Partnerships Flashcards
What is a partnership?
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.
Do you need a written agreement to form a partnership?
No.
Effect of profit sharing
If there is profit sharing, there is a presumption that there is a partnership
What is a partner by estoppel
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.
Partners are ___ of the partnership
Agents
Partners owe duties of ____ and ___
Loyalty; Care.
Rule re: partner’s transfer of his ptp interest
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
Partnership property
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)
A new partner must get the consent of __ the existing partners.
All.
A ____ of partners must approve ordinary business decisions while ___ partners must approve matters outside the ordinary course.
Majority; all.
A partner ___ derive a personal benefit from the use or possession of partnership property.
Cannot.
A partner is ___ to the partnership for damages caused by wrongful dissociation.
Liable
A partnership must indemnify a dissociated partner against all partnership liability incurred when?
Before or after the dissociation.
A partnership is ____ for a partners torts in the course of the partnership business
Liable
Partners are ____________ for all partnership obligations?
Jointly and severally liable. A judgment is first satisfied from the partnerhsips assets then the partners assets.
A dissociation from a partnership at will causes?
The partnership to dissolve.
Before winding up is complete, a partnership ____ resume carrying on its business as if dissolution had never occured.
May.
At formation, an LP must have
at least one general partner and one limited partner.
General partnership
A partnership will be a general partnership if it was formed without the formalities required of other types of partnerships
Factors indicating a partnership may exist
- Profit sharing (presumption of ptp)
- Sharing of losses
- 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
Exceptions to profit-sharing presumption
- Debt payments (including installment payments)
- Interest/other loan charges
- Rent
- Wages/other compensation paid to an employee or independent contractor
- Goodwill payments stemming from the sale of a business (including installment payments)
- Annuities/other retirement or health benefits paid to a beneficiary, representative, or designee of a deceased or retired partner
Rights of transferee of a partner’s ptp interest
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
When is a dissociation wrongful?
only if in breach of provision of the partnership agreement or before the completion of the undertaking.
