Pg 45

Question 1

What are the elements of a partnership?

Answer 1

• 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

Question 2

What does it mean that partners don’t have to be individuals?

Answer 2

They can be corporations or other types of associations

Question 3

Is profit-sharing alone enough to show that there is a partnership?

Answer 3

No, it is just evidence that there could be a partnership

Question 4

Partnerships involve sharing profits and what other things?

Answer 4

Sharing losses, control of the business, and contributing capital

Question 5

What does the contribution of capital involve for a partnership?

Answer 5

It can be cash or property

Question 6

What does it mean that you need to share control of the business to have a partnership?

Answer 6

You only need the power to share in significant managerial tasks, but that power does not have to be exercised.

Question 7

What is the control with regard to a partnership?

Answer 7

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.

Question 8

Is it possible to have a partnership by estoppel because a third-party relied?

Answer 8

Yes

Question 9

What is the fiduciary element of a partnership?

Answer 9

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.

Question 10

The fiduciary element of a partnership only applies to members that are what?

Answer 10

Known to each other

Question 11

The fiduciary element of a partnership bars what?

Answer 11

Blatant self dealing and situations when personal interest could conflict with those the fiduciary interest is owed to

Question 12

What is the liability that each partner has with regard to a partnership?

Answer 12

Joint and several liability

Question 13

How does a court determine if a partnership exists?

Answer 13

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

Question 14

What is the intent that is required for a partnership to exist?

Answer 14

The parties just need to intend to form the relationship that the law deems a partnership

Question 15

What are alternatives to partnerships?

Answer 15

- employer-employee
– debtor-creditor
– lessor-lessee 
– franchisor-franchisee
– landlord-tenant

Question 16

What is a general partnership?

Answer 16

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

Question 17

What are the required elements for a general partnership?

Answer 17

• 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

Question 18

Do general partnerships have pass-through taxation?

Answer 18

Yes

Question 19

Does there need to be a government or public filing for a general partnership?

Answer 19

No

Question 20

Does there need to be an intent to create a partnership for a general partnership?

Answer 20

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.

Question 21

What is the fiduciary duty for a general partnership?

Answer 21

Utmost care, good faith, loyalty to other partners

Question 22

Do general partners all have authority to contract for the partnership?

Answer 22

Yes, anyone partner combined all the others

Question 23

What is the liability with regard to a general partnership?

Answer 23

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.

Question 24

What is involved in a limited partnership?

Answer 24

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

Question 25

What is the role of the general partner with regard to a limited partnership?

Answer 25

He has complete control to manage the enterprise and unlimited personal liability. He also has a fiduciary obligation to the partnership.

Question 26

Do general partners have a duty to disclose information to limited partners even if the limited partners do not demand it?

Answer 26

Yes. The partners are in a fiduciary relationship where they must disclose material facts to each other.