R6 Module 4 Flashcards

1
Q

what are the elements of forming a general partnership?

A

1) two or more persons
2) who agree expressly or impliedly
3) to carry on as co-owners a business for profit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Is a writing generally necessary to create a general partnership? What if the partnership is to own real property?

A

a general partnership can be formed whenever two or more persons agree to enter into a business for profit as co-owners. The agreement need not be in writing; indeed it need not even be oral.
It can be implied from conduct. The fact that the partnership will own property does not change this

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

A partner’s interest in partnership property is subject to attachment to satisfy the partner’s alimony obligation. True or false?

A

False. A partner has no right to possess partnership property other than for partnership purposes, and a partner’s creditors cannot get any greater rights than the partner’s in such property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What is the liability of each partner for the partnership obligations?

A

partners are personally liable for all contracts entered into and all torts committed by other partners within scope of partnership business or which otherwise authorized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

If the partnership agreement is silent, how are profits and losses divided in a partnership?

A

if the partnership agreement is silent, profits and losses are divided equally, regardless of the contribution of each partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

for what services is a partner entitled to compensation if the partnership agreement is silent on the issue?

A

if the agreement is silent on the issue, a partner generally is not entitled to any compensation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

can a limited partnership be formed with limited liability for all partners?

A

No. A limited partnership must have at least one general partner who will be personally liable for all partnership debts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

is a limited partner personally liable for the debts of the partnership?

A

No. A limited partner is not personally liable for the debts of the partnership unless the limited partner is also a general partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

A limited partner has apparent authority to bind his or her limited partnership on contracts apparently within the scope of the partnership business.

True or False?

A

False. Limited partners are like shareholders of a corporation and have no apparent authority to bind their partnership in contract

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

can a limited liability company be formed with limited liability for all members?

A

Yes. Members of a limited liability company are not personally liable for obligations of the company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

a member of a limited liability company has apparent authority to bind the company on contracts apparently within the scope of the company’s business unless the company’s articles of organization provide otherwise. True or False?

A

True. Generally, unless the articles of organization provide otherwise, limited liability companies are member-managed, and the members have apparent authority to bind the company on contracts apparently within the scope of the company’s business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

under the uniform limited liability company act (ULLCA), if articles of organization and operating agreement are silent, how are profits and losses divided in a limited liability company?

A

profits are shared equally, regardless of capital contributions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

when does a member of an LLC have a right to a distribution?

A

a member of an LLC has a right to a distribution when the articles of organization, an operating agreement, or an agreement of the members so provides

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

is a member of an LLC personally liable for the debts of the LLC? What if the member is also a manager of the LLC?

A

No. A member of an LLC is like a limited partner or shareholder and is not personally liable for the LLC’s obligations. If the member is also a manager, the member is treated as an officer or director of a corporation rather than as a general partner of a limited partnership and is not personally liable for the obligations of the LLC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

how is a limited partnership similar to a corporation?

A

a limited partnership is similar to a corporation in that both can be formed only by compliance with statute and filing with the secretary of state, and both limited partnerships and corporations provide limited liability for investors (except general partners)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

which of the following businesses offer flow-through taxation for their owners: partnership, limited partnership, limited liability company, or corporation?

A

a partnership, limited partnership, limited liability company (although the owners of a limited liability company opt to be taxed as a C corporation), and corporations that elect S corporation status offer flow-through taxation for their owners.
C corporations do not offer flow-through taxation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

sole proprietorship characteristics

A

1) owner simply operates, no formation requirements
2) unlimited personal liability for all business obligations
3) sole proprietor manages directly or can appoint manager
4) sole proprietor can sell business at will
5) “flow through taxation”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

general partnership/joint venture characteristics (only for-profit)

A

1) can be formed by written (if more than 1 yr under Statute of Frauds) or formal agreement or mere conduct, no formation requirements
2) unlimited personal liability for all business obligations
3) owners manage directly or can appoint manager
4) partners cannot transfer interest without unanimous consent
5) “flow through taxation”
6) all partners have equal rights (profits and losses) if absent from agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

limited liability partnership characteristics

A

1) must file statement of qualification with state (state statute similar to corp.)
2) partners generally not liable for business obligations unless due to their negligence
3) partners manage directly or can appoint manager
4) partners cannot transfer interest without unanimous consent
5) “flow through taxation” but limited partners not managing have passive loss restrictions
6) no indefinite life unless agreement specifies otherwise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

limited partnership characteristics

A

1) must file certificate of limited partnership within state
2) contains general partner and limited partner
3) general partner has unlimited liability, limited partner only has investment at risk
4) general partners exclusive managers; limited partners do not manage
5) neither general or limited partners can transfer ownership without unanimous consent
6) “flow through taxation” but limited partners not managing have passive loss restrictions

21
Q

limited liability company characteristics

A

1) must file articles of organization with state
2) members not generally personally liable beyond their investment
3) all members manage directly or can appoint manager
4) absent of an agreement, members cannot transfer ownership without unanimous consent
5) “flow through taxation” but members not managing have passive loss restrictions
6) have apparent authority to bind entity in contract if members managing LLC agents
7) voting strength proportional to contributions

22
Q

corporation characteristics

A

1) must files articles of incorporation or corporate charter with state
2) shareholders not personally liable beyond their investment
3) managed by board of directors, who appoints officers to run day to day operations
4) shareholders free to transfer ownership unless agree otherwise
5) income taxed at corporate level and taxed again to shareholders when dividends distributed

23
Q

subchapter s corporation characteristics

A

1) must file articles of incorporation or corporate charter with state AND file “S” election
2) shareholders not personally liable beyond their investment
3) managed by board of directors, who appoints officers to run day to day operations
4) shareholders can generally transfer ownership unless agree otherwise, but cannot transfer to foreign or entity shareholders
5) “flow through taxation” but shareholders not managing have passive loss restrictions

24
Q

when sole proprietorship is a good option for business structure?

A

1) individual wants to manage business
2) wants to claim business income or losses on personal taxes
3) not bother with formalities
Note: individual risks all their personal assets

25
Q

difference between joint venture and general partnership

A

a joint venture is formed for a single transaction or project or related series of transactions or projects

26
Q

when general partnership needs unanimous consent

A

1) admitting new partners
2) confessing judgment (liability in lawsuit) or submitting claim for arbitration
3) making fundamental change in partnership

Note: only majority vote for ordinary course of business

27
Q

agency law in partnership

A

-partner is the agent
-partnership is the principal
-the act of a partner carrying out ordinary business for partnership binds partnership through apparent authority
-if partner acts without actual or apparent authority, partnership can be bound if it knows material facts of transactions and ratifies expressly or by accepting benefits of transaction

28
Q

property rights for partnership

A

-partners do not own partnership property
-cannot use property other than for partnership uses
-cannot use it for:
1) assigning or selling partnership property for own benefit
2) partner’s personal creditors cannot attach partnership property to satisfy an individual partner’s debts

29
Q

rights in partnership interest

A

-partner can assign interest in profits and surplus at any time
-assignee obtains rights to receive partner’s share of profits
-assignee does not become partner, and therefore cannot attend partner meetings, inspect books or vote
-assignee can only obtain rights if an unanimous vote to be made a partner

30
Q

charge order

A

creditor of an individual partner can obtain it against individual partner’s share of profits

31
Q

when a partner dies

A

-partner’s profits vests in their heirs
-partner’s right to partnership property vests in surviving partners

32
Q

distributions for partners

A

-partners not entitled to distributions for services rendered in partnership

33
Q

dissociation in partnership

A

-is a change in the relationship of the partners caused by any partner ceasing to be associated in carrying out business
-does not necessarily cause dissolution
Events of dissociation:
1) partner’s notice of withdrawal
2) partner dies
3) partner becomes bankrupt
4) event occurs specified in partner agreement
5) partner expelled

34
Q

consequences of dissociation

A

-partner’s right to participate in management ceases
-apparent authority still continues until third parties given notice of dissociation

35
Q

events that cause a dissolution in partnership

A

1) partnership sells at will
2) partner gives notice of withdrawal
3) partners agree to dissolution
4) court orders dissolution
5) termination of partnership occurs when winding up process complete
Note: death of partner does not cause dissolution if other partners want to continue within 90 days of partner’s death

36
Q

dissociation and debt/liabilities of partner

A

-partner still liable for own debts until creditors release him/her or are given a novation
-liable for debts by partnership up to 2 yrs after dissociation unless partner gives notice of dissociation
-a new admitted partner will not be personally liable for debts of partnership before becoming partner

37
Q

distribution of assets order in partnership

A

when solvent partnership dissolved and assets reduced to cash, cash used to pay partnership’s liabilities:
1) creditors (includes partners who are creditors)
2) partners (first to return their contributions and then on account of profits)

38
Q

order of distribution steps

A

1) for amts due or owed, deduct amount owed to creditors and then amounts to return to partner’s contributions from assets
2) if money still remains, divide profits among partners
3) if assets less than what is owed to creditors and partners, loss divided among partners
Note: if absent in agreement, losses and profits divided equally

39
Q

if partnership incurs loss upon dissolution…

A

-then partners generally need to contribute more capital to cover losses
-but if some partners do not want to contribute, losses are divided proportionally to remaining partners and contribute capital if some partners insolvent
-if some partners solvent and refuse to pay up, other partners who covered it can request recovery of it of solvent partners through indemnification

40
Q

difference between limited liability partnership and general partnership

A

1) partners generally not liable for acts of fellow partners, employees or agents
2) liable for own negligence and negligence of those under direct control
3) generally not personally liable for debts and contractual obligations of LLP

41
Q

contents to be included in certificate of limited liability partnership

A

registration include:
1) LLPs name
2) name and location of registered office
3) number of partners
4) description of partnership business

42
Q

general partner in limited liability partnership

A

-personally liable for all debts, even for losses
-can be a limited partner
-can be a secured or unsecured creditor of partnership

43
Q

limited partner roles

A

-liability limited to investment and unpaid commitments
-no right to take part in management activities
-not an agent of business and cannot bind business in contract
-right to review financial records and books
-partners cannot be held liable for participating in management and can vote on extraordinary matters
-does not owe fiduciary duty to partnership

44
Q

dissolution of limited liability partnership

A

1) occurrence of time or event stated in partnership agreement
2) written consent of partnership
3) withdrawal or death of general partner (not limited partner)
4) judicial decree

45
Q

order of distributions in limited liability partnership

A

1) creditors (even partner creditors)
2) former partners in satisfaction of liabilities not paid on own withdrawal
3) current partners (first contributions, then profits)
Note: if loss, general partner is only liable to contribute capital to make up debts

46
Q

operating agreement

A

-an agreement among members regarding how they will operate or run their business
-intent is to forestall and resolve disputes among members
-agreements not filed with state
-under Uniform Limited Liability Co. Act, need not be in writing

47
Q

contents in articles of organization for LLCs

A

1) stmt entity is an LLC
2) name of LLC
3) street address of LLC’s registered office
4) name of registered agent
5) if mgmt to be vested in managers
6) names of persons managing company

48
Q

transferability of ownership rights in LLC

A

-cannot transfer interest without unanimous consent
-can freely transfer interest in distributions (profits or dissolution)
-not free to assign rights to manage LLC

49
Q

termination of LLC

A

1) expiration of period of duration stated in articles
2) consent of all members
3) judicial decree or administrative order to dissolve LLC for violation of law
4) death, retirement, resignation, bankruptcy, incompetence of member