Flashcards in Bus. Structure: Partnerships Deck (45):
When a newly admitted partner admitted, what debts is s/he liable for?
1. A newly admitted partner is liable for pre-existing partnership debts only to the extent of funds contributed by the new partner.
Does the personal bankruptcy of one partner mean bankruptcy for the partnership?
Under RUPA, does the death of a partner make his/her heirs partners?
No, the remaining partners may have rights to buy out the deceased partner's share.
Upon dissolution of a partnership, what authority do partners have to bind the partnership, if any?
The partners still have apparent authority to bind the partnership.
How are losses allocated among partners?
If partners in a partnership have no agreement as to the sharing of losses, losses will be shared in the same manner as profits.
partnership liability for negligence
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.
Section 302 of Uniform Limited Partnership Act (ULPA)
a limited partner does not have the right or the power as a limited partner to act for or bind the limited partnership.
Section 303 of ULPA
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.
Section 305 of ULPA
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.
requirements for forming an LP
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.
Can an LP include the name of a limited partner in the company name?
The most recent version of ULPA (2001) permits the use of a limited partner's name in the partnership name.
ULPA naming requirements for LPs and LLLPs
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.”
An LP must maintain at its place of business the following:
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.
LPs vs. Corporations
Like a corp, an LP is:
1. An entity distinct from its partners.
2. Of perpetual duration.
3. Subject to fed. securities laws.
Does an LP issue stock?
Under the Uniform Partnership Act (UPA), a partner has notice of a fact if the person:
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.
partnership classification under UPA
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.
In which situations where profits are shared does UPA not consider the arrangement to be a partnership?
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.
In the absence of an agreement among partners on the division of profits, how are profits divided?
Profits are divided equally regardless of which partner has contributed more capital, more labor or more expertise.
Under RUPA, a partnership agreement may not:
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).
Section 204 of the UPA states that property is partnership property if acquired in the name of:
(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.
Property is presumed to be partnership property if purchased with...
partnership assets, even if not acquired in the name of the partnership.
When is partnership property considered separate property?
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.
Under RUPA, a partnership is dissolved, and its business must be wound up, upon...
the partner's intent to withdrawn.
winding up under RUPA
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.
Under RUPA, does a partner's death mean dissociation?
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.
Under RUPA, can a partnership by agreement alter the events which, under RUPA, cause automatic dissolution?
RUPA and buyout procedures
RUPA provides default procedures for buyout rights in a dissolved partnership in the event such procedures are not covered in the partnership agreement.
Which theory is used for RUPA?
RUPA has moved toward the separate entity theory for partnerships, which is also a change from prior law.
Is an LP a separate entity from its partners?
Yes; so is an LLLP, which is the same entity.
In a GP, how are partners liable?
Jointly and severally liable.
primary focus of RUPA
small, often informal, partnership.
Which of the following statements is correct with respect to the overall treatment found in RUPA?
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. -
fictitious name violation
Doing business under a fictitious name without filing with state authorities.
1. liability of purported partner
2. Repeated failure to object to the representation would be evidence of his consent.
When is an assignment effective?
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.
Can an instrument be assigned even when it is not a negotiable instrument?
Section 402 of UPA and distributions in kind
A partner has no right to receive, and may not be required to accept, a distribution in kind.
When can a partner be liable to the other partners for negligence?
When the partner exceeds his/her authority as outlined in the partnership agreement.
bare minimum requirement to form partnership
Simply agreeing to split profits is normally an indication that a partnership has been formed.
How is a loss on liquidation distributed among partners?
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.
When is a partnership dissolved?
A partnership is dissolved whenever one of the other general partners is changed. Thus, A can dissolve this partnership simply by withdrawing.
If the partnership is dissolved, are limited and general partners treated equally in the priority of the distribution of assets?
Joint ventures and partnerships- similarities:
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.