MEE Partnership Flashcards
(16 cards)
Partnership
- Association of 2+ people to co-own a business for profit
- Default partnership
Partnership formation
- No subjective intent required
- Sharing profits = presumption of partnership, unless for debt, wages, rent, or interest
- No writing needed unless agreement falls under Statute of Frauds
Partner liability
Partners are agents of partnership, so partnership liable for:
* Partners’ torts if within ordinary course of business or with authority
* Contracts entered into on its behalf by partners with actual/apparent authority
Partner personal liability
- Partners are jointly/severally liable for obligations, but partnership assets must first be exhausted
- Incoming partners: not personally liable for pre-existing obligations, but capital contribution may be used
- Outgong partners: liable for obligations during time in partnership
Partners’ duties
- Duty of loyalty
- Duty of care
- Duty of disclosure
Duty of loyalty
- No using partnership property to obtain personal benefit without notifying partnership
- No taking adverse positions
- No competing with partnership
Duty of care
- No grossly negligent or reckless conduct
- No intentional misconduct
- No knowingly violations of law
Duty of disclosure
- Partners/partnership must furnish information reasonably required for partner to execute rights and duties without demand
- Partners/partnership must furnish all other information on demand
Dissociation
Partner may withdraw at any time
* Wrongful dissociation: liability for damages, no management or winding-up rights
* Rightful dissociation: no liability, may held in winding up
Events generally triggering dissolution
- Occurrence of triggering event in agreement
- Business becomes illegal
- Judicial decree
Termination
Only happens after winding up (liquidating assets, paying creditors)
Dissolution of at-will partnership
Partner gives notice of express will to withdraw
Dissolution of partnership for definite term or particular undertaking
- Term ends or undertaking complete,
- All partners agree to wind up, or
- Within 90 days of partner dissociation, majority of remaining partners vote to wind up
Transfer of interest
- Partners may freely transfer financial rights (right to profit distributions)
- Partners may not transfer management rights unless all partners agree
Limited liability partnership
- No personal liability for partnership debts
- Must file certificate with state
- Converts from general partnership with unanimous partner approval
- Partners personally liable for obligations from before date certificate was filed
Limited partnership
- Requires at least one general and one limited partner
- Must file certificate with state with names, address, and signatures of general partners
