partnerships

Question 1

partnerships

Partnership Formation

Answer 1

A partnership is an association of two or more persons to carry on a for-profit business as co-owners. Although a written agreement is not necessary to form a partnership, a partnership agreement is subject to the Statute of Frauds, which requires contracts that cannot be performed in one year to be in writing. The key test applied to ascertain whether a business arrangement is a partnership is whether there is a sharing of the profits from the business; if so, such an arrangement generally is presumed to be a partnership, and persons who share in the profits are partners.

Question 2

partnerships

limited partnership

Answer 2

A limited partnership is a partnership formed by two or more persons that has at least one general partner and at least one limited partner. A limited partner’s liability for partnership debts is limited to the amount of her capital contribution to the partnership. To form a limited partnership, a certificate of limited partnership must be filed with the state.

Question 3

partnerships

liability for partnership obligations

Answer 3

As a separate entity, a partnership is subject to suit for its obligations. A partner is jointly and severally liable for all partnership obligations.

Question 4

partnerships

actual express authority

Answer 4

Actual authority includes both express authority and implied authority. Express authority can arise from the partnership agreement itself, an authorization of the partners, or a statement of authority filed with the state.

Question 5

partnerships

actual implied authority

Answer 5

Implied authority is based on a partner’s reasonable belief that an action is necessary to carry out his express authority.

Question 6

partnerships

apparent authority

Answer 6

For apparent authority to apply, the partner must perform the unauthorized act in the ordinary course of apparently carrying on either the partnership business or business of a kind carried on by the partnership. In addition, the third party with whom the partner was dealing cannot hold the partnership liable when that party knew or had received notice that the partner lacked authority.

Question 7

partnerships

fiduciary duties

Answer 7

A partner owes the partnership and the other partners two fiduciary duties, the duty of loyalty and the duty of care. Under the duty of loyalty, a partner is required to refrain from the following activities: (i) competing with the partnership business; (ii) advancing an interest adverse to the partnership; and (iii) usurping a partnership opportunity or otherwise using partnership property or business to derive a personal benefit, without notifying the partnership.

Question 8

partnerships

management rights

Answer 8

Each partner has equal rights in the management and conduct of the partnership.