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AGENCY AND PARTNERSHIP > PARTNERSHIP > Flashcards

PARTNERSHIP Flashcards

1
Q

PARTNERSHIP TYPES

A

GENERAL
LIMITED
LLP
LLC

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2
Q

DEFINITION OF PARTNERSHIPS

A

AN ASSOCIATION OF TWO OR MORE PERSONS TO CARRY ON AS CO-OWNERS AS A BUSINESS FOR PROFIT (NO RIGHT TO COMPENSATION)

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3
Q

PARTNERSHIP FORMATION

A
  1. MAY BE IMPLIED
  2. MAY BE ORAL
  3. MUST BE LEGAL
  4. MUST HAVE PERMISSION
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4
Q

IMPLIED PARTNERSHIP FACTORS (PRESUMPTION)

A

INTENT

SHARING OF PROFITS

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5
Q

EXCEPTION TO DEFINITION OF PROFITS

A
  • payments for a debt,
  • services rendered,
  • rent,
  • annuity or retirement benefits,
  • interest on a loan, or
  • sale of goodwill of a business
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6
Q

FACTORS IN IMPLIED PARTNERSHIP (DO NOT CREATE PRESUMPTION)

A

PROPERTY COMMON OR JOINT
DESIGNATE AS P
EXTENSIVE ACTIVITY
GROSS RETURNS ARE SHARED

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7
Q

PARTNERSHIP BY ESTOPPEL

A

BY WORDS OR CONDUCT

  1. REPRESENTATION AND RELIANCE
  2. HOLDS OUT AS P (BUT NOT IF HELD OUT AS OTHER AS PARTNER UNLESS CONSENT) HE IS MY PARTNER, DO NOT NEED TO DENY
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8
Q

VOTING IN PARTNERSHIP

A

ONE PARTNER ONE VOTE

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9
Q

PARTNERSHIP PROPERTY IS P’s WHEN

A
  • TITLED TO P

- TRANSFER INSTRUMENT BY OR TO P (OR PARTY AS PARTNER)

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10
Q

PROPERTY IS PRESUMED SEPARATE FROM P AND OF PARTNER

A
  1. held in name of partner(s)
  2. instrument transferring title names owner only
  3. Partnership funds were not used
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11
Q

PROPERTY PRESUMED TO BELONG TO P

A

P FUNDS USED TO BUY P

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12
Q

UNTITLED PROPERTY FOR PARTNERSHIP USE CL

A
  1. Used partnership funds
  2. Use of property by partnership
  3. Listed in partnership books as an asset
  4. Relationship property and business
  5. Improvement with partnership funds
  6. Maintenance with partnership funds
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13
Q

RIGHTS OF PARTNERS

A
  1. MANAGEMENT
  2. SHARE P/L
  3. REASONABLE WINDING
  4. INDEMNIFY
  5. EXCESS PAYMENTS
  6. SUIT
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14
Q

DUTIES OF PARTNERS

A

LOYALTY
CARE
OBEDIENCE
DISCLOSURE

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15
Q

P DUTY OF LOYALTY

A

a. Partners must account for all profits or other benefits derived by the partner in connection with partnership business
b. Partners may not deal with partnership as one with an adverse interest
c. Partners may not compete with the partnership

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16
Q

P DUTY OF CARE

A

a. Partners must refrain from engaging in negligent, reckless, or unlawful conduct
b. Partners must refrain from engaging in intentional misconduct

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17
Q

P DUTY OF OBEDIENCE

A

a. Partners must obey all reasonable directions of the partnership
b. Partners must refrain from acting outside the scope of the partner’s actual authority

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18
Q

P DUTY OF DISCLOSURE

A

a. Partners must provide complete and accurate information concerning the partnership
b. Without demand: business and affairs
c. On Demand: any other information

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19
Q

PARTNER LIABILITY CONTRACTS

A

Contract liability—partners are liable on contracts made by a partner in the scope of the partnership business and on any other contracts expressly authorized by the partners: each partner is jointly and severally. ACT OF PARTNER WILL BIND P UNLESS NO AUTHORITY AND 3RD PARTY KNEW

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20
Q

TORT LIABILITY OF PARTNERS

A
  1. Tort liability—partners are liable for any torts committed by a partner or an employee of the partnership in the ordinary course of partnership business
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21
Q

GENERAL LIABILITY OF PARTNERS

A

a. Agreement: No, unless 3rd party
b. New Partner: A newly admitted partner is NOT personally liable for partnership obligations that arose before his admission. He can only lose the amount of his investment in the partnership. (For the liability of withdrawing (dissociating) partners, see “Liability of Dissociated Partner” below.)

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22
Q

PARTNERSHIP DISSOCIATION

A

a. Notice of the partner’s express will to withdraw
b. The happening of an agreed upon event
c. The valid expulsion of a partner
d. The partner becoming bankrupt
e. The death of an individual partner, or the termination of a partner that is a business entity, or
f. A court decision that a partner is incapable of performing her duties

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23
Q

CONSEQUENCES OF DISSOCIATION

A

LIQUIDATION (AUTOMATIC IN AT-WILL)

BUY OUT

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24
Q

PARTNERSHIP BUY OUT

A

Partnership continues in existence with the dissociated partner becoming entitled to a buy-out of his partnership interest.

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25
Q

PARTNERSHIP LIQUIDATION

A

partnership is dissolved and that its business must be wound up

26
Q

PARTNERSHIP DISSOLUTION

A 
AT WILL
TERM
AGREED EVENT
ILLEGALITY
JUDICIAL DECREE
27
Q

TERM PARTNERSHIP DISSOLUTION

A

1) Within 90 days after a partner’s death, bankruptcy, or wrongful dissociation, at least half the remaining partners express a will to wind up the business
2) All the partners express a will to wind up the business, or
3) The term expires or the undertaking is complete

28
Q

PARTNERSHIP DISTRIBUTION PRIORITY

A

CREDITORS (OUT AND IN)
CAPITAL CONTRIBUTIONS
PROFITS LOSSES

29
Q

PARTNER RIGHT TO WIND UP

A

Partners who have not wrongfully dissociated may participate in the winding up of the partnership’s business.

30
Q

WIND UP APP AUTHORITY

A

Partners retain apparent authority to bind the partnership to a third party on new business even after an event requiring winding up. But the partnership can protect itself by notifying creditors directly of the dissolution (effective immediately). In addition, any partner who has not wrongfully dissociated may file a public statement of dissolution (becomes effective 90 days after filing).

31
Q

WRONGFUL DISSOCIATION

A

a. Dissociation is in breach of an express term in the partnership agreement
b. Partner withdraws, is expelled, or becomes bankrupt before the end of the term.
c. Term v. “At will partnership”
d. A partner who wrongfully dissociates is liable to the partnership for any damages caused by the dissociation.

32
Q

LIABILITY OF PARTNERS POST

A
  • Liable for partnership liabilities incurred within two years after the dissociation (assuming that dissolution has not occurred).
  • He can protect himself by notifying
    • creditors directly of his dissociation (effective immediately)
    • filing a public statement of dissociation (becomes effective 90 days after filing).
    • Partnership can make the filing as well.
33
Q

APPARENT AUTHORITY AFTER DISSOCIATION

A
  • Period: A dissociated partner has apparent authority to bind the partnership or a period of time not exceeding two years after dissociation(assuming that dissolution has not occurred).
  • The partnership can protect itself by
    • notifying creditors directly of the dissociation(effective immediately) or
    • by filing a public statement of dissociation(becomes effective 90 days after filing).
34
Q

DISSOLUTION OF PARTNERSHIP

A

AT WILL - EXPRESS NOTICE
TERM (90/AGREEMENT/COMPLETION/EXPIRATION)
ILLEGALITY
JUDICIAL DECREE

35
Q

LP LAW AND FORMATION

A
  1. Limited partnerships are governed by the Uniform Limited Partnership Act (“U.L.P.A.”)
  2. Need one or more general partners plus at least one limited partner
  3. Need to file a certificate of limited partnership with the secretary of state
36
Q

LP CONTRIBUTIONS

A
  1. Partner has no rights to distributions absent a contribution
  2. Contributions may be in the form of any benefit to the partnership (e.g., money, property, services, and promises to make such contributions)
37
Q

LL PARTNERS LIABILITY

A

NO PERSONAL LIABILITY - INVESTMENT IS THEIR LIABILITY

38
Q

G PARTNER LIABILITY

A
  1. Partner has no rights to distributions absent a contribution
  2. Contributions may be in the form of any benefit to the partnership (e.g., money, property, services, and promises to make such contributions)
39
Q

LP PARTNERS

A

LIMITED AND GENERAL

40
Q

DUTIES OF LL PARTNERS

A
  1. Limited partners owe no fiduciary duty to the partnership and are free to compete with the partnership, except as otherwise provided in the partnership agreement
41
Q

DUTIES OF G PARTNERS

A

General partners owe the limited partnership fiduciary duties of care, loyalty, obedience, and disclosure

42
Q

RIGHTS OF G AN LL PARTNERS

A
  1. Both general and limited partners have the right to distributions, which can be transferred, in whole or in part
  2. A partner may transact business with the limited partnership
  3. Any partner may maintain a derivative action on behalf of the partnership if the partner first makes demand on the general partners or the demand would be futile
  4. Any partner may apply for a decree of dissolution whenever it is not reasonably practicable to carry on the business in conformity with the partnership agreement
43
Q

RIGHTS OF G PARTNERS

A
  1. Each general partner has equal rights in management
  2. A general partner has a right to the partnership’s business information
  3. A general partner is not entitled to remuneration for services performed for the partnership
  4. A general partner is entitled to indemnification for liabilities incurred in the ordinary course of the partnership’s activities
44
Q

RIGHTS OF LIMITED PARTNERS

A
  1. Limited partners have no right to participate in management, except as provided by the partnership agreement
  2. Limited partners have the right to inspect and copy certain partnership records that are required to be kept in the records office
45
Q

DISSOLUTION OF LIMITED PARTNERSHIP

A

a. The happening of an agreed upon event
b. The consent of all the partners holding a majority of the right to receive distribution (“majority in interest”)
c. After dissociation of a general partner and the consent of the majority in interest, if no general partner remains, after 90 days unless a new partner is admitted, or
d. 90 days after dissociation of the last limited partner, unless a new limited partner is admitted

46
Q

LLP (RULLPA)

A
  1. Formation of an L.L.P. must be approved by whatever vote is necessary to amend the partnership agreement
  2. Requires statement of qualification (registration) filed with the secretary of state, containing:
    a. Name and address of partnership
    b. Statement of election to be an L.L.P.
47
Q

LLP NEEDS TO FILE

A

STATEMENT OF QUALIFICATION WITH SE

48
Q

LLP PARTNER LIABILITY

A
  1. A partner is not personally liable for the obligations of the partnership
  2. However, a partner remains personally liable for her own wrongful acts
49
Q

LLP STATEMENT OF QUALIFICATION

A

a. Name and address of partnership

b. Statement of election to be an L.L.P.

50
Q

LLP RIGHT AND DUTIES

A
  1. Financial rights and obligations of partners, including profit/loss-sharing and indemnity, are identical to those of general partners in a general partnership
  2. If partnership assets are insufficient to indemnify a partner for an L.L.P. obligation, each partner forfeits a right to receive contributions in exchange for being relieved of the obligation to contribute to the personal liability of other partners
51
Q

LLC

A

LIMITED LIABILITY COMPANY

52
Q

FORMATION OF LLC (RULLCA)

A
  1. Most states follow the Revised Uniform Limited Liability Company Act of 2006 (“R.U.L.L.C.A.”), except where noted in your state’s outline
  2. Limited Liability Companies (“LLCs”) are taxed like partnerships, but members enjoy limited liability, like shareholders in a corporation, and the LLC is treated as an entity distinct from its members
  3. An LLC is formed by filing a certificate of organization with the secretary of state
53
Q

LLC TAXES

A

LIKE CORP

54
Q

LLC NEED TO FILE

A

CERTIFICATE OF ORGANIZATION

55
Q

MANAGEMENT OF LLC

A
  1. All members participate in management except as otherwise specified in the operating agreement
  2. Each member of a member-managed LLC has authority to bind the company to contracts, unless the member lacks actual authority to do so and the other party has notice of same
56
Q

PIERCING LLC VEIL

A
  1. A court may piece an LLC’s veil of limited liability under circumstances similar to those under which courts pierce the veil of a corporation: (i) where the LLC is the alter ego of the member(s) or manager(s); (ii) for inadequate capitalization at the inception of the LLC; or (iii) if the LLC was formed to perpetrate a fraud. Because LLCs can be run with fewer formalities than a corporation, the failure to observe formalities is not a ground for piercing an LLC.
57
Q

LLC DISTRIBUTIONS

A

Equal shares unless the operating agreement provides otherwise
BUT most states allocate distributions on the basis of contributions unless the operating agreement provides otherwise

58
Q

RIGHT TO INFORMATION LLC

A

MEMBER MANAGED: right to inspect and copy any record concerning the LLC’s business that is material to the member’s rights and duties
MANAGER MANAGED: managers have the same right to information and duty to furnish information as discussed above

59
Q

LLC DISSOCIATION

A
  1. A member has the power to dissociate at any time
  2. A wrongfully dissociating member may be liable to the LLC for damages
  3. Generally, the events that cause dissociation of a partner also cause dissociation of an LLC member
60
Q

LLC DISSOLUTION

A

a. An agreed upon event of dissolution
b. The consent of all the members
c. The passage of 90 consecutive days during which the LLC has no members
d. Judicial decree
e. Administrative dissolution by the secretary of state

AGENCY AND PARTNERSHIP (2 decks)

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