Partnerships

Question 1

Formation of general partnership

Answer 1

Two or more people associate as co-owners to carry on a business for profit.

Question 2

Tort liability of PartnerSHIP

Answer 2

Liable for wrongful acts/omissions of any partner acting
1. Within ordinary course of PSP’s busienss; OR
2. With authority of all other partners

Question 3

Tort liability of partners (GP and LP)

Answer 3

GP: J&S for all obligations of partnership arising from wrongful partner acts (i) within ordinary course of business or (ii) with unanimous partner authority

LP: Liable for own misconduct, not other LPs

Question 4

Legal effect of conversion from one form of partnership to another

Answer 4

Does not create a new partnership (ie preexisting obligations of GP that subsequently becomes LLP remain obligations of LLP)

Question 5

Contract liability of partnerSHIP

Answer 5

Liable for actions within the ordinary course of business to carry on the partnership’s business unless the partner:

1. Has no authority; AND
2. Other side has notice or knowledge of no authority

Question 6

Contractual liability of PSP for actions OUTSIDE partnership business

Answer 6

Don’t bind the PSP unless other partners unanimously authorize with actual or apparent authority

Question 7

Contractual liability of

• general partners
• limited partners

Answer 7

GPs - J&S liable for all debts/obligations

LPs - personally liable up to their investment and/or their own misconduct

Question 8

Default transferability of partnership interest

Answer 8

P can transfer interest in P/L to 3P; transferee doesn’t become a P and PSP doesn’t dissolve

Question 9

Liability of newly admitted partner

Answer 9

Liable for obligations AFTER admittance

Capital contribution made by incoming partner at risk for satisfaction of PSP obligations

Question 10

Causes (broad) of dissolution

Answer 10

1. Actions taken by partners
2. Operations of law
3. Court order

Question 11

Impact of partner changes on PSP under UPA and RUPA

Answer 11

UPA: Any change in membership triggers dissolution subject to agreement terms. If dissolution is wrongful, remaining Ps can hold dissolving P liable

RUPA: Disassociation does not automatically trigger dissolution - Ps can buy out departing P unless
1. At-will PSP (can dissociate at any time)
2. Event partners specified would cause dissolution occurred

Question 12

Dissolution of a term partnership (under RUPA)

Answer 12

Can be dissolved before term expires if:

1. At least 50% of Ps vote to wind up w/i 90 days after disassociation by death, bankruptcy, incapacity or wrongful disassociation; OR
2. All partners agree to amend LP by agreeing to dissolve

Question 13

Partnership duties

Answer 13

1. Care
2. Loyalty

Question 14

Duty of care

Answer 14

Refrain from:
1. Grossly negligent or reckless conduct
2. Known violations of law
3. Intentional misconduct

Question 15

Duty of loyalty

Answer 15

1. Good faith and fairness towards other partners
2. Account for property/profit/benefit
3. Refrain from competing/usurping business opportunities

Question 16

Can duties be reduced in the partnership agreement

Answer 16

The duty of loyalty can be reduced, but not eliminated

Question 17

Use of partnership property

Answer 17

Partner may ONLY use PSP property:

1. On behalf of PSP; or
2. To carry on PSP business

Personal use of property requires consent of other partners

Question 18

Management and control

Answer 18

GPs have equal rights to manage/control (default)

Disagreements are decided by a majority of partners

Question 19

Right to inspect

Answer 19

All partners have access to books and records upon reasonable demand. Right not conditioned on purpose/motive but must be in good faith

Question 20

Right to profits and losses

Answer 20

Default - Each P generally entitled to:

1. Equal share of PSP profits; and
2. Losses in proportion to share of profits