Rules

Question 1

A partnership is an association of two or more persons to carry out a for-profit business as co-owners. Is it possible to form a partnership between a corporation and another partnership?

Answer 1

Yes.

For purposes of forming a partnership, a person is an individual, corporation, government entity, or another partnership. Therefore, a partnership may be formed between a partnership and a corporation.

Question 2

What kind of intent is necessary to form a partnership?

Answer 2

Two or more person with intent to carry on a business for profit as co-owners. Specific intent to form a partnership is not required.

Question 3

What six kinds of payments can be used to rebut the presumption that a partnership was intended and created even when the payments intend to be a sharing of profits?

Answer 3

(1) Debts
(2) Interest on a loan
(3) Rent
(4) Wages or other compensation paid
(5) Goodwill payments stemming from the sale of a business
(6) Annuities paid to surviving spouses or beneficiaries

Question 4

When will a person be characterized as a partner by estoppel and be liable to third parties?

Answer 4

When a person represents himself either orally, in writing, or implied by conduct as a partner, he will be a partner by estoppel, and he will be liable to third parties if the third party reasonably relied on the representation and suffered damages as a result.

Question 5

Generally, a person who is held out by another as a partner without consent is not under a duty to deny that representation. When is it not a defense that the purported partner was unaware that she was being represented as a partner?

Answer 5

If the representation was made in a public manner.

Question 6

What two fiduciary duties does a partner owe to the partnership and to the other partners?

Answer 6

(1) Duty of care
(2) Duty of loyalty

Question 7

Is a written agreement required to form a partnership?

Answer 7

No, unless the agreement cannot be performed within a year (SoF).

Question 8

When is a partner entitled to remuneration for services rendered to the partnership?

Answer 8

Absent agreement to the contrary, a partner is not entitled to remuneration.

Exceptions:
(1) When the partner renders services in winding up
(2) When the partners agree to pay a partner for her efforts

Question 9

When must a partnership indemnify a partner who incurs personal liability?

Answer 9

For personal liabilities in the ordinary course of business of conducting partnership business or in order to preserve the partnership’s business or property.

Question 10

A partnership can be contractually bound when a partner acts with either actual or apparent authority. How can a partnership escape liability when a partner acts with apparent authority?

Answer 10

When the third parry possesses actual knowledge of the lack of apparent authority.

Question 11

What is the rule regarding use of partnership property?

Answer 11

A partner may use or possess partnership property only on behalf of the partnership. A partner using partnership property for personal benefit must compensate the partnership.

Question 12

What rights does a partner have with respect to access to records and information of the partnership’s business?

Answer 12

Partners and their agents have the right to access, inspect, and copy partnership records and books. Upon demand, partners must furnish any and all information affecting the partnership.

Question 13

Does a partnership agreement govern a partnership or does RUPA?

Answer 13

If it exists, the partnership agreement will govern the partnership.

Question 14

Under what circumstances might a judicial expulsion of a partner occur?

Answer 14

When the partner has either:

(1) Engaged in misconduct that adversely or materially affects the partnership business
(2) Willfully and persistently caused a material breach of the partnership agreement
(3) Breached a duty owed to the partnership or other partners

Question 15

When a partner dissociates from a partnership and that partner’s interest is purchased by the partnership, does the partner remain responsible for partnership obligations that occurred prior to dissolution?

Answer 15

The partnership must generally indemnify the partner against all partnership liabilities, whether the liabilities were incurred before or after the dissociation.

An exception exists for liabilities incurred by the partnership due to the dissociated partner’s post-dissociation actions.

Question 16

What does a statement of dissociation filed with the state do?

Answer 16

(1) Constitutes a limit on the dissociated partner’s authority
(2) Gives third parties notice of the dissociation as of 90 days after the statement is filed
(3) Reduces the window of partnership liability for a dissociated partner’s actions from two years to 90 days

Question 17

Under the duty of loyalty, what is a partner required to refrain from doing?

Answer 17

(1) Competing with the partnership
(2) Advancing an interest adverse to the partnership
(3) Usurping a partnership opportunity without notifying the partnership

Question 18

What does a partner’s duty of care entail?

Answer 18

A partner is required to refrain from engaging in:

(1) Grossly negligent or reckless conduct
(2) Intentional misconduct
(3) Knowing violations of the law

Question 19

When is titled property in the name of an individual partner actually the property of the partnership?

Answer 19

When the instrument indicates either the named person’s capacity as a partner or the existence of the partnership.

Also, property purchased with partnership assets or credit is presumed to be partnership property.

Question 20

How is a judgment for a third party against a partnership usually satisfied?

Answer 20

The creditor must first exhaust partnership assets before levying on a partner’s personal assets.

Question 21

When a partner dissociates from the partnership, but the partnership is not dissolved, what happens to the partner’s interest?

Answer 21

The partnership must buy out the partnership interest, at a value determine by the what the interest would be worth if the partnership was wound up on the date of dissociation.

Question 22

What are procedures for converting a limited partnership into a partnership?

Answer 22

(1) Consent of all general and limited partners
(2) Cancellation of the limited partnership certificate

Conversion takes effect upon cancellation of the certificate.

Question 23

Which partners can make decisions as to matters in the ordinary course of business? Which partners can make decisions as to matters outside the ordinary course of business?

Answer 23

All partners have equal rights in the management and conduct of the partnership.

A majority are needed for matters in the ordinary course, an all partner’s consent is required for matters outside the ordinary course.

Question 24

What happens when there is a partnership agreement that addresses the division of partnership profits, but is silent on the division of partnership losses?

Answer 24

If there is no agreement, equal division of profits and losses is presumed.

When the agreement only touches profits, losses are to be shared in the same manner as the profits would be.

Question 25

When is a partnership liable for a partner’s tortious acts, including fraud?

Answer 25

When the tortious acts are committed in the ordinary course of the partnership or with partnership authority, whether actual or apparent.

Question 26

What powers does a person winding up the partnership business have?

Answer 26

(1) Dispose of and transfer partnership property
(2) Discharge partnership liabilities
(3) Preserve the business or property to maximize value
(4) Distribute assets to settle partners’ accounts

Question 27

What are the exceptions to first satisfying a judgment from partnership assets over a partner’s personal assets?

Answer 27

(1) Partnership is a debtor in bankruptcy
(2) Partner consent
(3) Partner is independently liable
(4) Partnership assets are clearly insufficient
(5) Exhaustion of partnership assets would be excessively burdensome
(6) It is otherwise equitable to do so

Question 28

How is the partnership affected by the criminal act of one of the partners?

Answer 28

A partnership may be convicted of a crime for which the penalty is a fine levied on partnership assets.

Merely being a partner, however, is not sufficient to make a partner criminally liable for the acts of another partner.

Question 29

What is the exception to the general rule that a partner’s knowledge or notice of fact is immediately imputed to the partnership?

Answer 29

When a fraud on the partnership is committed by or with the consent of the partner.

Question 30

What are the procedures for converting a partnership into a limited partnership?

Answer 30

(1) All of the partners consent
(2) Articles of conversion are filed with the state

The conversion takes effect upon the filing of the articles of conversion.

Question 31

How may a person become a limited partner after the limited partnership is formed?

Answer 31

Upon written consent of all partners, unless the partnership agreement provides otherwise.

Question 31

In a limited partnership, a general or limited partner may contribute a promise to pay cash, to provide property, or to perform services. What happens when a partner is unable to perform an enforceable promise for this kind of future contribution?

Answer 31

A partner is obligated to the limited partnership with respect to any enforceable promise of future contribution. When a partner is unable to perform due to death or disability, the partner or his estate must pay the cash value of the promise.

Question 31

What types of events can trigger a partnership’s dissolution?

Answer 31

(1) Actions of the partners
(2) Operation of law
(3) Judicial determination

Question 32

How may a general partner withdraw from a limited partnership?

Answer 32

At any time, so long as the general partner gives written notice to the other partners.

Question 33

Upon dissolution of a limited partnership, who may wind up the partnership’s business?

Answer 33

The general partners who have not wrongfully dissolved the limited partnership. If there are no general partners, the limited partners may wind up.

Question 34

Which partners may participate in winding up the partnership’s business once it has dissolved?

Answer 34

Any partner who has not wrongfully dissociated from the partnership may participate.

Question 35

Does a partnership have to repay a loan that a partner makes in furtherance of the ordinary course of business?

Answer 35

Yes, including interest from the date of the loan or advance.

Question 36

What are the standing requirements for a limited partner to bring a derivative action on behalf of the limited partnership?

Answer 36

(1) Must be a partner at the time the action is brought
(2) Must have been a partner at the time of the wrongful transaction
(3) Unless the status of partner devolved on him by operation of law or pursuant to the partnership agreement

Question 37

Upon dissolution, how are partnership assets distributed?

Answer 37

First applied to obligations, including partners who are creditors, then to partners.

Question 38

What must the name of a limited liability partnership contain at the end?

Answer 38

LLP/RLLP/etc.

Question 39

What is the partner’s liability for a tort committed by the limited liability partnership?

Answer 39

A partner is not personally liable for an obligation of an LLP unless the partner also engaged in the conduct that caused the obligation.

Question 40

What partnership roles are required in a limited partnership?

Answer 40

At least one general partner and at least one limited partner.

Question 41

What is the procedure for a limited partner to withdraw from a limited partnership?

Answer 41

Six months prior written notice to each general partner.

Question 42

A general partner in a limited partnership is personally liable to third parties and is typically liable to the partnership as well. What kind of partner would take on this liability?

Answer 42

Typically an entity such as a corporation that has its own liability shield.

Question 43

What is a general partner’s accountability if he withdraws from a limited partnership in violation of the partnership agreement?

Answer 43

Damages caused by the breach of his agreement.

Question 44

What rights to distribution does a partner have in a limited partnership if those rights are not specified in the partnership agreement?

Answer 44

A partner has no rights to receive a distribution before withdrawal or dissolution of a partnership.

Question 45

Can a partnership continue doing business after dissolution but prior to winding up?

Answer 45

Yes, so long as all partners, including any properly dissociated partners, agree to waive rights to terminate the partnership.

Question 46

What must a certificate of limited partnership contain?

Answer 46

(1) Name of the partnership
(2) In-state address
(3) Name and address of in-state agent for service of process
(4) Name and business address of each partner
(5) Statement of duration for the limited partnership
(6) Signatures of all general partners

Question 47

When might a limited partner be personally liable for partnership obligations?

Answer 47

If he:

(1) Also serves as a general partner
(2) Participates in the control of the business, or
(3) Allows his name to be used in the name of the limited partnership

Question 48

What happens when there is only one general partner in a limited partnership and that general partner withdraws?

Answer 48

The withdrawal terminates the partnership, unless all partners agree in writing to carry on the business and appoint a general partner within 90 days.