R6 Module 4 Flashcards
what are the elements of forming a general partnership?
1) two or more persons
2) who agree expressly or impliedly
3) to carry on as co-owners a business for profit
Is a writing generally necessary to create a general partnership? What if the partnership is to own real property?
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
A partner’s interest in partnership property is subject to attachment to satisfy the partner’s alimony obligation. True or false?
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
What is the liability of each partner for the partnership obligations?
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
If the partnership agreement is silent, how are profits and losses divided in a partnership?
if the partnership agreement is silent, profits and losses are divided equally, regardless of the contribution of each partner
for what services is a partner entitled to compensation if the partnership agreement is silent on the issue?
if the agreement is silent on the issue, a partner generally is not entitled to any compensation
can a limited partnership be formed with limited liability for all partners?
No. A limited partnership must have at least one general partner who will be personally liable for all partnership debts
is a limited partner personally liable for the debts of the partnership?
No. A limited partner is not personally liable for the debts of the partnership unless the limited partner is also a general partner
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?
False. Limited partners are like shareholders of a corporation and have no apparent authority to bind their partnership in contract
can a limited liability company be formed with limited liability for all members?
Yes. Members of a limited liability company are not personally liable for obligations of the company
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?
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
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?
profits are shared equally, regardless of capital contributions
when does a member of an LLC have a right to a distribution?
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
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?
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 is a limited partnership similar to a corporation?
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)
which of the following businesses offer flow-through taxation for their owners: partnership, limited partnership, limited liability company, or corporation?
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
sole proprietorship characteristics
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”
general partnership/joint venture characteristics (only for-profit)
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
limited liability partnership characteristics
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