Partnerships

Question 1

General Partnership

Answer 1

A general partnership is an association of two or more people who are carrying on as co-owners or a business, whether or not the parties intended to form a partnership.

No formailities are required, so courts look to the intent of the parties.

Question 2

Liability In A General Partnership

Answer 2

The partners in a GP are liable for all contracts entered into by a partner that are w/in the scope of the partnership business and/or are made with the authority of the partnership.

A general partner is jointly and severally liable for all partnership obligations. A limited partner is personally liable for obligations of a limited partnership when a third party actually believes in good faith person is a general partner at the time of a transaction.

Question 3

Limited Liability Partnership

Answer 3

A limited liability partnership is one where the partners are not personally liable for the obligations of the partnership. To form an LLP the partnership must file a statement of qualification with the SOS.

Question 4

Partnership Profits & Losses

Answer 4

The partnership agreement controls a partner’s rights to share in the partnership’s profits and losses.

If there is no agreement, or if the agreement is silent as to the division of the profits and losses, each partner is entitled to an equal share of the partnership profits and losses.

When the agreement addresses only the division of partnership profits, partnership losses are shared in the same manner.

Question 5

Authority

Answer 5

In order to determine if a partnership should be bound by a K, the partner must have had express, implied, or apparent authority to bind the partnership.

**Express: ** Authority expressly granted under a partnership agreement.

Implied Authority: Where the partner reasonably believes she has the authority to act based on the partnership agreement, the partnership will be bound.

Apparent Authority: An unauthorized partner’s act may bind the partnership if the act is performed in the ordinary course of apparently carrying on (1) the partnership business or (2) business of a kind carried on by the partnership.

Question 6

Promoter Liability

Answer 6

A promoter is one who enters into contracts, prior to incorporation, for the benefit of the to-be corporation.

Promoters are personally liable for pre-incorporation contracts until there has been a novation replacing the promoter’s liability with the corporations or the parties have expressly agreements the promoter is not liable.

Question 7

Partnership: Duty of Care

Answer 7

A partner owes a duty of care to the partnership and to other partners to refrain from engaging in negligent, reckless, or unlawful conduct.

Question 8

Partner: Duty of Loyalty

Question 9

Parntership Dissolution:

Answer 9

After dissolution, the partnership must wind up its business. In winding up a partnership’s business, partnership assets are first applied to discharge partnership obligations:
1. to creditors (including partners who are creditors of the partnership) before being distributed to the partners;
2. to partners and former partners in satisfaction of distribution previously owed;
3. to partners - capital contributions;
4. to partners and former partners in satisfaction of distribution previously owed;