Partnerships

Question 1

In an action between partners for settlement of the partnership account, when must the claim be brought?

Answer 1

within 5 years from cessation of the dealings in which they are interested together

Question 2

What is the default in a partnership for how many partners must consent to allow a new partner to join?

Answer 2

All of the existing partners

Question 3

What is required for a partnership?

Answer 3

no formalities required

sharing of profits (not services in exchange for wages)

Question 4

Is each partner liable for the torts of the other partners?

Answer 4

Yes, if within the scope of partnership business

Question 5

Is an incoming partner liable for prior debts?

Answer 5

no, but money paid into partnership may be used to satisfy debts

Question 6

Does a dissociating partner remain liable for subsequent debts incurred by the partnership?

Answer 6

Yes, until actual notice of dissociation is given to creditors or 90 days after filing a notice of dissociation with the state

Question 7

Is a party liable to third parties for the torts of another person, when the party alleges there is a partnership between the party and person?

Answer 7

Yes - partnership liability by estoppel.

Question 8

May partnership property be transferred by one partner without the consent of the other partners?

Answer 8

No - cannot be transferred without partnership authority.

Question 9

A, B, and C, agree to contribute money and share profits 60-30-10. How do they vote in the partnership?

Answer 9

equally.

Question 10

What is an exception that a partner may receive a salary from a partnership in the absence of an agreement?

Answer 10

When winding up the business of the partnership.

Question 11

In a partnership how are profits and losses shared?

Answer 11

Absence agreement, profits are shared equally and losses shared like profits.

Question 12

What is the period between dissolution and termination of a partnership referred to as?

Answer 12

winding up

Question 13

How are the partnership assets distributed upon termination?

Answer 13

1) pay all creditors, including partners who loaned money to the partnership
2) repay all capital contributions
3) profits are shared equally
- if deficiency, then individual partners may be liable

Question 14

Does a new partnership that assumes the obligations of a dissolved partnership relief the partners of the dissolved partnership of personal liability?

Answer 14

No does not exculpate obligations as to outside creditor who have not consented to the assumption of obligation

Question 15

Is a partner liable for another partner’s act of embezzlement?

Answer 15

Yes, because it involves a breach of trust.

- normally no criminal liability for crimes committed by a copartner

Question 16

Does the mere fact that two people purchase property as tenants in common establish a partnership?

Answer 16

No, even if they would split profits from property

Question 17

What must a partner who breaches his duty to the partnership do?

Answer 17

make an accounting of profits received as a result of the breach of the duty of loyalty

Question 18

Can a partnership be terminated by one partner?

Answer 18

Yes, unless stated otherwise, the partnership is at will and may be terminated by one partner

Question 19

In a limited liability partnership how are ordinary business decisions made?

Answer 19

majority vote of all partners (general and limited)

Question 20

In a limited liability partnership how are amendments to the partnership agreement that are substantial voted upon?

Answer 20

Unanimous vote of all partners, including limited liability partners

Question 21

During winding up, may a wrongfully dissociated partner participate?

Answer 21

A partner who wrongfully dissociates is not entitled to wind up the affairs of the partnership.

Question 22

How can a limited liability further avoid liability in a partnership?

Answer 22

Not participate in the control of the business.

Question 23

What act do not constitute participation in the control of a partnership by a limited partner?

Answer 23

1) consulting/advising a general partner; 2) pursing a derivative action; 3) requesting to attend general partner meeting; 4) voting on changes to partnership or removal of general partner; 5) amendments to partnership agreement

Question 24

Does withdrawal of a limited partner cause a dissolution of the limited partnership?

Answer 24

No. Only general partner withdrawal could cause a dissolution

Question 25

How can a limited partner seek to dissolve a limited partnership?

Answer 25

Judicial dissolution - file in circuit court

Court may dissolve is it is no longer reasonably practicable to carry on the partnership agreement

Question 26

Can a limited partner bind the partnership solely on the basis of a limited partner status?

Answer 26

No. Need to have actual or apparent authority based on conduct to be liable.

Question 27

Can a limited partnership be liable the contracts from limited partners?

Answer 27

If limited partnership accepted the benefits of the contract (ratification)

Question 28

What is the extent of a limited partner’s liability on contracts entered into by the limited partnership?

Answer 28

unpaid capital contributions

Question 29

May a creditor of a limited partnership enforce a limited partner’s obligation to make a contribution to the partnership?

Answer 29

Yes. Limited partners are liable for unpaid contributions.

Question 30

If a limited partnership who has failed to make the complete capital contribution transfer the interest in the partnership to another is the other party liable for the deficient capital contribution?

Answer 30

No. Original limited partner remains liable, unless the unpaid contributions where known to the new limited partner.