Bus. Structure: Partnerships

Question 1

When a newly admitted partner admitted, what debts is s/he liable for?

Answer 1

1. A newly admitted partner is liable for pre-existing partnership debts only to the extent of funds contributed by the new partner.

Question 2

Does the personal bankruptcy of one partner mean bankruptcy for the partnership?

Answer 2

No.

Question 3

Under RUPA, does the death of a partner make his/her heirs partners?

Answer 3

No, the remaining partners may have rights to buy out the deceased partner’s share.

Question 4

Upon dissolution of a partnership, what authority do partners have to bind the partnership, if any?

Answer 4

The partners still have apparent authority to bind the partnership.

Question 5

How are losses allocated among partners?

Answer 5

If partners in a partnership have no agreement as to the sharing of losses, losses will be shared in the same manner as profits.

Question 6

partnership liability for negligence

Answer 6

When a partner in a partnership commits negligence in the course of partnership business, the partners and the partnership are jointly and severally liable for injuries or damages proximately caused by the negligent conduct.

Question 7

Section 302 of Uniform Limited Partnership Act (ULPA)

Answer 7

a limited partner does not have the right or the power as a limited partner to act for or bind the limited partnership.

Question 8

Section 303 of ULPA

Answer 8

1. An obligation of a LP, whether arising in contract, tort, or otherwise, is not the obligation of a limited partner.
2. A limited partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for an obligation of the LP solely by reason of being a limited partner.

Question 9

Section 305 of ULPA

Answer 9

A limited partner does not have any fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner.

Question 10

requirements for forming an LP

Answer 10

1. Designate and maintain an agent for service of process.
2. Annual delivery to the state current reports.
3. Deliver to local filing offices of a certificate stating the name of the LP, the name and the street and mailing address of each gen. partner, including whether the LP or an LLLP.

Question 11

Can an LP include the name of a limited partner in the company name?

Answer 11

The most recent version of ULPA (2001) permits the use of a limited partner’s name in the partnership name.

Question 12

ULPA naming requirements for LPs and LLLPs

Answer 12

1. The name of a LP may contain the name of any partner.
2. The name of an LP that is not an LLLP must contain the phrase “limited partnership” or the abbreviation “L.P.” or “LP” and may not contain the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.”.
3. The name of an LLLP must contain the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.” and must not contain the abbreviation “L.P.” or “LP.”
4. Neither type of entity may substitute the designation of “Corporation.”

Question 13

An LP must maintain at its place of business the following:

Answer 13

1. A current list showing the full name and last known street and mailing address of each partner, separately identifying the GPs and the LPs.
2. A copy of the initial certificate of LP and all amendments to and restatements of the certificate.
3. A copy of the LP’s federal, state, and local income tax returns and reports, if any, for the three most recent years.

Question 14

LPs vs. Corporations

Answer 14

Like a corp, an LP is:

1. An entity distinct from its partners.
2. Of perpetual duration.
3. Subject to fed. securities laws.

Question 15

Does an LP issue stock?

Answer 15

No.

Question 16

Under the Uniform Partnership Act (UPA), a partner has notice of a fact if the person:

Answer 16

1. Knows of it.
2. Has received a notification of it.
3. Has reason to know it exists from all of the facts known to the person at the time in question.

Question 17

partnership classification under UPA

Answer 17

an association of two or more persons who carry on as co-owners a business for profit will be treated as a partnership, whether or not the persons intend to form a partnership.

Question 18

In which situations where profits are shared does UPA not consider the arrangement to be a partnership?

Answer 18

1. Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership even if the co-owners share profits made by the use of the property.
2. A person receives a share of the profits of a business where the profits were received in payment:
   (i) of a debt by installments or otherwise;
   (ii) for services as an independent contractor or of wages or other compensation to an employee;
   (iii) of rent.

Question 19

In the absence of an agreement among partners on the division of profits, how are profits divided?

Answer 19

Profits are divided equally regardless of which partner has contributed more capital, more labor or more expertise.

Question 20

Under RUPA, a partnership agreement may not:

Answer 20

1) unreasonably restrict the right of access to books and records;
(2) eliminate the duty of loyalty (but, the partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not unreasonable);
(3) unreasonably reduce the duty of care;
(4) eliminate the obligation of good faith and fair dealing under (but the partnership agreement may prescribe reasonable standards by which the performance of the obligation is to be measured);
or, (5) vary the power to dissociate as a partner under (except to require the notice to be in writing).

Question 21

Section 204 of the UPA states that property is partnership property if acquired in the name of:

Answer 21

(1) the partnership;
or (2) one or more partners with an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership but without an indication of the name of the partnership.

Question 22

Property is presumed to be partnership property if purchased with…

Answer 22

partnership assets, even if not acquired in the name of the partnership.

Question 23

When is partnership property considered separate property?

Answer 23

Property acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership and without use of partnership assets, is presumed to be separate property, even if used for partnership purposes.

Question 24

Under RUPA, a partnership is dissolved, and its business must be wound up, upon…

Answer 24

the partner’s intent to withdrawn.

Question 25

winding up under RUPA

Answer 25

1. In general, a partnership continues after dissolution only for the purpose of winding up its business. 2. The partnership is terminated when the winding up of its business is completed. 3. At any time after the dissolution of a partnership and before the winding up of its business is completed, the partners may waive the right to have the partnership's business wound up and the partnership terminated. 4. A filing w/appropriate state authorities is NOT required for dissolution to occur.

Question 26

Under RUPA, does a partner's death mean dissociation?

Answer 26

Dissociation by a partner's death or bankruptcy results in a buyout of the partner's interest rather than automatic dissolution of the partnership. This is a defining change from prior law.

Question 27

Under RUPA, can a partnership by agreement alter the events which, under RUPA, cause automatic dissolution?

Answer 27

Yes.

Question 28

RUPA and buyout procedures

Answer 28

RUPA provides default procedures for buyout rights in a dissolved partnership in the event such procedures are not covered in the partnership agreement.

Question 29

Which theory is used for RUPA?

Answer 29

RUPA has moved toward the separate entity theory for partnerships, which is also a change from prior law.

Question 30

Is an LP a separate entity from its partners?

Answer 30

Yes; so is an LLLP, which is the same entity.

Question 31

In a GP, how are partners liable?

Answer 31

Jointly and severally liable.

Question 32

primary focus of RUPA

Answer 32

small, often informal, partnership.

Question 33

Which of the following statements is correct with respect to the overall treatment found in RUPA?

Answer 33

1. The Revised Act enhances the “entity” treatment of partnerships to achieve simplicity for state law purposes, particularly in matters concerning title to partnership property. 2. The Revised Act is largely a series of "default rules" that govern the relations among partners in situations they have not addressed in a partnership agreement. -

Question 34

fictitious name violation

Answer 34

Doing business under a fictitious name without filing with state authorities.

Question 35

estoppel

Answer 35

1. liability of purported partner | 2. Repeated failure to object to the representation would be evidence of his consent.

Question 36

When is an assignment effective?

Answer 36

immediately, but is only binding on the obligor when the obligor has been given notice. Thus, if B, after receiving notice of the assignment, pays the full balance to A, B will remain liable to C. An instrument is assignable even though it does not qualify as a negotiable instrument.

Question 37

Can an instrument be assigned even when it is not a negotiable instrument?

Answer 37

Yes.

Question 38

Section 402 of UPA and distributions in kind

Answer 38

A partner has no right to receive, and may not be required to accept, a distribution in kind.

Question 39

When can a partner be liable to the other partners for negligence?

Answer 39

When the partner exceeds his/her authority as outlined in the partnership agreement.

Question 40

bare minimum requirement to form partnership

Answer 40

Simply agreeing to split profits is normally an indication that a partnership has been formed.

Question 41

How is a loss on liquidation distributed among partners?

Answer 41

1. The loss on sale is assigned according to their assigned profit %s, and the assigned loss reduces each partner's capital. 2. Then, the remaining assets are assigned according to their assigned profit %s, and the assigned loss reduces each partner's capital. 3. Finally, any remaining negative balance in any partner's account is assigned according to their assigned profit %s, and the assigned loss reduces each partner's capital.

Question 42

When is a partnership dissolved?

Answer 42

A partnership is dissolved whenever one of the other general partners is changed. Thus, A can dissolve this partnership simply by withdrawing.

Question 43

If the partnership is dissolved, are limited and general partners treated equally in the priority of the distribution of assets?

Answer 43

Yes.

Question 44

Joint ventures and partnerships- similarities:

Answer 44

1. A joint venture operates similarly to a partnership in many ways, such as fiduciary duty among members of the venture, unlimited liability, and the rights of the joint venturers to participate in management. 2. A joint venture is not typically required to file papers or certifications with the state in which it operates.

Question 45

Joint ventures and partnerships- point of difference:

Answer 45

Unlike w/a partnership, there is no apparent authority or agency relationship among joint venturers.