Study Unit 17

Question 1

What type of partnership may be created without statutory formalities?

Answer 1

General partnership

Question 2

Is the intent to form a partnership required for the formation of a partnership?

Answer 2

An intest to form a partnership is not required. However, the co-owners must intend to make a profit even if no profit is earned.

Question 3

Does a transfer (assignment) of partnership interest result in a transfer of duties and obligation of the transferring partner?

Answer 3

Transfer of a partner’s interest does not

- Result in loss of rights (other than the right to transfer the interest)
- Excuse a partner’s performance of duties and obligations
- Make the recipient (e.g., a person or estate) a partner
- Dissociate or dissolve the partnership

Question 4

Will the death of a partner result in the dissolution of the partnership?

Answer 4

The death of a partner results in a dissociation but not a dissolution of the partnership.

Question 5

Under what circumstances is consent of all partners required (through voting)?

Answer 5

A unanimous vote is required to

- Amend a partnership agreement
- Admit a new partner
- Determine other nonroutine issues

Question 6

Give examples of the rights of partners in a partnership.

Answer 6

Partners have the right to

- Equal participation in management
- Access partnership information
- Use or possess partnership property
- Choose associates

Question 7

What is the apparent authority of a partner in a partnership limited to?

Answer 7

The scope of apparent authority of a partner is limited to carrying on in the ordinary course of business.

Question 8

Give examples of duties imposed upon partners.

Answer 8

• Fiduciary duty of loyalty
• Fiduciary duty of care
• Fiduciary duty of good faith and fair dealing

Question 9

To what extent is a new partner liable for obligation incurred prior to his or her admission to an existing partnership? To what extent is a withdrawing partner liable for obligation incurred before his or her withdrawal from an existing partnership?

Answer 9

Liability to the Existing Partnership

New Partner Limited to the extent of investment

Withdrawing Partner Limited to partnerships debts incurred before withdrawal unless creditors agree otherwise

Question 10

Give examples of circumstances under which dissociation of a partnership occurs.

Answer 10

A partner ceases to be associated in carrying on the business of the partnership upon

- Notice of the partnership of a partner’s express will to withdraw 
- An event specified in the agreement
- Expulsion under the partnership agreement
- Incapacity or death
- Bankruptcy or insolvency

Question 11

Name the written document required to be filed to form a limited partnership.

Answer 11

The certificate of limited partnership must be filed of the partnership will be treated as a general partnership.

Question 12

Give examples of powers of (1) general partners and (2) limited partners in a limited partnership.

Answer 12

General Partners Limited Partners
Right to: Right to:
- Equal participation in management - Propose and vote on partnership affairs that do not directly control partnership
Operations
- Access partnership information - Do business with the partnership
- Use or possess partnership property - Reasonable access to partnership records
- Choose associates - Inspect and copy partnership records
- Assign the limited partnership interest
- Apply for dissolution of the partnership
- Obtain an accounting of partnership affairs