Pg 45 Flashcards
What are the elements of a partnership?
- PTRS: partners don’t have to be individuals
– PROFIT: must associate for profit and share in the profits
– CONTROL: share in control of the business
What does it mean that partners don’t have to be individuals?
They can be corporations or other types of associations
Is profit-sharing alone enough to show that there is a partnership?
No, it is just evidence that there could be a partnership
Partnerships involve sharing profits and what other things?
Sharing losses, control of the business, and contributing capital
What does the contribution of capital involve for a partnership?
It can be cash or property
What does it mean that you need to share control of the business to have a partnership?
You only need the power to share in significant managerial tasks, but that power does not have to be exercised.
What is the control with regard to a partnership?
The authority of partners to act on each other’s behalf. Each has the apparent authority to contract for the partnership, and unless there’s a contrary agreement, all partners have equal rights to manage and do business.
Is it possible to have a partnership by estoppel because a third-party relied?
Yes
What is the fiduciary element of a partnership?
An obligation of loyalty to the joint concern and the utmost good faith, fairness, and honesty in dealings with other partners relating to the enterprise.
The fiduciary element of a partnership only applies to members that are what?
Known to each other
The fiduciary element of a partnership bars what?
Blatant self dealing and situations when personal interest could conflict with those the fiduciary interest is owed to
What is the liability that each partner has with regard to a partnership?
Joint and several liability
How does a court determine if a partnership exists?
It looks at all of the attendant facts and circumstances such as:
- the right to manage and control the business
- the sharing of profits and losses
- intent of the parties
- contributions of capital
*** but profit sharing is the most important one because without it there is no partnership
What is the intent that is required for a partnership to exist?
The parties just need to intend to form the relationship that the law deems a partnership
What are alternatives to partnerships?
- employer-employee – debtor-creditor – lessor-lessee – franchisor-franchisee – landlord-tenant
What is a general partnership?
When two or more people carry on as co-owners of a business for profit. There doesn’t have to be intent form a partnership. Should have a detailed partnership agreement about management, contribution, profit and loss sharing, partner authority, withdrawal, removal of a partner, etc. This can be formed by an informal agreement among the participants
What are the required elements for a general partnership?
- association that involves a voluntary relationship
- two or more people
– person: individuals, partnership, corporation, other associations
– business: continuous ongoing trade or occupation done on a private basis
– for profit: intent to make money
– co-owners: right to participate in control of the business
– carry-on: do business for a sustained period of time
– business: trade, occupation, a professional
Do general partnerships have pass-through taxation?
Yes
Does there need to be a government or public filing for a general partnership?
No
Does there need to be an intent to create a partnership for a general partnership?
No, you just look at the conduct of the parties and the circumstances of their relationship. All they have to intend is to do the things that make a partnership.
What is the fiduciary duty for a general partnership?
Utmost care, good faith, loyalty to other partners
Do general partners all have authority to contract for the partnership?
Yes, anyone partner combined all the others
What is the liability with regard to a general partnership?
Each partner is personally liable for the debts of the partnership and the acts of the partners that are done in the course and scope of the partnership business. There is unlimited personal liability.
What is involved in a limited partnership?
This is a way to profit-share by passive investors because the risk of loss is limited to their investment so they are not personally liable for partnership debts. There must be at least one general partner and one limited partner. Must file a verified certificate with provisions where are the limited partnership’s principal place of business is. Only the general partner is involved in the managing of the partnership
What is the role of the general partner with regard to a limited partnership?
He has complete control to manage the enterprise and unlimited personal liability. He also has a fiduciary obligation to the partnership.
Do general partners have a duty to disclose information to limited partners even if the limited partners do not demand it?
Yes. The partners are in a fiduciary relationship where they must disclose material facts to each other.
