Partnerships Flashcards
How to prove a partnership
In NY, can make prima faciae showing just by showing that profits were shared.
- 5 ways to rebut:
1) profits shared to pay off debt.
2) profits linked to interest for loan.
3) profit-sharing is for compensation.
4) goodwill payments.
5) retirement benefits.
Partnership by estoppel
Can impose liability on the purported partner OR the partnership.
- Against purported partner:
1) representation of partnership;
2) by person of with her consent;
3) 3p reasonably relied;
4) 3p suffered damage from reliance. - Against partnership:
1) representation that purported partner is a partner;
2) by partner of partnership with consent of all partners. - IF only one partner without consent of others, then ONLY that partner is liable.
Fiduciary duties of partners
- can be curtailed, though not abrogated, by partnership agreement.
Partner entitlements
Share of profits.
NOT compensation for services.
Reimbursement for expenses in course of business.
Indemnification for actions in pursuit of partnership business.
Rights to partnership property
NO right to unilaterally transfer partnership property. NO use for personal gain.
Property cannot be attached for personal judgments against partners.
- Factors to determine whether sthg is partnership property:
1) use of property;
2) improvements made to property;
3) similar in character to other property of partnership;
4) listed as an asset on partnership books;
5) partnership pays taxes.
Partnership consent
Ordinary business decision = majority.
Special decision = unanimous.
1) admitting new partner.
2) selling substantial portion of assets.
3) amending partnership agreement.
Accounting
- General rule = partners NOT allowed to sue each other.
- Partners can sue for accounting ONLY IF:
1) wrongfully excluded from business;
2) wrongfully excluded from possession and use of property;
3) partnership agreement explicitly permits;
4) another partner has obtained secret profits in violation of duties.
5) other just and reasonable circumstances. - when partner MAY sue:
1) tort claim of negligence;
2) regarding transaction discrete and unrelated to partnership business, that can be handled separately.
NO worker’s comp. for partners.
Special business matters (no apparent authority to bind partnership)
1) assignment of partnership property;
2) disposition of goodwill;
3) action that makes it impossible for partnership to continue operation in line of business;
4) confess a judgment on behalf of partnership;
5) submit claim or liability to arbitration.
When to recover property transferred without authority?
If in partnership name, then freely recoverable.
If not in partnership’s name, then recoverable ONLY IF transferee knew it was partnership property transferred without authority.
Knowledge gained prior to joining partnership
Imputed to partnership ONLY IF “present in mind” when acting as partner and knowledge was relevant.
Knowledge of retired partners
Imputed to the partnership ONLY IF info is so important that a reasonable person would have told the partnership.
Liability for torts
- Partnership is jointly and severally liable for partner torts, EXCEPT:
1) fraud against partnership;
2) outside scope of business;
3) criminal act.
New partner liability for prior debts
ONLY up to his capital contribution.
Events causing dissolution
WE ME BAD:
1) At-will partnership;
2) Term expires;
3) Partners unanimously consent;
4) Good faith expulsion of a partner;
5) Individual partner goes bankrupt;
6) Activities of partnership become illegal;
7) Death of a partner.
Court-decreed dissolution
BIG IPO:
1) Partner is willfully breaching duties, making it impossible to do business;
2) Partner declared incompetent by judicial proceeding;
3) Partner found guilty of conduct that prejudicially affects carrying on of partnership.
4) Partner becomes incapable of fulfilling duties.
5) Partnership can no longer make profit.
6) Any equitable grounds.