MC Partnerships & LLCs

Question 1

What is a partnership

Answer 1

An association of two or more persons to carry on as co-owners a business for profit. Partnership law is based on the law of contract and agency. Florida partnerships are governed y the Revised Uniform Partnership Act (RUPA).

Question 2

Except with respect to partners’ personal liability for partnership obligations, is a partnership a legal entity distinct from its partners?

Answer 2

yes

Question 3

Is title to land allowed to be held in the partnership name

Answer 3

yes

Question 4

May a partnership sue or be sued in the partnership name?

Answer 4

yes

Question 5

How does the governing law of a partnership work?

Answer 5

Generally, the RUPA provides a default set of rules. Partners are free to agree–through a partnership agreement–to abide by different rules for governing the relationships among themselves, and the RUPA will govern only those issues not provided for in the partnership agreement.
Note, however, that certain RUPA provisions cannot be waived (e.g., the duty of loyalty, the right of a court to expel a partner).

Question 6

What level of agreement is needed for partnership formation

Answer 6

No formal agreement is required to form a partnership; the parties’ intent may be implied from their conduct

Question 7

Is writing required to form a partnership; what is the consequence if no writing is used

Answer 7

No writing is required to form a partnership. However, because of the Statute of Frauds, if partners wish to have an enforceable agreement to remain partners for more than one year, they generally must execute a writing reflecting their agreement

Question 8

What is the capacity requirement for partnership formation

Answer 8

Anyone who is capable of entering into a binding contract may be a partner. A would-be partner who lacks capacity is liable only to the extent of his capital contribution, but the partnership with such person is not void; it will continue to exist until steps are taken to dissolve it

Question 9

What happens if a partnership is formed to achieve an illegal purpose

Answer 9

A partnership formed to achieve an illegal purpose is void, and the court will not compel an accounting or a settlement of a void partnership’s affairs

Question 10

What consent is required for one to become a partner in the partnership

Answer 10

Unless otherwise agreed, no one can become a partner without the express or implied consent of all partners

Question 11

How can one find proof of partnership existence

Answer 11

Since no formalities are required to form a partnership, it is sometimes difficult to determine whether the relationship between the parties is a partnership or something else. To determine whether a partnership exists, courts generally look to the intent of the parties. If they intended to carry on a business as co-owners, there is a partnership even if they did not subjectively intend to be partners. Where the parties’ intent is uncertain, the court considers certain rules.

Question 12

Where the parties’ intent to form a partnership is uncertain, the courts consider what five things?

Answer 12

(i) the sharing of profits raises presumption of partnership unless the share was received as payment of a debt, for services rendered, as rent payment, as an annuity or other retirement benefit, as interest on a loan, or for the sale of goodwill of a business (this is the loan factor that raises a presumption of partnership);
(ii) Title to property is held in joint tenancy or in common;
(iii) the parties designate their relationship as a partnership;
(iv) the venture undertaken by the parties requires extensive activity (e.g., if A and B each contribute $100,000 to buy a building of rental apartments that must be managed, it is more likely that they are partners than if they each contributed $100,000 to buy shares in a company that manages real estate); and
(v) sharing of gross returns

Question 13

What is the liability of a person who by words or conduct represents himself as a partner or consents to being represented by another as a partner

Answer 13

He will be liable to third parties who extend credit to the partnership in reliance on the representation

Question 14

Is it true that a person held by another as a partner is not liable as a partner unless he actually consents to the holding out (the mere failure to deny a representation of partnership would not give rise to liability as a purported partner)

Answer 14

Yes

Question 15

What is the liability of a person who holds another out as a partner

Answer 15

He thereby makes that person his agent to bind him to third parties. (If there is a partnership, only those partners who know of or consent to this holding out will be bound.)

Question 16

What is includable in partnership property

Answer 16

There is no restriction on what may be partnership property, and sometimes it is not always obvious whether property is partnership property or the individual property of a partner. The RUPA has a number of provisions concerning ownership of titled property (both titled personal property and real property)

Question 17

Under the RUPA, titled property is deemed to be partnership property if: one of what two things

Answer 17

1) it is titled in the partnership name; or
2) it is titled in the name of one or more partners and the instrument transferring title notes the titleholder’s capacity as a partner or the existence of a partnership

Question 18

Under the RUPA, when is property presumed to be partnership property

Answer 18

if it was purchased with partnership funds, regardless of in whose name title is held. “Partnership funds” includes not only the partnership’s cash, but also the partnership’s credit.

Question 19

Under the RUPA, if property is held in the name of one or more partners and (what two things), the property is presumed separate property, even if the property is used for partnership purposes

Answer 19

(i) the instrument transferring title does not indicate the person’s capacity as a partner or mention the existence of a partnership and
(ii) partnership funds were not used to acquire the property

Question 20

In cases not governed by the explicit RUPA provisions (e.g., in cases of property that is not titled), in determining whether property is partnership property or the separate property of a partner, courts will probably continue to look to the following common law criteria which tend to indicate that the property was intended to be partnership property (6)

Answer 20

a. Acquisition of the property with partnership funds;
b. Use of the property by the partnership in conducting the partnership’s business;
c. Entry of the property in the partnership books as a partnership asset;
d. A close relationship between the property and the business operations of the partnership;
e. Improvement of the property with partnership funds; and
f. Maintenance of the property with partnership funds

Question 21

What are the rights of a partner in partnership property

Answer 21

A partner is not a co-owner of partnership property and has no transferable interest in specific property of the partnership. Thus, a partner’s creditor may not reach partnership property to satisfy the personal obligations of a partner.

Question 22

What is a partner’s interest in the partnership

Answer 22

Each partner has a transferable interest in the partnership, which consists of his share of partnership profits, losses, and distributions. Absent an agreement to the contrary, a partner shares equally in the partnership profits and must contribute to the losses in proportion to his share of the profits.

1. the interest in the partnership is treated as personal property;
2. the interest is transferable without dissolving the partnership or causing the transferring partner’s dissociation; and
3. It is attachable

Question 23

Does the transfer of a partner’s interest give the transferee rights with regard to the operation of the partnership?

Answer 23

No. It merely entitles the transferee to receive profits to which the transferring partner would otherwise be entitled. Also note that a partner may not sell his partner status (i.e., may not make another a partner) without the unanimous consent of the other partners

Question 24

all partners have equal rights in the management of the partnership business absent what

Answer 24

an agreement to the contrary

Question 25

what portion of vote is required for decisions involving (i) decisions made within the ordinary course of business, and (ii) matters outside the ordinary course of business

Answer 25

decisions involving matters within the ordinary course of business can be controlled majority vote, but matters outside the ordinary course of business require unanimous consent.

Question 26

each partner owes what two duties to the partnership

Answer 26

the duty of loyalty and the duty of care

Question 27

what three things does the duty of loyalty require

Answer 27

that the partner (i) account for all profits or other benefits derived by the partner in connection with partnership business; (ii) not deal with the partnership as one with an adverse interest; and (iii) not compete with the partnership

Question 28

what does the duty of care require

Answer 28

the partner refrain from engaging in negligent, reckless, or unlawful conduct or intentional misconduct

Question 29

is there generally a right to remuneration for services rendered to the partnership

Answer 29

no, absent an agreement to the contrary, except for services performed in winding up the business

Question 30

where a partner has impliedly or expressly promised to devote time to the partnership and fails to do so, what happens

Answer 30

she may be charged in an accounting for damages caused to the partnership

Question 31

how does indemnification and other repayment work where one partner is required to pay or satisfy more than his share of a partnership debt

Answer 31

he may require the other partners to contribute their pro rata shares

Question 32

where must books and information be kept

Answer 32

the chief executive office

Question 33

does each partner have a right to inspect and copy the partnership books

Answer 33

yes

Question 34

upon demand, must each partner render true and full information of all things affecting the partnership

Answer 34

yes

Question 35

does a judgment against the partnership alone count the same as a judgment against the individual partners

Answer 35

no. to reach partner’s personal assets, there must be a judgment against the partner. note that actions may be brought against the partnership and the partners in the same action

Question 36

what two things may a partnership bring an action against a partner for

Answer 36

breach of the partnership agreement or of fiduciary duty

Question 37

for what may a partner bring an action against the partnership or other partners

Answer 37

to enforce any right created by the partnership agreement or the RUPA, or that otherwise belongs to the partner

Question 38

is every partner considered an agent of the partnership

Answer 38

yes, for business purposes. an act performed by any partner either with actual or apparent authority, or that is ratified by the partnership, will bind the partnership and thereby other partners.

Question 39

what is the three part provision for apparent authority in RUPA

Answer 39

(i) the act of any partner;
(ii) for apparently carrying on in the ordinary course the partnership business or business of the kind carried out by the partnership;
(iii) binds the partnership unless:
1) the partner had no authority to act for the partnership in the particular matter; and
2) the person with whom the partner was dealing knew or had received notification that the partner lacked authority
Note that partners only have apparent authority to bind the partnership to any contract within the scope of the partnership business (which includes transactions for the purpose of carrying on business). if a contract is outside the scope of partnership business, the partnership generally will not be bound unless the partner has actual authority

Question 40

may any partner transfer property held in the name of the partnership?

Answer 40

yes

Question 41

what happens if partnership property is held in the name of one or more partners (who are identified as such) but the partnership is not named and the partnership wants to transfer the property

Answer 41

transfer by the titleholders in their own names is effective. In either case, if the transferring partner lacked authority, the partnership may recover the property from the initial transferee but not from a subsequent bona fide purchaser

Question 42

if the partnership’s interest is not indicated in the instrument transferring the property, what happens

Answer 42

the transfer may be made by those in whose name the property is held. if the transferee gives value without notice or lack of authority, she takes free of the partnership interest

Question 43

is a partnership bound by an act of a partner if the partner has actual authority

Answer 43

yes

Question 44

what is actual authority and from where can it come

Answer 44

actual authority is the authority a partner reasonably believes he has based on the communications between the partnership and the partner. Such actual authority can come from the partnership agreement or a vote of the partners. A majority vote is required to authorize ordinary business; a unanimous vote is required to authorize extraordinary acts

Question 45

what is a statement of authority

Answer 45

it grants or limits a partner’s authority to enter into transactions on behalf of the partnership. the statement must be filed with the department of state and, for real property transfers, with the county recorder. Note that a grant of authority in a properly filed statement of authority is conclusive in favor of a bona fide purchaser for value

Question 46

what is a limitation of authority

Answer 46

a properly filed limitation of authority to transfer real property gives purchasers constructive knowledge of a lack of authority, but filing a limitation does not give constructive knowledge of the limitation with regard to any other transaction

Question 47

how may a partner listed in a filed statement of partnership authority effectively deny her authority

Answer 47

by filing a statement of denial with the department of state

Question 48

Under RUPA, a partner has notice of a fact when the partner has one of what three things happen

Answer 48

Under RUPA, a partner has notice of a fact when the partner (i) has actual knowledge of the fact, (ii) is notified of the fact, or (iii) has reason to know of the fact based on the surrounding circumstances

Question 49

is a notification effective if it is merely delivered to a place of business held out by the partner as a place for receiving communications

Answer 49

yes

Question 50

when is a partner’s notice of a fact relating to the partnership imputed to the partnership

Answer 50

immediately unless the partner having notice is participating in a fraud against the partnership

Question 51

Where one partner, acting within the scope of partnership business, defrauds a third party, is the partnership liable?

Answer 51

yes

Question 52

Where one partner, acting not within the scope of partnership business, defrauds a third party, is the partnership liable?

Answer 52

No

Question 53

If a partner seeks to defraud the partnership as part of a transaction with a third party and the third party is aware of the fraud, is the partnership still liable to the third party?

Answer 53

No

Question 54

What is the nature of liability of a partnership between the individual partners

Answer 54

liability is joint and several for all obligations of the partnership, whether arising in contract, tort, or for breach of trust. However, a judgment is not personally binding on a partner unless she has been served and the creditor has exhausted partnership assets

Question 55

Is an incoming partner personally liable for obligations incurred by the partnership before the person became a partner?

Answer 55

No

Question 56

Does an outgoing or dissociated partner remain liable for obligations arising while he was a partner in the partnership?

Answer 56

Yes unless there has been payment, release, or novation. Liability generally continues until 90 days after he has filed a notice of dissociation with the department of state

Question 57

Will partners be criminally liable for the crimes of other parnters committed within the scope of the partnership business

Answer 57

No, unless the other partners participated in the commission of the crime either as principals or accessories.

Question 58

What is a dissociation

Answer 58

Dissociation is the change in the relationship caused by a partner’s ceasing to be associated in the carrying on of the business. Dissociation does not necessarily result in the winding up of the business of the partnership

Question 59

Dissociation can be caused by what 6 things

Answer 59

(i) a partner’s express will to withdraw;
(ii) the happening of an agreed-upon event;
(iii) the expulsion of a partner pursuant to the partnership agreement, unanimous vote of the partners if it is unlawful to carry on business with that partner, or judicial decree upon a partner’s misconduct;
(iv) the bankruptcy, death, or incapacity of a partner;
(v) the appointment of a receiver of a partner’s transferable interest; or
(vi) the termination of an entity-partner

Question 60

What happens if a partner wrongfully dissociates

Answer 60

A partner who dissociates in breach of the partnership agreement or prior to an agree-upon time or event is liable for damages caused by the wrongful dissociation

Question 61

What happens to a partner’s right to participate in management if he dissociates

Answer 61

the right ceases.

Question 62

What happens to the partner’s interest as far as compensation when he dissociates

Answer 62

The partnership must purchase (buy out) the partner’s interest at either liquidation or going-concern value, with the values determined as if the partnership assets were sold and the partnership would up on the date of dissociation. Interest must be paid on the buyout price from the date of dissociation to the date of payment, and damages for wrongful dissociation reduce the amount due to the dissociated partner. The partnership must indemnify him against known predissociation liabilities.

Question 63

What happens to a partner’s interest as far as compensation if the partnership is for a definite term or particular undertaking and a partner wrongfully dissociates before the term expires

Answer 63

The partner is not entitled to payment of the buyout price until the term expires or the undertaking is completed, unless he can establish that earlier payment will not cause undue hardship to the partnership business. Interest must be paid on the buyout price from the date of dissociation to the date of payment.

Question 64

A partnership can be bound by an act of a dissociated partner undertaken within one year after dissociation if what three things happens

Answer 64

(i) the act would have bound the partnership before dissociation, and (ii) the other party to the transaction reasonably believed the dissociated partner was still a partner and (iii) did not have notice of dissociation

Question 65

A dissociated partner can be liable for obligations incurred by the partnership within one year after the partner dissociates if what two things happens

Answer 65

if (i) when entering the transaction the other party reasonably believed the dissociated partner was still a partner and (ii) did not have notice of the partner’s dissociation.
Note that a dissociated partner can cut short this period of liability by filing a notice of dissociation with the department of state; all persons are deemed to have notice of a dissociation 90 days after such a notice is filed

Question 66

A partnership is dissolved and its business must be wound up when any of the following five things occur:

Answer 66

(i) notification by a partner at will of an intent to withdraw;
(ii) in a partnership for a definite term or particular undertaking (a) within 90 days after a partner’s death, bankruptcy, or wrongful dissociation, at least half of the remaining partners wish to wind up the partnership, (b) all partners consent to wind up the business, or (c) the term expires or the undertaking is completed; (iii) the happening of an even agreed to in the partnership agreement requiring winding up; (iv) the happening of an event making the partnership business illegal; or (v) the issuance of a judicial decree that the business is to be wound up.

Question 67

A partnership will be bound by a partner’s postdissolution acts if one of either what two things happens

Answer 67

if either (i) the acts are appropriate for winding up the business, or (ii) the third party did not have notice of the dissolution. A third party will be deemed to know of a dissolution 90 days after a statement of dissolution, if any, is filed.

Question 68

Who may participate in dissolving (or winding up) the partnership business, and in what scenarios

Answer 68

If all partners agree to a dissolution or the partnership term expires, then all partners have the right to wind up the partnership business. If the partnership is dissolved by a partner’s death or bankruptcy, the surviving or remaining partners have the right to wind up the partnership business. A partner who wrongfully dissolves is not entitled to wind up the affairs of the partnership.

Question 69

When may partners waive dissolution and continue the business

Answer 69

Any time before winding up is complete, the partners may decide to waive the dissolution and continue the partnership by unanimous vote of the partners who have not wrongfully dissolved. Such waiver does not affect the rights of persons who have relied on the dissolution before receiving notice of the waiver.

Question 70

What is the order of distribution of a solvent partnerships assets upon dissolution

Answer 70

The assets are reduced to cash and the partnership liabilities are paid in the following order: (i) Creditors, including partners who are creditors; and (ii) partners’ accounts. Note that if the account has a positive balance, that amount is distributed to the partner. If the account balance is a negative amount, the partner must contribute the amount of the deficiency to the partnership. Note that if a question asks you to determine the amounts owing to the partners, deduct from the assets left at dissolution any amount still owing to creditors (including partners who are creditors) and then deduct the partners’ contributions (if these have not already been repaid). If money stikll remains, it is a profit that must be divided among the partners per the partnership agreement

Question 71

What happens if a partner fails to contribute to the partnership’s debt upon dissolution

Answer 71

All of the other partners must contribute the additional amount necessary in the proportion in which the partners share losses. Where a partner is forced to pay more than his share of the partnership’s debts, he is entitled to contribution from the other partners to equalize the shares

Question 72

How does a limited partnership generally work

Answer 72

A limited partnership is comprised of one or more general partners and one or more limited partners. It is created under specific statutory authority, and the liability of a limited partner for partnership debts is generally limited to the capital that she contribute to the partnership

Question 73

Every limited partnership must have a writing that sets out what 4 things

Answer 73

(i) the amount of cash or agreed value of all property or services to be contributed by each partner; (ii) the times at which future contributions are to be made; (iii) for any person who is both a general partner and a limited partner, a specification of transferable interest the person owns in each capacity; and (iv) any events of dissolution. Note that it is important to remember that a limited partnership is a creature of statute and thus can exist only on compliance with the limited partnership statute. Watch out for exam questions that set up facts where one partner wants limited liability and the other partner tells him that he can be a limited partner, but there is no filing with the department of state. Since there is no statutory compliance, a limited partnership is not created and all partners are subject to full liability

Question 74

What are the rules regarding the name of a limited partnership

Answer 74

The partnership name may contain the name of any partner. The name of each limited partnership must contain the words “limited partnership” or “limited,” the abbreviation “LP” or “Ltd”. The name also must be distinguishable from the names of other entities on file with the division of corporations of the department of state

Question 75

How does it work, in a limited partnership, if a person wants to be both a general partner and a limited partner

Answer 75

He may be both but he is subject to the obligations, duties, and restrictions of a general partner when he acts as a general partner, and those of a limited partner when he acts as a limited partner

Question 76

In a limited partnership, a person may become a general partner in what four ways

Answer 76

(i) as provided in the partnership agreement; (ii) as the result of a conversion or merger; (iii) with the consent of all partners; or (iv) following the dissociation of a limited partnership’s last general partner, by the provisions accorded for nonjudicial dissolution

Question 77

In a limited partnership, a person may become a limited partner in what three ways

Answer 77

(i) as provided in the partnership agreement; (ii) as the result of a conversion or merger; or (iii) with the consent of all the partners

Question 78

May a partner contribute in services renders or even a promise to contribute such cash property or services rendered in the future?

Answer 78

yes

Question 79

When is a limited partner’s promise to contribute enforceable

Answer 79

It is not enforceable unless it is in writing and signed by the limited partner

Question 80

Only in what case may a partner’s obligation to contribute be compromised

Answer 80

Only by consent of all of the partners. However, a previous creditor may enforce the original obligation. Furthermore, if a partner properly receives the return of her contribution, she remains liable to the partnership for the return for one year, but only to the extent necessary to discharge partnership debts. If the return was improper, she remains liable for the entire amount of the return for six years

Question 81

Is a person who becomes a general partner of an existing limited partnership personally liable for preexisting obligations

Answer 81

no (provisions for a general partner in a limited partnership are similar to that of a general partnership)

Question 82

Is a limited partner (in a limited partnership) personally liable for an obligation of the limited partnership solely be reason of being a limited partner? What if that partner participates in the management and control of the limited partnership?

Answer 82

No and still no

Question 83

What are the five rights of both general and limited partners in a limited partnership

Answer 83

(i) to share in distributions; (ii) to transfer their right to distributions (but the transferee’s participation in the partnership is limited to the right to receive the transferred distributions–the transferring partner remains a partner, and the transfer does not constitute a dissociation or cause a dissolution; (iii) to transact business with the partnership; (iv) to apply for dissolution when it is not reasonably practicable to carry on business; and (v) to maintain a direct or derivative action against the limited partnership

Question 84

In what way are distributions split between partners in a limited partnership

Answer 84

unless otherwise provided in the partnership agreement, distributions are made on the basis of the partners’ contributions. NOTE that this is different from the general rule under the RUPA which provides that profits and losses are to be shared equally

Question 85

What are the two solvency requirements when making distributions for a limited partnership

Answer 85

a limited partnership may not make a distribution if after making the distribution: (i) the partnership would not be able to pay its debts as they become due in the ordinary course of the limited partnership’s activities; or (ii) the partnership’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the partnership were to be dissolved, wound up, and terminated at the time of the distribution, to satisfy the preferential rights of partners whose preferential rights are superior to those of persons receiving the distribution

Question 86

What happens if a general partner consents to an improper distribution under the solvency requirements

Answer 86

The general partner is personally liable to the limited partnership for the amount that the distribution exceeds what could properly have been distributed. Any partner who receives an improper distribution knowing that it is improper may be forced to return the improper amount to the partnership. However, no personal liability for an improper distribution arises if the distribution appeared to have been proper based on reasonably prepared financial statements

Question 87

A partnership may maintain a derivative action to enforce a right of a limited partnership if one of what two things

Answer 87

if (i) the partner first makes a demand on the general partners to bring an action to enforce the right and the general partners do not bring the action within a reasonable time; or (ii) a demand would be futile

Question 88

What are those rights specific to general partners in a limited partnership

Answer 88

a general partner of a limited partnership also has all of the rights of a partner in regular partnership, including the right to manage the partnership and right to receive information

Question 89

What are those rights specific to a limited partner in a limited partnership

Answer 89

A limited partner also has the following rights: (i) to participate in management and control of the limited partnership without becoming personally liable for the limited partnership’s obligations, and (ii) to receive information

Question 90

What are the duties owed by a general partner in a limited partnership

Answer 90

a general partner owes the limited partnership limited fiduciary duties of care and loyalty, similar to those owed by a partner in a general partnership. A general partner does not violate the duty of loyalty merely because the general partner’s conduct furthers his own interests

Question 91

What are the duties owed by a limited partner in a limited partnership

Answer 91

A limited partner has no fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner, and does not violate a duty or obligation under the partnership agreement merely because his conduct furthers his own interest. However, to the extent a limited partner has management duties under the partnership agreement, he owes, with respect to the exercise of those duties, the duties of loyalty and care, and he must discharge those duties consistently with the obligation of good faith and fair dealing

Question 92

What happens if a person erroneously believes that she is a limited partner in a limited partnership

Answer 92

she can avoid general liability if, upon discovering the mistake, she files an appropriate certificate of limited partnership or certificate of amendment or withdraws from future equity participation by filing a certificate of withdrawal. However she will be liable as a general partner to any third party who actually and in good faith believed she was a general partner if the transaction occurred prior to her filing an appropriate certificate or withdrawing from future equity participation

Question 93

In addition to those events causing dissociation of a partner in a general partnership, a limited partner in a limited partnership can be dissociated by what two things

Answer 93

(i) expulsion by the unanimous consent of the other partners if it is unlawful to carry on the partnership activities with the person as a limited partner, there has been a transfer of all of the persons, transferable interest in the partnership, the limited partner is a limited liability company or partnership that has been dissolved and whose business is being wound up, or in certain cases where the limited partner is a corporation and ceases to exist or conduct business as a corporation; or (ii) conversion or merger of the limited partnership if the person ceases to be a limited partner as a result. Note that upon a person’s dissociation as a limited partner, he has no further rights as a limited partner, and any interest he owned in the partnership he then owns as a mere transferee

Question 94

In a limited partnership, a person’s dissociation as a general partner is wrongful only if one of what two things

Answer 94

(i) it is in breach of an express provision of the partnership agreement, or
(ii) it occurs before the termination of the limited partnership and the person withdraws as a general partner by express will, is expelled as a general partner by judicial determination, is dissociated by becoming a debtor in bankruptcy, or the person is not an individual, trust, or estate and is dissociated because it willfully dissolved or terminated

Question 95

A limited partnership can be bound by the acts of a dissociated general partner only if one of what two things

Answer 95

(i) the act would have bound the limited partnership before the dissociation; or (ii) less than two years have passed since the dissociation and the other party does not have notice of the dissociation and reasonably believes the dissociated general partner is a general partner

Question 96

A dissociated general partner is not generally liable for limited partnership obligations incurred after his dissociation except for what two things

Answer 96

(i) if the general partner’s dissociation resulted in the dissolution and winding up of the partnership’s activities, the dissociated general partner is liable to the same extent as a general partner on an obligation incurred by the limited partnership after dissolution; or (ii) if the dissociation did not result in the dissolution and winding up of the partnership, the dissociated general partner is liable only if a general partner would be liable on the transaction or less than two years have passed since the dissociation and the other party does not have notice of the dissociation and reasonably believes the dissociated general partner is a general partner

Question 97

For what three reasons may a limited partnership be administratively dissolved by the department of state

Answer 97

for failure to pay fees, file records, or deliver an annual report

Question 98

When may a limited partnership be judicially dissolved

Answer 98

if, upon application of a partner, it is not reasonably practicable to carry on the limited partnership in conformity with the partnership agreement

Question 99

Unless judicially or administratively dissolved, a limited partnership is dissolved, and its activities must be wound up, only upon the occurrence of any of what five things

Answer 99

1) the happening of an event specified in the partnership agreement;
2) the consent of all general partners and of all limited partners;
3) after the dissociation of a person as a general partner, if there is at least one remaining general partner, the consent of all partners;
4) after the dissociation of a person as a general partner, if there are no remaining general partners, the passage of 90 days after the dissociation, unless before the end of the period all remaining partners consent to, and admit, at least one general partner; or
5) the passage of 90 days after the dissociation of the last limited partner, unless before the end of the period the limited partnership admits at least one limited partner

Question 100

What three things happens if a foreign limited partnership (a limited partnership formed under foreign laws) intending to transact business in Florida fails to register with the department of state for a certificate of authority to transact business

Answer 100

(i) it bars the partnership from suing in Florida until it registers, but the partnership may defend itself in Florida courts; (ii) the partnership’s contracts are not impaired; and (iii) the partnership is deemed to have appointed the department of state as its agent for service of process with respect to claims arising out of its business in the state. (Limited partners may not be held liable as general partners solely by reason of failure to register)

Question 101

What is required in a general partnership for conversion (and merger) (changing into another organization)

Answer 101

all partners must consent. Note that a partnership that has been converted is essentially the same entity that existed before conversion, and all liabilities continue as obligations of the converted entity

Question 102

What is required in a limited partnership for conversion (and merger) (changing into another organization)

Answer 102

all general partners must consent as well as limited partners who own a majority of the rights to receive distributions. A limited partnership that has been converted is essentially the same entity that existed before conversion, and all liabilities continue as obligations of the converted entity.

Question 103

Does conversion or merger destroy personal liability for obligations of an organization that was converted or merged

Answer 103

no

Question 104

what is the essential element of a limited liability partnership

Answer 104

the major advantage is that partners are not personally liable for the limited liability partnership’s obligations

Question 105

What are the requirements regarding a limited liability partnerships name

Answer 105

the name of the limited liability partnership must end with the words “Registered Limited Liability Partnership” or “Limited Liability Partnership,” or the abbreviation “RLLP”

Question 106

What is the extent of the liability of partners in a limited liability partnership

Answer 106

A partner in a limited liability partnership is not personally liable (directly, indirectly, or by way of contribution) for the obligations of the partnership, whether arising in contract, tort, or otherwise. However, a partner remains personally liable for her own wrongful acts

Question 107

What is the essence of a limited liability company

Answer 107

An LLC is a statutory form of business organization designed to give investors both limited liability as in a corporation and federal (but not state) income taxation as a partnership. Most operations rules governing LLCs parallel the rules governing corporations

Question 108

What is the scope of transferability of interests in an LLC

Answer 108

a member may freely transfer his interest in profits and losses, but may not transfer his interest in managing the company without the unanimous consent of the other members

Question 109

How does management work in an LLC (who manages, who approves, how removed)

Answer 109

By default, management is vested in the members, but the articles of organization or an operating agreement may provide for management by a manager or managers. A decision of a majority-in-interest of the members or managers is controlling. A manager may be chosen or removed by the consent of a majority-in-interest of the members. A manager holds office until a successor has been chosen, unless the manager resigns, is removed, or dies at an earlier time.

Question 110

In an LLC, a member or manager may be personally liable for damages to the LLC or any other person for acts or omissions, if the member or manager breached or failed to perform her duties and this breach or failure to perform constitutes one of what five things

Answer 110

(i) a violation of criminal law, unless the member or manager had reasonable cause to believe her conduct was lawful or no reasonable cause to believe her conduct was unlawful; (ii) a transaction from which the member or manager derived an improper personal benefit, either directly or indirectly; (iii) an improper distribution; (iv) where the LLC or a member is the plaintiff, the act or failure to act constitute a conscious disregard of the best interest of the LLC or willful misconduct; or (v) where a third party is the plaintiff, the act or failure to act involved recklessness or was committed in bad faith, with malicious purpose, or in a manner exhibiting a wanton and willful disregard of human rights, safety, or property

Question 111

What are the rules for naming an LLC

Answer 111

The name must include the words “limited liability company” or the abbreviation LLC . The name must be distinguishable from the names of other entities on file with the division of corporations of the department of state. Additionally, the name may not state or imply that the LLC is (i) organized for a purpose other than that authorized by statute or the LLC’s articles of organization; or (ii) connected with a government agency, corporation, or other entity

Question 112

What sort of authority do members of an LLC have to bind the LLC

Answer 112

If management is vested in the membership, individual members have apparent authority to bind the company contractually; otherwise, only the elected managers normally have such authority

Question 113

What are an LLC’s basic rules on finances (profit sharing, upon dissolution, etc)

Answer 113

profits and losses are shared among the members on the basis of the agreed value of their capital contributions. An LLC may from time to time distribute its property to the members, but no distributions may be made if the LLC would be insolvent after the distribution. Subject to the company’s solvency, a member is entitled to the return of her capital contribution on dissolution

Question 114

An LLC dissolves upon what 5 things

Answer 114

upon the occurrence of an event specified in the operating agreement; upon unanimous consent of all members; upon the passage of 90 days when there are no members; when a court orders dissolution; or when the department of state files an administrative dissolution. Note that the procedure for winding up LLCs is similar to that for corporations

Question 115

How is voting weighed in an LLC

Answer 115

in proportion to the member’s then-current percentage or other allocable interest in the profits of the LLC. In a manager-managed LLC, each manager has equal rights in the management and conduct of the LLC’s activities

Question 116

How does dissociation work in an LLC

Answer 116

A person has the power to dissociate as a member of an LLC at any time, although a wrongfully dissociating member may be liable to the LLC for damages. Generally, the events that will cause dissociation of a partner in a partnership also will cause dissociation of a member of an LLC.