Rights and Liabilities Between General Partners Flashcards
What are the fiduciary duties that partners owe to each other and to the partnership?
General partners are fiduciaries of each other and the partnership. Therefore, general partners owe to each other and the partnership:
- The duty of loyalty: general partners may never engage in self-dealing; may never usurp partnership opportunities; and may never make a secret profit at the partnership’s expense.
What is the remedy for a partner who breaches the duty of loyalty to the partnership?
It is an action for accounting - the partnership may recover losses that are caused by the breach and also may disgorge profits made by the breaching partner.
What are the partner’s rights in partnership property and liquidity?
There are three types of partnership property in NY:
1. Specific Partnership Assets: land, leases, or equipment, which are owned only by the partnership itself and therefore, may not be transferred by individual partners without partnership authority.
2. Share of Profits: personal property owned by individual partners so it may be transferred to third parties.
3. Share in management: an asset owned only by the partnership itself, and therefore, it cannot be transferred to third party - can’t be sold or conveyed.
In order to determine whether the fact pattern involves property owned by the partnership or personal property owned by an individual partner, the test is whose money was used to buy the property. If GP money was used, then it is GP property. If personal property/money was used, then it becomes personal property.
How does management work in a general partnership?
Absent an agreement, each partner is entitled to equal control (vote). 1 partner = 1 vote.
Do partners get a salary?
Absent an agreement, partners get no salary. Partners do get compensation for helping to wind-up the business.
How do partner’s share profits and losses?
Absent an agreement, profits are shared equally.
Absent an agreement, losses are shared like profits.
