Partnerships Flashcards
Partnership by estoppel
> someone can be treated as a partner even when a partnership doesn’t exist
(1) false assertion that they’re a partner
(2) P reasonably relied and suffered damages bc of it
What is the required intent to form a partnership?
Specific intent to carry on a for-profit business as co-owners
For a purported partner to be liable for the debts of a partnership, what must they do?
he must make or consent to representation, that a third party reasonably and detrimentally relies on
Absent an agreement otherwise, how are profits and losses allocated in a limited partnership?
In accordance with the value of their contributions
What is the main difference between a limited liability limited partnership (LLLP) and a limited partnership?
In LLLPs, even the general partners have limited liability protection.
To impose liability as a purported partner, what 4 elements must be established?
i) There must be a representation—orally, in writing, or implied by conduct—that a person is a partner in an actual or purported partnership;
ii) The representation must be made by the purported partner, or done with his consent;
iii) A third party must have reasonably relied on the representation; and
iv) third party suffered damages bc of reliance.
Is a partnership agreement subject to the statute of frauds?
yes
Is a transferee entitled to participate in the management or conduct of the partnership business, to access partnership records, and to demand other information from the partnership?
no
A general partner is personally liable, __________ and __________ with the limited partnership, to third parties for the obligations of the limited partnership.
jointly; severally
When there is a conflict between the terms of a partnership agreement and FRUPA, which one generally governs the relations among the partners and the partnership?
partnership agreement
Can just one person form a partnership?
no need at least 2 ppl
Although Florida partnership law allows partners to exclude specific types or categories of activities from the duty of loyalty, the exclusion of such activities may not be _______________.
unreasonable
Can a partnership agreement eliminate the obligation of good faith and fair dealing?
NO, although it can prescribe reasonable standards by which the performance of this obligation is to be measured.
The LLLP:
obligations of a partnership incurred while it is an LLLP, no matter what they may be, are solely partnership obligations.
None of the partners, even general partners, is personally liable in those capacities for such obligations.
LLLPs are most common in the real estate business.
Can a partner can demand distributions of partnership profits?
No, a partner cannot demand a distribution of partnership profits. Instead, a partner is only entitled to have his partnership account credited with his share of the profits. Even if a distribution is made, a partner cannot demand that specific partnership property be distributed to him.
Under the duty of loyalty, a partner is required to refrain from what three things?
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 conducting partnership business to derive a personal benefit unless the partner accounts to the partnership for such benefit.
When there is no partnership agreement, or its silent as to division of the profits and losses, how are partnership profits and losses split?
50/50
Is a partnership liable for a partner’s tortious acts committed in the ordinary course of the partnership business?
yes;
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.
partnership at will
an open-ended partnership that does not have fixed termination based on a period of time or particular undertaking
In Florida, what type of partnership eliminates a partner’s personal liability for obligations of the partnership?
A limited liability partnership
A limited partner does not have any fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner
Each partner has equal management rights over the partnership, regardless of capital contributions or the allocation of profits.
can partners agree to continue the business of a partnership before the winding up process is complete?
yes, each partner who has not wrongfully dissociated from the partnership must waive their right to terminate the partnership.
A limited partner may bring a derivative action on behalf of the partnership if he tried to do what first?
get a general partner to bring the action first
Partners are liable for their own misconduct, even when acting on behalf of the partnership.
can partnership property be sold unilaterally by a partner?
No;
Property purchased with partnership assets is partnership property and cannot be sold unilaterally by a partner.
When can a purported partnership can be created?
when a person (1) is held out as a partner, (2) with consent, (3) a third party relies on the representation and (4) suffers damages.
A limited partnership may be converted into a partnership.
When does the conversion becomes effective?
Upon the cancellation of the certificate of limited partnership
how are assets distributed after a dissolution of a partnership?
> creditors
capital contributions
what remains is then split 50/50
A limited liability partnership must be registered with the state, and is formed by filing a statement of qualification with the state.
The state may revoke the statement of qualification for failure to file required annual reports.
this doesn’t trigger dissolution but instead it allows the state to transform the limited liability partnership into a simple partnership.
A partner in a general partnership may transfer her interest in the partnership to someone else.
The transferee (i.e., the person receiving the interest) is entitled to seek a judicial order of dissolution of the partnership.
A transferee may demand an accounting only from the time of the last accounting undergone by the partnership—not for any period of the partnership’s existence.
Do individual partners need to be named in the judgment for the plaintiff to recover their
personal assets?
yes
capital contribution has to be paid before equal splitting
forget if the other person contributed work
> and if there isn’t enough money to pay a partner that contributed capital then whoever did make a contribution gets the remaining assets, and the partners must split the losses equally of anything still left to be paid
A general partner is personally liable to third parties for the obligations of the limited partnership.
A limited partner is not personally liable, either directly or by contribution, for obligations of the limited partnership even if they participate in management/control
Although goodwill is presumed to be an asset of a partnership, a partnership can overcome this presumption by express or implied agreement.
A limited partner may withdraw upon express notice of her intent to withdraw as a limited partner, or upon any date she specifies.
A partnership is liable for a partner’s tortious acts committed in the ordinary course of the partnership business, or with actual or apparent partnership authority
and a partner is jointly and severally liable for all partnership obligations. .
However, a partner may sue a tortfeasor partner to recover for injuries
The purported partner and actual partners who consent to the representation are jointly and severally liable for the transaction
is there was a partnership obligation incurred (like a judgment) and then a new partner is admitted, are they liable for the obligation?
No they’re not personally liable for any partnership obligation incurred before his admission as a partner.
However, any capital contribution made by an incoming partner to the partnership is at risk for satisfaction of such obligations.
A partnership will be dissolved upon judicial decree if
(i) the purpose of the partnership is frustrated;
(ii) a partner has engaged in conduct making it not reasonably practicable to carry on the business;
(iii) the business cannot be practicably carried on in conformity with the partnership agreement; and
(iv) upon application of a transferee of a partnership interest that it is equitable to wind up the business.
absent an amendment, how many partners must approve a conversion?
a majority
some differences between a limited liability partnership and a general partnership
LLP = Partners are not liable for the obligations of the partnership
GP = partners in a general partnership are
LLP = Amust file a statement with the Department of State
GP = does not .
LLP= a limited liability partnership’s name must identify it as a limited liability partnership.
GP= A general partnership’s name need not identify it as a general partnership
In a limited partnership, a partner may contribute a promise to pay cash, provide property, or perform services.
But the partner’s promise of a future contribution must be written in order to be enforceable.
Conversion of a partnership to a limited partnership does not affect the resulting limited partnership as an entity, and the resulting partnership is subject to suit for its obligations.
new entity isnt liable for old debts, old entity IS
Additionally, any general partner who becomes a limited partner due to conversion remains liable for any obligation incurred by the partnership before the conversion
there’s a presumed partnership when the business arrangement is for profit
a general partner can be personally liable
A partner in a limited partnership may hold dual roles and will be liable for partnership obligations based on his general partner status.
when there’s a transfer of partnership interests, the transferee gets all distributions the transferring partner would have been entitled to receive, including those distributed during the winding up of the business
A general partnership may become a limited liability partnership by doing what?
filing a statement of qualification with the Department of State
Partners in a general partnership are jointly and severally liable for the obligations of a partnership.
A creditor must usually exhaust all partnership assets before going after a partner’s personal assets but may obtain a judgment against a partner when the partnership’s assets are clearly insufficient.
A limited partner has the right to bring a derivative action on behalf of the partnership after either:
> making a demand on the general partner to do so
or
explaining why making such an effort would likely fail.
Think of this like a proceeding to compel the LP to pursue a legal claim (e.g., a lawsuit
against a GP manager for fraud)
recovery = goes to the limited partnership not the partner
Each partner has equal rights in the management of the partnership business.
so amount of votes are equal
Any partner, partner’s legal representative, or transferee may seek judicial supervision of winding up.
A partner in a limited partnership may transact business with the limited partnership and, subject to fiduciary duties, the partner has the same rights and obligations with respect to the transaction as a third party would.
In the absence of a contrary agreement of the partners, a limited partnership will be dissolved by the withdrawal of the only general partner.
Bc there must be at least one general partner in a limited partnership.
Does joint ownership of property (e.g., tenancy in common) establish a partnership by itself when the joint owners share profits made from use of the property?
No, joint ownership of property does not itself establish a partnership, even when the owners share profits from the use of the property.
Fill in the Blank. A foreign limited partnership must apply for a ___________________ to transact business in Florida with the secretary of state.
certificate of authority
What two fiduciary duties does a partner owe the partnership and the other partners?
The duties of loyalty and care
What are the two steps involved in the termination of a partnership?
Dissolution and winding up.
What three things must a partner refrain from engaging in pursuant to a partner’s duty of care?
(1) grossly negligent or reckless conduct
(2) intentional misconduct
(3) a knowing violation of the law.
May a partnership agreement specify a percentage for sharing profits that differs from the percentage for sharing losses?
yes
Does a partnership agreement have to be in writing?
no
What are the two types of actual authority?
i) Express authority can arise from the partnership agreement, an authorization of the partners, or a statement of authority filed with the state; and
ii) Implied authority is based on a partner’s reasonable belief that an action is necessary to carry out his express authority.
two persons intend to carry on a business for profit as co-owners
their subject intent doesnt matter
May a partnership agreement may eliminate the duty of loyalty?
No; can’t eliminate the duty of loyalty, but can identify specific activities that do not violate this duty.
True or False: An organization other than a limited partnership can convert to a limited partnership, and a limited partnership can convert to another type of entity.
true
Does a partner have the right to transfer his partnership interest to a third party?
yes; entirely or in part
Are partners in a partnership protected from personal liability for the partnership’s obligations?
NO
Does a limited partner, in a limited partnership, have the right or power to act or bind the limited partnership?
NO. A general partner is an agent of the limited partnership and HIS actions for carrying on in the ordinary course of the partnership’s business bind the limited partnership.
In winding up a partnership’s business, do partners have priority over creditors to the partnership’s assets?
No, creditors have priority over partners to the partnership’s assets.
What does a partnership account consist of?
> contributions to the partnership reduced by any liabilities (e.g., mortgages)
> plus the partner’s share of partnership profits, minus distributions of money or other property to the partner and the partner’s share of the partnership losses.
When is property presumed to be partnership property?
> When the property is purchased with partnership assets
or
if partnership credit is used to obtain financing.
For a partnership that is for a definite term, the partner’s dissociation is wrongful when, before the expiration of the term the partner: (i)______; (ii) _____; (iii) ______; or (iv) _______.
> withdraws
(unless within 90 days, of another partner’s wrongful dissociation or dissociation due to death, bankruptcy ,etc)
> is expelled by court order
> is a debtor in bankruptcy
> In the case of a partner who is not an individual, trust, or estate, the partner willfully dissolved or terminated.
Fill in the Blank: A creditor of a partner who has obtained a judgment against the partner may enforce that judgment against the partner’s partnership interest by obtaining a ____________.
judicial charging order.
What are the seven actions that require approval of all general partners in a limited partnership?
(1) amending the partnership agreement
(2) admitting a general/limited partner
(3) Compromising a partner’s obligation to make contributions or return improper distributions
(4) Expelling a general partner
(5) Dissolving the partnership;
(6) Disposing the limited partnership’s property; and
(7) Approving a plan of conversion or merger
a former partner of a partnership or their agent, can inspect/copy all the records from when they wre a partner if during business hours
regardless of whether the request in unreasonable bc partnership right is super intimate.
it was their business too
when does a partnership dissolve?
(1) when something makes it illegal for it to continue
(2) when an illegality isn’t cured w/in 90 days of receiving notice
A partnership is an association of 2+ ppl intending to carry n a business for profit
> splitting GROSS profits does NOT count
rent splitting doesn’t count
> person = individual, entity, estate, govt entity, corp, LLC. etc
how to become a general partner in a limited partnership
> after dissociation of a limited partnership’s last general partner
> bc of a conversion/merger
> a specified event named in the partnership agreement
> unanimous sent of all partners (limited AND general)
what cant a partner do under their duty of loyalty
> compete w the partnership business
> usurp/take a partnership opportunity for themselves or use P property to get a benefit without compensating it back
> advance an interest adverse to the Partnership
Does a foreign (i.e ohio) limited partnership need to have a certificate of authority to conduct business in FL?
Yes but a partner wont be held liable solely bc they transacted business without a certificate of authority
partnership requires everyone to be of age.
what happens if there is a underaged partner and there’s a judgment against the partnership?
Minor partner doesn’t make a partnership void & will only be liable up to her contribution
the other partners would be personally liable
does a conversion/merger make the liabilities go away?
no
The dissociating partner’s liability continues for 60 days after notice of dissociation with the department of state.
If a partnership wants to limit authority for the transfer of the partnership’s real property, it must file a Statement of Authority with
> the Department of State
AND
> in the county recording office where the real property is located.
Filing a Registration Statement of the partnership as a PREREQUISITE for filing the Statement of Authority.
who must a merger/conversion be approved by in a limited partnership?
by all general partners + by all limited partners who own a majority of the rights to receive distributions
creditor wants to collet from a limited partner
> a judgment creditor is entitled only to a charging lien
they cant foreclose
lien attaches to the partner’s economic interest
A general partner is typically responsible for the actions of other partners in a partnership.
However, they won’t face criminal charges for crimes committed by other partners during business activities unless they participated in the crime as a principal or accessory.
while the partnership and other partners may be civilly liable to the defrauded party, criminal liability does not extend to them.
an individual partner’s creditors and the partnership’s creditors have equal claim to the partner’s separate assets
but the partnership creditors have priority over a partner’s creditor
to the assets of the partnership
a partner will be forced to return an improper distribution only if they knew it was improper when they received
a general partner who consents to an improper distribution IS personally liable to the limited partnership for the amount that exceeding what would’ve been proper
If a partner derives a personal benefit from the use or possession of partnership property, then the partner is required to compensate the partnership for that benefit.
General partners are personally liable for partnership obligations.
General partners who convert to limited partners may be liable to third parties if the third parties had no notice of the conversion and reasonably believed that the limited partners were general partners.
General partners are personally liable for a limited partnership’s obligations, whereas limited partners are not.
