Partnerships Flashcards
Partnership Opening Statement
A partnership is an association of two or more persons to carry on and manage as co-owners a business for profit. The Revised Uniform Partnership Act provides defaults that contract terms in a partnership can override.
How is a partnership organized?
No written agreement or filing is required for a partnership, just an intentional act. Partners may file a statement of partnership authority and register a name with the DOL. The SOF applies to express partnerships that will last more than one year. Unless otherwise agreed, all partners share profit and loss equally, and sharing of profits is presumptive evidence of partnership.
What property rights to partners have?
Partners have a property right in their ownership interests and a right to participate in management. A partner’s ownership interest is his share of the profits and losses and right to receive distributions. Conveyance assigns the p/l share but gives management rights only if all other partners agree. CRs may get changing orders to collect from profits.
What are a partner’s rights and relationships?
All partners have a fiduciary duty of loyalty (no competition, avoid adverse interests, hold pship property in trust) reasonable care, good faith, and fair dealing to the pship and to other partners. Partners may do business w/ the pship after disclosure. The pship brings action against a partner for breach of duty. Partners may access records w/ notice. Ordinary pship decisions are by majority, but unanimity is required for changing the agreement or partners or anything outside the ordinary course of business.
Who/what is liable to third parties?
Partners are personally liable for all pship debts and j/s liable for pship obligations to third parties. Every partner is an agent for the pship, and the pship is liable for Ks in the ordinary course and through vicarious liability for torts. Any partner can transfer property in the pship’s name or pship property in her own name (can only recover if the partner lacked authority and the third party knew).
How is a partner dissociated?
By express will, expulsion, insolvency, death/incapacity; the partner gets the value of her ownership interest, which the pship buys by pro rata share of the pship’s net assets. Wrongful dissociation (i.e. w/drawal that violates the agreement) gives damages to the pship and other partners. A statement of dissociation can be filed w/ the sec of state to give 90-day constructive notice. A dissociated partner’s authority terminates except as it is apparent to thirds for up to two years.
How is a partnership dissolved and wound up?
If half the partners agree, the term expires, illegality, or a judicial determination of economic frustration or impracticality. A statement of dissolution may be filed to give 90-day constructive notice, and the pship continues after dissolution for winding up. The profit or loss from after an asset sale goes to CRs, then partners for capital contributions, then profits to the partners. If the pship is insolvent, partners get a contribution right for paying more than their share. Conversion or mergers must be approved by partners (dissenters get FMV of pship interest).
Limited Partnership Opening Statement
A limited partnership is created by state statute and governed by the Uniform Limited Partnership Act in about half of the states and the Revised Uniform Limited Partnership Act in many others.
How is a limited partnership structured?
J/s liability ends at filing as at least one general partner (can be a corporation) is named w/ fiduciary duties of loyalty and care. Limited partners are only liable to the extent of their capital contributions (unless they hold themselves out as general partners). A certificate is filed with the sec of state. It is dissolved when the last general partner dies or withdraws, unless the limited partners all agree to keep it going.
What is a limited partner’s role?
A limited partner cannot participate in control of the business but is not liable to third parties (even as an agent or consultant). A limited partner can transfer his ownership interests without causing dissolution or go bankrupt with no effect (would force withdrawal for a general partner). Limited partners earn distributions according to their capital contribution (unlike equal-sharing partnerships). All partners can admit a new general partner. General partners owe a fiduciary duty to limited partners.
What is a limited liability partnership?
Partners are treated as equal shareholders, insulated from K or tort liability (except their own, supervised subordinates’). An application is filed instead of a certificate, profit and loss are distributed based on contribution, and malpractice insurance or a bond is required for partners to escape personal liability.
