Partnerships Flashcards
List requirements to form a partnership
- no real formal requirements, may be oral or written
Define partnerships
the default form of business enterprise, no formalities required, no document needs to be filed but can be
were x and x partners?
analize: mutual consent to a relationship involving combining of resources and efforts in determined proportions to collaborate at mutual risk for common profit or benefit. Look at whether or not there was consideration that was proper. (a promise to give cash is acceptable)
How do partners share?
partners share equally unless otherwise agreed
what contributions are allowed to create a partnership?
contributions must have eCONOMIC value (this is different from corporations)… Failure to make contributions allows third party creditor of partnership to sue to enforce the obligation to contribute, as does the partnership itself.
what contribution can one partner claim from the other partner if they paid 17,500 to creditors
a. 17500
b. 0
c. 8750
d. 17500 plus forfeiture of contributions as penalty for improper withdraw
b. 8750. a partnership as principal obligor is primarily liable for its debts, each partner is secondarily liable for her virile share of debts. they have contributed equally and agree to share losses equally. one partners share is 1/2. If partner added after act or contract, code isn’t clear, but most other states don’t make such a partner liable.
ordinarily are partners liable for the debts and liabilities of a partnership
each partner is secondarily liable , after the partnership itself, for their virile share of the partnerships debts and liabilities
is a partner sued in the capacity of partner entitled to any indemnification or reimbursement of litigation expenses?
No, unless required by mandate law if costs of defending suit could be characterized as a loss suffered by a partner, without his fault, as mandatary of the partnership
is a partner in a partnership automatically entitled to reimbursement from the partnership for the reasonable attorney fees incurred in successfully defending a lawsuit brought by a third party by virtue of his/ her status as a partner?
no. there is no automatic indemnification provision in the partnership provisions of the civil code for a partner who successfully defends an action against her by a third party
Discuss management structure
Unanimity is required: to AMEND, ADMIT, TERMINATE partnership. (Decisions that affect structure)
Majority is required: decisions that affect management unless otherwise agreed
by what vote do partners of a partnership make decisions
if the decision is regarding structure of the partnership , then unanimity. if decisions regarding management or other issues, majority vote rules.
can partners be expelled from a partnership , if so by what vote?
a partnership may, by majority vote of partners, expel a partner for just cause
What is the duty of a partner in a partnership
fiduciary duty of loyalty: no asset of partnership may be used for ones own interest, must be in best interest of partnership. If breached, partnership can sue for damages or recover profit one gained as result of breach.
can a business owner/ partner inspect the books of business?
yes and partnership agreement can not take this away. a partner has right to inform herself of the partnership business and consult any record
Are partners mandataries?
yes, each partner is a madatary of partnership for all matters in the : ordinary course of business: EXCEPT the alienation, lease, or encumbrance of partnership immovable prperty. (note that acquiring property is not prohibited, only disposal of immovable … and this rule is only applicable where disposal of immovable property is ordinary course of business. )
does a partner in a partnership, acting alone, have the authority to sign contracts on behalf of the partnership, and bind the partnership?
a partner acting along may act as mandatary of partnership and may bind partnership to contracts with respect to all matters in the ORDINARY COURSE OF BUSINESS except ordinary course that requires alienation, lease, or encumbrance of partnership’s immovable property.
a partnership agreement can take this authority away, however when a third party deals with this partner, he has a right to rely if they reasonbly believe partner they deal with is a mandatary
a partnership agreement can take away share in partnership losses, but again this does not affect third party, binding only between parties
does each partner in a real estate investment general partnership have the authority to bind the partnership in borrowing money from bans for purchasing property for partnership?
a partner has the authority to act as a mandatary of the partnership and may bind the partnership to contracts, but only with respect to all matters in the ordinary course of the partnerships business, except the alienation, lease, or encumbrance of its immovable. A partner does not have authoirty to sign contracts bidning the partnership with respect to matters not in the ordinary course of business, even if in the ordinary course, matters involving alienation, lease, or encumbrance of immovable. Loan is to purchase property, not in the ordinary course of business for real estate investment partnership. So, if not in ordinary coruse then no authoirty, if is in ordinary course, then authority to bind.
How does membership in a partnership cease?
death interdiction bankruptcy seizure of interest expulsion withdraw or in accordance with agreement
what happens if all but one partner withdraws?
partnership becomes sole proprietership (applies to all partnership types)
When may a partner be expelled
for JUST CAUSE- majority must agree on expulsion
When may a partner withdraw?
look to see if there is a term for the partnership:
- term- may withdraw during term with consent of other parties, unless another partner failed to perform a material obligation
- No term- may withdraw at any time with notice and good faith at time that is not unfavorable to partnership. He is entitled to his interest of the partnership value
explain the factors that determine whether a partner may validly withdraw from a partnership that has been consituted for a term
a partner may withdraw from a partnership constituted for a term only if either 1. the other partners unanimously give their consent to withdrawl or 2. withdrawing partner has just cause arising out of the failure of another partner to perform a material obligation
ordinarily, can a partner withdraw from a partnership and require the partnership to purchase his/ her partnership interest?
in a partnership constituted without a term, a partner may withdraw from the partnership at any time with reasonable notice, without the consent of other partners and thereby require the partnership to purchase her interest at fair value. in a partnership for a term, a partner may withdraw without consent and require purchase of her share only if she has just cause arising out of the failure of one of the other partners to performa an obligation
how may a partnership be terminated?
unanimous consent judgment of termination bankruptcy of partnership reduction of membership to one person expiration of term attaining of or the impossibility of attaining object of the partnership OR in accordance with agreement
can a partnership be continued after term expiration?
yes, expressly or tacitly it may continue after term expiration, object is attained, or after parties agree to terminate
true or false:
creditors of partnership get paid before individual partner creditors.
true.
What is the priority of creditors for debts to be paid (on termination)?
secured creditors unsecured creditors who are not partners unsecured creditors who are partners capital contributions get restored surplus is divided proportionately
