Partnerships

Question 1

Types of partnerships

Answer 1

General partnership, limited liability partnership, and limited partnership

Question 2

General partnership

Answer 2

Any association of two or more as co-owners for for-profit business; no formal agreement required and intent can be inferred if co-owners in a business

All partners liable, personally and jointly, for all partnership debts

Question 3

Partnership formation

Answer 3

Formed when two or more people associate carry on for-profit business as co-owners, no formalities required and intent inferred

Courts look to profit sharing, management, etc.

Question 4

Partnership by estoppel

Answer 4

Where no partnership exists, parties may be held liable to third parties as partnership if they actively held themselves or others out as partners or consented to being held out as such

Question 5

Partnership property

Answer 5

Consists of capital contributed by each partner and all property owned by partnership

Look for: (a) title of property, (b) source of funds for property purchase, and also (c) use of property

Question 6

Partners’ interest in partnership property

Answer 6

No individual interest in partnership property

Question 7

Share of profits

Answer 7

Each partner has transferable interest consisting of share of profits and losses and right to receive distributions absent agreement

Question 8

Right to manage

Answer 8

Absent agreement, partners have equal rights in management of partnership business

Question 9

Fiduciary duty

Answer 9

Partners owe partnership duty of loyalty and care

Question 10

Duty of loyalty

Answer 10

Each partner must

1. Account for property, profits, or benefits
2. Refrain from self-dealing or competing

Question 11

Duty of care

Answer 11

Each partner must refrain from engaging in

1. Gross negligent or reckless conduct
2. Intentional misconduct
3. Knowing violations of law

Question 12

Obedience and complete information

Answer 12

Partners must obey all reasonable directions from partnership and provide each other complete and accurate information

Question 13

Inspection

Answer 13

Every party has a right to inspect and copy partnership financial information

Question 14

K liability

Answer 14

All partners liable for any K made in scope of partnership business and other Ks expressly authorized by partners

This means power to bind unless (a) partner has no authority to act on behalf, and (b) other side knows

Question 15

Tort liability

Answer 15

Liable for those committed by partner or employee if in ordinary course of business or with authority of partnership

Question 16

Nature and extent of liability

Answer 16

Joint and severally liable

Question 17

Dissociation

Answer 17

Any partner ceasing to be associated in carrying on partnership business and terminates legal relationship, including rights to profits and management

If continuing on, must purchase dissociated partners’ interest

Question 18

Dissolution

Answer 18

Termination of partnership happening at agreed-upon event, expiration of term in partnership agreement, issuance of judicial decree, etc.

Question 19

Limited liability partnership

Answer 19

Limits partner’s personal liability for partnership obligations and actions

Question 20

Formation of LLP

Answer 20

Approval by vote and filing statement of qualification with state containing partner names, addresses, LLP election, and effective date

Question 21

LLP liability

Answer 21

Partner in LLP is not personally liable for partnership obligations of any sort but every partner remains liable for her own acts

Question 22

LLP rights and obligations

Answer 22

Financial rights and obligations of LLP partners is same as standard general partnership

Question 23

Limited partnership

Answer 23

Contains two types (general and limited) and one or more of each

Question 24

LP general partners

Answer 24

Manage and control day-to-day and owe same fiduciary duties as partners in general partnership

Personally, jointly and severally liable for all partnership obligations unless incurred before became partner

Question 25

LP limited partners

Answer 25

Usually passive investors with limited authority; no fiduciary duty and unless agreement says otherwise, many compete or have conflict of interests

Not liable for debts of business

Question 26

Formation of LP

Answer 26

Filing certificate of limited partnership with state; certificate must contain names and addresses of each general partner and their signatures