partnership
41
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
42
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.
43
cant have implied authority without
express authority
44
Each partner has equal rights in
the management and conduct of the partnership.
45
each partner has equal management rights, regardless of their respective
capital contributions to the partnership.
46
each partner has equal management rights even if the partners do not share equally in
the partnership’s profits.
47
The only agreement necessary to create a partnership is
the agreement to conduct a for-profit business as co-owners.
48
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.
49
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.
50
The sharing of profits from a business does not create a rebuttable presumption that the arrangement is a partnership in
six statutorily enumerated circumstances.
51
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.
52
It is difficult to construe an agreement as an employment agreement when the employee begins the employment by
paying her employer $10,000.
53
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.
54
The partnership agreement controls
a partner’s rights to share in the partnership’s profits and losses.
55
The agreement may specify a percentage for sharing profits that
differs from the percentage for sharing losses;
56
neither profits nor losses are required to be shared on a
per capita basis
57
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.
58
because the agreement is silent on the issue, any losses would be distributed
in the same percentage as the profits
59
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.)
60
A partner may pursue a legal action against another partner to
enforce the partner’s rights under the partnership agreement or the Virginia code.
61
A partner has a right to access
all partnership records, including the financial records, for inspection or to copy.
62
A partner has a right to seek
an accounting as to the partnership business at any time.
63
a partners possible breach of her fiduciary duties to the partnership does not prevent her from
exercising her rights of partnership, namely seeking an accounting and access to partnership records through maintenance of a lawsuit
64
A partnership is
an association of two or more persons to carry on a for-profit business as co-owners.
65
The only requirement for a partnership to be formed is an agreement to conduct a for-profit business as co-owners, which may be
implied from their conduct
66
a partners liability on all partnership obligations is
joint and several liability
67
A general partner is personally liable to
third parties for the obligations of the limited partnership to the same extent that a general partner in a partnership is liable for the obligations of the partnership.
68
Except as provided in the partnership agreement, a general partner also has liabilities to
the partnership and the other partners
69
A partner’s act that was authorized by the partnership
binds the partnership.
70
Actual authority includes
both express authority and implied authority.
71
Express authority can arise from
1) the partnership agreement itself,
2) an authorization of the partners, or
3) a statement of authority filed with the state.
72
Implied authority is based on
a partner’s reasonable belief that an action is necessary to carry out his express authority.
73
a partner’s act that was not authorized by the partnership may nevertheless bind the partnership under
the principle of apparent authority.
74
For apparent authority to apply, the partner’s unauthorized act must be
performed in the ordinary course of apparently carrying on either the partnership business or business of a kind carried on by the partnership.
75
For apparent authority the third party with whom the partner was dealing cannot hold the partnership liable when
that party knew or had received notification that the partner lacked authority.
76
a partnership may be liable for an obligation that was entered into without actual or apparent authority if
the partnership ratified the obligation.
77
Ratification occurs when
a principal affirms a prior act that was done or purported to be done on the principal’s behalf.
78
Suretyship is a three-party contract, wherein
one party (the surety) promises a second party (the obligee) that the surety will be responsible for any debt or other obligation of a third party (the principal) resulting from the principal’s failure to pay or perform as agreed.
79
A limited partner is generally not personally liable for the obligations of a limited partnership unless
the limited partner also serves as a general partner or participates in the control of the business.
80
Even if a limited partner participates in the control of the business, he is personally liable only to
1) persons who transact business with the limited partnership,
2) reasonably believing, based on the limited partner’s conduct,
3) that the limited partner is a general partner.
81
limited partners action against general partner for breach of duty
A limited partner has the right to bring a derivative action on behalf of the limited partnership.
82
In order to bring a derivative action, the limited partner must be
1) a partner at the time of bringing the action
2) as well as at the time of the wrongful transaction,
3) unless the status of partner is devolved on him by operation of law or pursuant to the terms of the operating agreement.
83
a the derivative action is successful, the limited partner may receive
an award for his reasonable expenses, including attorney’s fees; and is entitled to the remainder of the judgment proceeds.
84
A partner owes the partnership and the other partners
two fiduciary duties—the duty of loyalty and the duty of care.
85
Under the duty of loyalty, a partner is required to refrain from the following activities:
(i) competing with the partnership business,
(ii) advancing an interest adverse to the partnership, and
(iii) usurping a partnership opportunity,
or otherwise using partnership property or business to derive a personal benefit without notifying the partnership.
86
Property is rebuttably presumed to be a partner’s separate property rather than the property of the partnership when
the property is acquired in the name of one or more partners, the instrument transferring title to the property does not indicate the person’s capacity as a partner or the existence of a partnership, and partnership assets were not used to acquire the property.
87
Each partner’s account reflects not only that partner’s contributions to the partnership, but also
the partner’s share of the partnership’s pre-dissolution profits and losses.
88
The partner's account must be adjusted to reflect the profits and losses that result from
the liquidation of the partnership assets
89
After these adjustments, any partners with a negative account balance must
contribute to the partnership an amount necessary to bring the account balance to zero.
90
partnership must make a final liquidating distribution to any partner with
a positive account balance
91
partners with a negative account balance must
contribute to the partnership an amount necessary to bring the account balance to zero.
92
a general partner who becomes a limited partner due to a conversion is liable for
any obligation incurred by the limited partnership in the 90 days following the conversion, as long as the other party to the transaction reasonably believes that the limited partner is a general partner at the time of the transaction.
93
the general partner of a limited partnership is liable for the limited partnership’s obligations to the same extent that
a general partner in a partnership is liable for the obligations of the partnership.
94
To become a partner, a person must secure the consent of
all of the existing partners
95
there is no requirement that a new partner accept personal liability for existing partnership obligations in order to
be admitted as a partner
96
A capital contribution made by a partner to the partnership is subject to
the claims of the partnership’s creditors.
97
Any capital contribution made by a new partner may be used by the partnership to pay partnership obligations, including
obligations incurred prior to the new partner becoming a partner
98
Under certain circumstances, a partner who dissociates from a partnership is liable for obligations
incurred by a partnership within 90 days of the partner’s dissociation
99
there is no corresponding 90-day “honeymoon” period with respect to
partnership obligations incurred within the first 90 days of a new partner becoming a partner.
100
Unlike a partner in a general partnership, a partner in a limited liability partnership (LLP) is
not personally liable simply by virtue of his status as a partner for the obligations of the limited liability partnership
101
Only the LLP itself is liable for
an obligation that is entered into by a partner as an agent of the LLP
102
The name of a limited partnership must contain the words
“limited partnership,” “a limited partnership,” or the abbreviations “L.P.” or “LP.”
103
A limited partnership name must not contain
the name of a limited partner unless (i) it is also the name of a general partner, or (ii) the business of the limited partnership was conducted under that name before the admission of that limited partner.
104
A partnership is liable for
a partner’s tortious acts, including fraud, committed in the ordinary course of the partnership business, or with actual or apparent partnership authority
105
A partner is jointly and severally liable for
all partnership obligations, including tort and contractual obligations
106
When an agreement is silent as to the apportionment of partnership losses, but addresses the division of partnership profits, a partner is chargeable with
a share of the losses in proportion to the partner’s share of the profits.
107
losses are shared in the same proportion as profits, rather than
capital contributions
108
although losses are typically shared equally if there is no agreement or if the agreement is silent as to the apportionment of profits and losses, they are shared in proportion to
the partner’s share of profits when the agreement specifies the division of profits.
109
a partnership agreement need not specify
the division of losses
110
A partnership may pursue a legal action against a partner for
breach of the partnership agreement or for violating a duty owed to the partnership that caused the partnership harm.
111
a partner may pursue a legal action against the partnership or another partner to
enforce the partner’s rights under the partnership agreement, including legal actions for a breach of the duty of loyalty
112
Under the duty of care, a partner is required to refrain from engaging in
grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.
113
Dave’s sale of the goods to a competitor (BMC) resulted in VGD not winning a lucrative contract. Dave thus
advanced an interest adverse to the partnership by intentionally acting contrary to the partner’s agreed policy. Thus, Dave violated his duty of loyalty.
114
A partner may only use and possess partnership property for
partnership business.
115
A partner who derives a personal benefit from the use or possession of partnership property must
compensate the partnership for such benefit.
116
A partnership may pursue a legal action against a partner for
breach of the partnership agreement or for violating a duty owed to the partnership that caused the partnership harm.
117
The agreement to conduct a for-profit business as co-owners can be
written, but it can also be oral or implied by the conduct of the parties
118
To form a limited partnership in Virginia
a certificate of limited partnership must be filed with the state
119
Though they listed the entity as a partnership named New Many Motors, LTD, the LTD designation in the business name they chose is
insufficient to form a limited partnership
120
in order to form a limited partnership, there must be
1) a certificate of limited partnership filed with the state
121
the certificate of limited partnership must contain certain information, including
either the words “limited partnership,” “a limited partnership,” or the abbreviations “L.P.” or “LP.
122
a limited partnership is not formed unless
the certificate of limited partnership is filed with the state, and the certificate includes words limited partnership/ or abbreviations L.P./LP
123
Termination of a partnership is a two-step process—
dissolution and winding up.
124
One of the events that may trigger dissolution is
dissolution of a partnership at will
125
partnership at will
a partnership with no fixed termination based on a period of time or particular undertaking
126
partnership at will is dissolved when
a partner chooses to dissociate by giving notice of withdrawal
127
A dissociated partner is generally not liable for a partnership obligation incurred after dissociation but may be if
the partnership does not dissolve and wind up.
128
During winding up, the partnership is bound by
a partner’s act that is appropriate for dissolution.
129
A partnership is a legal entity that is
distinct from its partners
130
A partner is
1) an agent of the partnership for the purpose of its business and
2) can contractually bind the partnership when the partner acts with
3) either actual or apparent authority.
131
Actual authority includes
both express authority and implied authority.
132
Express authority can arise from
the partnership agreement itself, an authorization of the partners, or a statement of authority filed with the state.
133
Implied authority is based on
a partner’s reasonable belief that an action is necessary to carry out his express authority.
134
A partner’s act that was not authorized by the partnership may nevertheless bind the partnership under the principle of
apparent authority
135
For apparent authority to apply, the partner’s unauthorized act has to be
performed in the ordinary course of apparently carrying on either the partnership business or business of a kind carried on by the partnership
136
Apparent authority derives from
the reliance of a third party on that party’s perception of the level of authority granted to the agent by the principal.
137
A principal can ratify an act performed by another person, whether or not
person is an actual agent of the principal
138
For ratification to occur, the following must exist:
(i) the principal must ratify the entire act, contract, or transaction;
(ii) the principal must have the legal capacity to ratify the transaction at the time it occurs;
(iii) the principal’s ratification must be timely; and
(iv) the principal must have knowledge of the material facts involved in the original act.
139
A limited partner is generally not personally liable for the obligations of a limited partnership, unless
the limited partner also serves as a general partner or participates in the control of the business.
140
Solely being an agent of the limited partnership or a general partner does not constitute
participation in the control of the business.
141
Even if a limited partner participates in the control of the business, he is personally liable only to
persons who transact business with the limited partnership, reasonably believing, based on the limited partner’s conduct, that the limited partner is a general partner
142
A general partner is personally liable to third parties for the obligations of the limited partnership to the same extent that
a general partner in a partnership is liable for the obligations of the partnership
143
a general partner may withdraw from a limited partnership by
giving written notice to the other partners.
144
For the withdrawal of a general partner to be effective, the limited partnership must
file an amendment to the certificate of limited partnership within 30 days after the withdrawal
145
A limited partner’s liability for partnership debts is limited to
the amount of her capital contribution to the partnership.
146
a limited partner generally does not have personal liability for the obligations of the partnership, unless
she participates in the control of the business
147
Except as provided in the partnership agreement, a partner is obligated to the limited partnership with respect to
any written, enforceable promise of a future contribution.
148
If a partner is obligated to pay a contribution to the limited partnership, a creditor may
enforce that obligation
149
An assignee becomes liable for obligations of the assignor to make and return contributions known to the assignee at the time he became a limited partner, but
the assignor is not released from those obligations or obligations arising from false statements in the certificate of limited partnership
150
