PROPERTY ISSUES Flashcards
What are the 3 rules for dertermining partnership property?
It is partnership property if it is acquired in the
partnerships’s name or in a partner’s
name where it is apparent from the document that she is acting for a partnership (e.g., it mentions a partnership or says she is a partner).
2. It is presumed to be partnership property if partnership funds are used.
3. It is presumed to be a partner’s property if
acquired in her name without partnership funds and there is no sign that she is acting for a partnership.
Polly bought a truck in her name with her own money. Her partnership uses the truck for deliveries. Does the truck belong to the partnership or does it belong to Polly?
It is presumed to belong to Polly. if acquired in her name without partnership funds and there is no sign that she is acting for a partnership
What are the partnership’s rights in the use of the partnership property? Why?
Rights are totally unrestricted. The partnership owns the property
If the truck is partnership property, may the partnership pledge it as collateral for a loan?
Yes the Partnership’s rights are totally unrestricted in partnership property.
If the truck is partnership property, may a partnership creditor levy on / attach the truck?
Yes. A partnership creditor can seize partnership assets to satisfy the partnership’s debts.
Is a partner a co-owner of partnership property?
No. A partner is not a co-owner of partnership
property and has no interest in partnership property which can be transferred. (The partnership is an entity; the partnership itself, not the partners, owns its property!)
When an a partner use partnership property?
A partner can simply use partnership property for partnership purposes
Assume the truck is partnership property. May Polly use it on her vacation?
No. Unless the partnership consents.
Can Polly pledge her interest in the truck as collateral for a personal loan? Can Polly devise her interest in the truck to her husband? Can Polly’s judgment creditor attach her interest in the truck?
No. Polly has no interest in the truck. A partner has no interest in partnership property.
A partner’s ownership interest in a partnership is called his __________
Partnership interest
The partnership interest is who’s property?
the personal property of the partner
Are there restrictions on what the partner can do with his partnership interest?
Yes
What two rights is a partnership interest comprised of?
(1) management rights (i.e., a partner’s right to participate in the management of the business, to obtain information about the partnership, and to be recognized as a “partner”); and
(2) financial rights (i.e., the partner’s right to receive his share of any profit distributions made by the partnership).
Can a partner unilaterally transfer his management rights and thereby make the transferee a “partner.” Why or why not? What is the rule called?
No, uless otherwise agreed, a partner cannot unilaterally transfer his management rights and thereby make the transferee a “partner.” The
default rule for the admission of a new partner is that it requires a unanimous vote of the existing partners.
This is called the pick your partner rule
Can a partner unilaterally transfer his financial rights?
Yes, Unless otherwise agreed, a partner can unilaterally transfer his financial rights.
Why can a partner unilaterally transfer his financial rights?
The transferee merely has the right to receive profit distributions from the partnership that would have otherwise gone to the partner. The transferee is not a partner; the transforor is still a partner and retains all of the management rights of a partner.
A, B, C, and D are partners in the ABCD partnership. B purports to sell his partnership interest to X. X demands to be recognized as a partner and seeks to participate in the management of the partnership (vote, request information, etc). Is X a partner?
No. X can only be admitted as a partner upon a unanimous partner vote, which did not occur. A partner cannot unilaterally transfer management rights. X is a “mere transferee,” which means that X is simply entitled to any profit distributions that would otherwise have been paid to B. B is still a partner with all of the rights of a partner (other than the right to profit distributions).
Can Polly unilaterally assign her financial interest in the partnership? Can Polly devise it to her husband? Can a judgment creditor of Polly attach (“charge”) her financial interest in the partnership?
Yes. A partner’s financial rights are personal property and are unilaterally transferable (voluntarily or involuntarily). The transferee, however, does not become a partner; the transferee just gets any profit distributions that would otherwise have been paid to Polly.
