Partnerships

Question 1

What is a partnership?

Answer 1

When two or more persons or entities intend to carry on a for-profit business as co-owners.

Do NOT need intent to form a partnership.

Question 2

Do you need a written agreement to form a partnership?

Answer 2

No.

Question 3

Effect of profit sharing

Answer 3

If there is profit sharing, there is a presumption that there is a partnership

Question 4

What is a partner by estoppel

Answer 4

A person will be treated as a partner if: there is a representation that the person is a partner, the person makes or consents to the representation, a third party reasonably relies on the representation, and the third party sufferes damages as a result.

Question 5

Partners are ___ of the partnership

Answer 5

Agents

Question 6

Partners owe duties of ____ and ___

Answer 6

Loyalty; Care.

Question 7

Rule re: partner’s transfer of his ptp interest

Answer 7

A partner has a transferable partnership interest - i.e. a partner may transfer the right to share in the profits & losses of the ptp AND to receive distributions

This does NOT cause dissolution or dissociation

Question 8

Partnership property

Answer 8

Property is ptp property IF it is acquired in the name of the ptp - it is property of the ptp, & NOT of the partners individually

A partner may use or possess ptp property ONLY on behalf of the ptp (unless agreement otherwise)

Question 9

A new partner must get the consent of __ the existing partners.

Answer 9

All.

Question 10

A ____ of partners must approve ordinary business decisions while ___ partners must approve matters outside the ordinary course.

Answer 10

Majority; all.

Question 11

A partner ___ derive a personal benefit from the use or possession of partnership property.

Answer 11

Cannot.

Question 12

A partner is ___ to the partnership for damages caused by wrongful dissociation.

Answer 12

Liable

Question 13

A partnership must indemnify a dissociated partner against all partnership liability incurred when?

Answer 13

Before or after the dissociation.

Question 14

A partnership is ____ for a partners torts in the course of the partnership business

Answer 14

Liable

Question 15

Partners are ____________ for all partnership obligations?

Answer 15

Jointly and severally liable. A judgment is first satisfied from the partnerhsips assets then the partners assets.

Question 16

A dissociation from a partnership at will causes?

Answer 16

The partnership to dissolve.

Question 17

Before winding up is complete, a partnership ____ resume carrying on its business as if dissolution had never occured.

Answer 17

May.

Question 18

At formation, an LP must have

Answer 18

at least one general partner and one limited partner.

Question 19

General partnership

Answer 19

A partnership will be a general partnership if it was formed without the formalities required of other types of partnerships

Question 20

Factors indicating a partnership may exist

Answer 20

1. Profit sharing (presumption of ptp)
2. Sharing of losses
3. Role/participation in day-to-day operations

**extensive activity: courts consider amount of related activities directed towards achieving a business’ end goal when determining whether a ptp exists

Question 21

Exceptions to profit-sharing presumption

Answer 21

1. Debt payments (including installment payments)
2. Interest/other loan charges
3. Rent
4. Wages/other compensation paid to an employee or independent contractor
5. Goodwill payments stemming from the sale of a business (including installment payments)
6. Annuities/other retirement or health benefits paid to a beneficiary, representative, or designee of a deceased or retired partner

Question 22

Rights of transferee of a partner’s ptp interest

Answer 22

Transfer of ptp interest creates in transferee a right to receive distributions to which the transferor would otherwise be entitled

Transferee is NOT entitled to participate in management or conduct of the ptp business OR access ptp records

Transfer of partner’s ptp interest does NOT make transferee a partner, unless the other partner(s) consent to making the transferee a partner

Question 23

When is a dissociation wrongful?

Answer 23

only if in breach of provision of the partnership agreement or before the completion of the undertaking.