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Partnerships-Bar > partnerships > Flashcards

partnerships Flashcards

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1
Q

what is a partnership?

A

an association of two or more persons to carry on as co-owners a business for profit
–must be at least two persons involved in forming a partnership

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2
Q

what is required to form a partnership?

A
  • -an agreement between two or more persons to share profits generally
  • -writing generally not required (SOF for longer than one year needs writing tho)
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3
Q

what will courts look to in order to see whether a partnership exists?

A
  • -courts will generally look to the intent of the parties to determine whether a partnership exists
  • -if the parties intended to carry on business as co-owners, there is a partnership even if they did not subjectively intend to be partners

–> sharing of profits raises a presumption of partnership

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4
Q

what other evidence is indicative of a partnership existing?

A
  • -title to property held in joint tenancy or in common
  • -parties designate their relationship as partners
  • -sharing of gross returns
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5
Q

when will a partnership be inferred and thus liability attached?

A

–when a person by words or conduct represents himself as a partner or consents to being represented by another as a partner—> he will be liable to 3rd parties who rely upon that representation

–when a person holds another out as a partner, he thereby makes that person his agent to bind him to third parties.

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6
Q

what is partnership property?

A

everything the partnership owns including the capital and property subsequently acquired in partnership transactions

– property purchased with partnerships funds is rebuttably presumed partnership property regardless of whose name is on the title

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7
Q

is titled property partnership property?

A

yes

  • -title property is partnership property if:
  • -it is titled in the partnership name or
  • -it is titled in the name of one or more partners and the instrument transferring title notes the titleholder’s capacity as a partner or the existence of a partnership
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8
Q

how do you determine partnership property in cases where the property is not titled??

A

under the common law, the courts will look at the follow factors which tend to indicate that the property was intended to be partnership property:

  • -acquisition of the property with partnership funds
  • -use of the property by the partnership in conducting the partnership’s business
  • -entry of the property in the partnership books as a partnership asset
  • -a close relationship between the property and the business operations of the partnership
  • -improvement of the property with partnership funds
  • -maintenance of the property with partnership funds
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9
Q

does a partner have a right to use partnership property as his own?

A

NO

  • -a partner is NOT a co-owner of partnership property
  • -a partner has no right to use partnership property other than for the benefit of the partnership
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10
Q

partner’s interests in the partnership

A

each interest is treated as personal property; transferable without dissolving the partnership; and attachable

— partner may NOT sell his status as a partner without UNANIMOUS consent of the all the other partners

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11
Q

right to participate in management

A

all partners have equal rights in the management of partnership business absent an agreement to the contrary

  • -decisions involving ordinary business= majority void
  • -decisions involved matters outside ordinary business = unanimous vote
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12
Q

what are the 4 fiduciary duties partners owe the partnership?

A
  1. duty of loyalty
  2. duty of care
  3. duty of obedience
  4. duty to provide complete and accurate information
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13
Q

renumeration

A

absent an agreement to the contrary, a partner has no rights to renumeration for the services rendered to the partnership except for the reasonable compensation in the winding up the of the partnership

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14
Q

indemnification

A

a partnership must indemnify every partner with regard to payments made and obligations reasonably incurred in carrying on the partnership business

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15
Q

apparent authority

A

1) the act of any partner
2) for apparently carrying on in the ordinary course the partnership business or business of the kind carried out by the partnership
3) binds the partnership UNLESS:

–the partner had no authority to act for the partnership in the particular manner AND the person with whom the partner was dealing knew or had received notification that the partner lacked authority

– partnership will be bound when agent contract sunder apparent authority for any contract within the scope of the partnership business

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16
Q

actual authority

A

the authority a partner reasonably believes he has based on the communications between the partnership and the partner

17
Q

liability of partners

A

–partners are liable for ALL CONTRACTS AND ALL TORTS entered into by a partner in the scope of the partnership business or with the authority of the partnership.

  • -liability is joint and severable for all obligations of the partnership
  • -each partner is personally and individually liable for the entire amount of partnership obligations
18
Q

what is a new incoming partner liable for?

A

–a new incoming partner is NOT liable for obligations incurred by the partnership before the person became a partner

19
Q

what is an outgoing partner liable for?

A

an outgoing or dissociated partner remains liable for all obligations incurred while he was a partner unless there has been payment, release, or novation.

20
Q

do the partners have criminal liability for the acts of their other partners?

A

no
–a partner will not be liable for the crimes of other parters committed within the scope of the partnership business unless the other partners participate in the commission of the crime either as principal or accessories

21
Q

dissociation

A

a change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business
HOW:
–oral or written notice of the partner’s express will to withdraw
–happening of an agreed event
–valid expulsion of the party
–the partner’s bankruptcy
–partner’s death or incapacity to perform partnership duties
–decision of the court that the partner is incapable of performing a partner’s duties
–termination of a business entity that is a partner

22
Q

what event will automatically trigger dissociation of a partnership at will?

A

a partner’s express will to withdraw from the partnership will automatically trigger dissolution fo the partnership

23
Q

events that trigger dissolution of a partnership

A
  • -notification by any partner of an express will to withdraw as a partner
  • -expiration of the term or completion of the undertaking of the partnership, consent of all the partners
  • -the happening of an event that makes it unlawlful for the partnership to continue
  • -issuance of a judicial decree
24
Q

what is the order of distribution of partnership assets?

A
  1. creditors (including partners who are creditors)

2. partner’s accounts

25
Q

limited liability partnership

A
  • -NOT PERSONALLY LIABLE FOR LLP’S OBLIGATIONS
  • -must file a statement of qualification with the secretary of state
  • -name of the partnership MUST end with the letters LLP
  • -partner in limited partnership is still held liable for their own personal acts
26
Q

limited partnership

A

–comprised of one or more general partners and one or more limited partners

  • general partners = personally liable for partnership obligations
  • limited partners = not personally liable for beyond any agreed upon contributions

–> created by filing a certificated of information with the state

27
Q

duties owed by the general and limited partners

A

general partners– owe the same duty of care and loyalty as a regular partnership

limited partners– owes NO fiduciary duties to the partnership and thus is free to compete with the partnership and have interests adverse to those fo the partnership unless the agreement provides otherwise

28
Q

what is the right to assign partnership interests in a limited partnership?

A

a partner’s right to distributions is personal property that may be transferred in whole or in part

  • -the transfer gives the transferee only the right to receive the transferred distribution and to demand an accounting thereon
  • -the transfer does NOT make the transferee a partner or give the transferee any rights as a partner
    • the transferring partner still remains a partner and the transfer does not constitute a dissociation or cause a dissolution
29
Q

what are the rights specific to general partners only?

A
    • right to management –> each general partner has equal rights in the management and conduct of the limited partnership’s activities
    • right to information
  • -indemnification
30
Q

what are the rights specific to limited partners only?

A
  • -management rights –> only if the partnership agreement allocates them this right
  • -right to information
31
Q

power to bind the limited partnership after dissolution

A
    • after dissolution, a partnership will be bound by any acts of a general partner that are appropriate for winding up the partnership
  • -the partnership can also be bound by acts of a general partner that are NOT appropriate for the winding up if the acts would have bound the partnership before dissolution and the party with whom the general partner dealt did not have notice of the dissolution
32
Q

limited liability companies LLC

A
  • -hybrid
  • -taxed like a partnership
  • -offers its owners (called members) the limited liability of shareholders of a corporation
  • -can be run like either a corporation or a partnership
33
Q

how is an LLC formed?

A
  • -filing a certificate of organization with the secretary of state
  • -management is presumed to be by all members but the operating agreement can provide otherwise
34
Q

what duties are owed in a member-managed LLC

A

–each member owes the other members the duty of care and the duty of loyalty

35
Q

what duties are owed in a manager-managed LLC

A

managers– owe the duty of loyalty and care

members– may authorize or ratify an act by a manager that would otherwise violate the duty of loyalty

36
Q

piercing the LLC veil

A

members and managers are NOT personally liable for the LLC’s obligations
–courts may pierce the veil for similar reasons as they would to pierce the veil of a corporation

37
Q

transfers of interest in an LLC

A
  • -an assignment of a member’s interest in an LLC transfers only the member’s right to receive distribution, NOT management rights
  • -one can become a member of an LLC ONLY with the consent of ALL members or as provided in the operating agreement
38
Q

dissolution of an LLC

A

a dissolution of an LLC with result if any of the following occur:

  • -an event or circumstance that the operating agreement states causes dissolution
  • -the consent of all the members
  • -the passage of 90 consecutive days during which the LLC has no members

Partnerships-Bar (1 decks)

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