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Flashcards in FL - Partnerships & LLCs Deck (72)
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1

NATURE OF A PARTNERSHIP

"Partnership" Defined

FL adopted Revised Uniform Partnership Act (RUPA)

Partnership is an association of 2 or more persons to carry on as co-owners a business for profit.

2

NATURE OF A PARTNERSHIP

Joint Venture is a Partnership

Joint Venture is an association of persons with intent to engage in a single business venture for joint profit.

Legal consequences of Joint Ventures almost identical to Partnerships.

3

NATURE OF A PARTNERSHIP

Governing Law (Default Rules)

MAY NOT BE WAIVED

Can agree to different rules in Partnership Agreements (RUPA Governs those not provided for).

(i) Rights and duties regarding execution, filing, and recording of PARTNERSHIP REGISTRATION except to eliminate the duty to provide copies of statements to all partners;

(ii) A Partner's RIGHT OF ACCESS to books and records and to information reasonably required for the proper exercise of the partner's rights and duties;

(iii) a Partner's duties of LOYALTY AND CARE;

(iv) The Power to DISSOCIATE as a Partner;

(v) the Power of a Court to EXPEL a Parnter;

(vi) The Requirement that a partnership BE WOUND UP in the event of either the illegality of the business or certain judicial determinations that continuing the business is not practicable or equitable;

(vii) the RIGHTS OF THIRD PARTIES under the RUPA;

(viii) a Partner's duty of GOOD FAITH AND FAIR DEALING; and

(ix) the law applicable to limited liability partnerships

4

FORMATION OF A PARTNERSHIP

How a Partnership is formed

As soon as two or more people associate to carry on as co-wners a business for profit.

THERE IS NO REQUIREMENT THAT THE PARTIES SUBJECTIVELY INTEND TO FORM A PARTNERSHIP, ONLY THAT THEY INTEND TO RUN A BUSINESS AS CO-OWNERS.

No Agreement or writing required.

5

FORMATION OF A PARTNERSHIP

Capacity

Who May Be Partner?

Anyone capable of entering into a binding contract.

(MINORS)

6

FORMATION OF A PARTNERSHIP

Capacity

Liability Where No Capacity

If lack capacity, NOT PERSONALLY LIABLE for the obligations of the partnerships or breaches of the partnership agreements.

* Bound to the extent of her contribution of capital to the Partnership

7

FORMATION OF A PARTNERSHIP

Capacity

Consent

Unless otherwise provided, no one can become a partner in a partnership without the express or implied consent of ALL PARTNERS

(blackballing @ a frat)

8

FORMATION OF A PARTNERSHIP

Capacity

Statement of Partnership Authority

A Partnership may (but is NOT required to) file a registration statement with the department of state.

Statement can give CONSTRUCTIVE knowledge of the intent of the partner's authority to enter into real estate contracts on behalf of the partnership.

9

FORMATION OF A PARTNERSHIP

Proof of Partnership Existence

Courts look @ INTENT OF THE PARTIES to carry on a business as co-owners. If so, there is a partnership even if they did not subjectively intend to be partners.

Where party intent is uncertain look to:
(1) Sharing profits raises presumption of partnerships unless if profits were received in payment of debt, rent, services, wages, annuity, interest, sale of goodwill

10

FORMATION OF A PARTNERSHIP

Purported Partners

No agreement and parties (as between themselves) are not partners, they may be held liable to 3rd parties as if they were partners

11

FORMATION OF A PARTNERSHIP

Purported Partners

Liability of Person Who is Held Out As Partner?

When a person, by words or conduct, represents herself as a Partner or consents to being represented by another as partner, she will be liable to 3rd parties who enter into transactions w/ the actual or apparent partnership in reliance on representation

--> no duty to deny partnership --> only liable if actually consents

12

FORMATION OF A PARTNERSHIP

Purported Partners

Liability of Person Who Holds Another Out As Partner?

Makes the alleged partner her agent with POWER TO BIND her to third parties as if the other were, in fact, a Partner.

* If the person making the representation is in fact a member of an already existing partnership and the representation is to the effect that the would be partner is a member of this partnership, ONLY those partners who MADE or CONSENTED to the reprensentation will be bound (not necessarily all or even the partnership as a whole)

13

PROPERTY OF A PARTNERSHIP

Classifications of Property

Partnership Capital

Partnership capital consists of the PROPERTY OR MONEY CONTRIBUTED by each of the partners for the purpose of carrying on the Partner's Business

14

PROPERTY OF A PARTNERSHIP

Classifications of Property

Partnership Property

Partnership Property embraces everything that the partnership owns consisting both of the capital contributed by its members AND the properties subsequently acquired in partnership transactions

15

PROPERTY OF A PARTNERSHIP

Rights of Partner in Partnership Property

A partner is not a co-owner of partnership property and has no interest in partnership property. Thus, a partner's creditors may NOT reach partnership property to satisfy the personal (non partnership) obligations of a Partner

16

PARTNER'S INTEREST IN THE PARTNERSHIP

In General

A partners interest in the Partnership consists of (i) management and other rights and a right to share in the partnership profits and losses and receive distributions

A partner may NOT transfer his interest in management and other rights, BUT MAY transfer his interest in profits, losses and distributions.

17

PARTNER'S INTEREST IN THE PARTNERSHIP

Transferable Interest is Personal Property

Each partner has a TRANSFERABLE interest in the partnership, which consists of his share of the PROFITS AND LOSSES and the right to receive distributions. This interest is treated as personal property. Absent an agreement to the contrary, each partner is entitled to an EQUAL share of the partnership profits and must contribute toward the partnership losses in proportion to his share of the profits.

**LOSSES FOLLOW PROFITS**

18

PARTNER'S INTEREST IN THE PARTNERSHIP

Transfer of Transferable Interest

Because a partner's transferable interest in the partnership is personalty, IT MAY BE TRANSFERRED by the partner voluntarily or involuntary at any time. Such a conveyance does not dissolve the partnership or cause the transferring partner's dissociation.

19

PARTNER'S INTEREST IN THE PARTNERSHIP

Transfer of Transferable Interest

Transferee's Rights

In Partnership

In absence of an agreement, a transfer does not entitle the transferee to interfere in the management or administration of the partnership business or affairs, to require any information or account of the partnership transactions, or to inspect the partnership books.

Rather, a transfer merely entitles the transferee to receive , in accordance with the contract, distributions to which the transferring partner would otherwise be entitled. However, a partnership need not give effect to an transferee's rights until it has notice of the transfer

20

PARTNER'S INTEREST IN THE PARTNERSHIP

Transfer of Transferable Interest

Transferee's Rights

At Dissolution

Transferee entitled to receive his transferor's net amount distributable, and may require an accounting only from the date of the last accounting agreed to by all the partners.

21

PARTNER'S INTEREST IN THE PARTNERSHIP

Charge of Transferable Interest (Attachment)

Judgement creditor of a partner may charge (attach) the transferable interest of the debtor to satisfy the judgment. The charging order becomes a lien on the interest. The Court may also appoint a receiver of the debtor's share of the distributions due or to become due from the partnership.

22

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Right to Participate in Management

UOA, all partners have EQUAL RIGHTS in the management of the partnership business. Decisions regarding matters within the ORDINARY COURSE OF BUSINESS of the partnership may be controlled by a MAJORITY VOTE, but matters OUTSIDE THE ORDINARY COURSE OF BUSINESS require the consent of ALL PARTNERS

23

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Fiduciary Duties

Partners owe the partnership and other partners two fiduciary duties: duties of loyalty and care. Partners must discharge these duties in good faith and fair dealing.

24

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Fiduciary Duties

Duty of Loyalty

A partner's duty of loyalty is three-fold:

(i) to account for profits, property, opportunities, or other benefits derived by the partner in conjunction with the partnership business;

(ii) the refrain from dealing with the partnership as or on behalf of a party having an interest adverse to the partnership; and

(iii) to refrain from competing with the partnership

25

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Fiduciary Duties

Duty of Care

A partner's duty of care to the partnership and the other partners is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or knowing violation of law

26

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Remuneration (working for Profits)

UOA, a partner is NOT entitled to remuneration except for reasonable compensation for services rendered in winding up the partnership's business.

Unless the circumstances indicate otherwise, it is implied that each partner will devote her entire time and energy to the partnership business. Where a partner impliedly or expressly promises to devote time to the partnership business and fails to do so, she may be charged in an accounting for damages caused to the partnership. This includes the amount expanded by the partnership to replace the services she should have performed as well as any other loss caused by her breach of contract.

27

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Indemnification and other Repayment

The partnership must indemnify partners for payments reasonably made and obligations reasonably incurred by a partner in carrying on the business of the partnership. Similarly, if a parter makes any payment or advance on behalf of the partnership beyond the amount the partner agreed to contribute, the partnership must repay the partner. In any case, such payments, obligations, and advances constitute loans to the partnership, which must be repaid WITH INTEREST.

28

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Books and Information

The partnership books must be kept, subject to an agreement to the contrary, at the partnerships chief executive office and every partner has the RIGHT TO INSPECT AND COPY them. Each partner, upon demand of another partner/legal rep, must provide complete and accurate information concerning the partnership.

29

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Legal Actions by and Against Partners

Partnership May be Sued

A partnership may sue or be sued in its own name. Note, however, that a judgment against the partnership is not itself a judgment against a partner.

To reach a partner's personal assets, there must ALSO be a judgement against the partner. Actions may be brought against the partnership and the partners in the same action (due process must serve both).

30

RELATIONS BETWEEN PARTNERS ( DEFAULT RULES)

Apparent Authority

RUPA provides that:

(i) the act of ANY PARTNER;

(ii) for apparently carrying on IN THE ORDINARY COURSE the partnership business or BUSSINESS OF HTE KIND carried out by the partnership;

(iii) binds the partnership UNLESS:

(a) the partner had NO AUTHORITY to act for the partnership in the particular matter; AND

(b) the person with whom the partner was dealing KNEW OR HAD RECEIVED NOTIFICATION that the partner lacked authority.