Parnterships

Question 1

Partnership Formation Requirements

Answer 1

1. Association of ≥ 2 persons;
2. to carry on as co-owners;
3. An on-going business for profit.

No formal agreement needed.
Intent of the parties does not matter.

Question 2

Liability of Partners

Answer 2

Unlimited Liability

Question 3

How can a partnership’s formation occur

Answer 3

1. Express formation by oral or written agreement; or,

2. Implied by the parties conduct.

Question 4

Limited Partnership Formation

Answer 4

1. Meets the requirements of a partnership
2. Has at least one general partner; and,
3. Has at least one limited partner.

Question 5

A limited partner’s liability is

Answer 5

limited to his contributions

Question 6

A general partner’s liability is

Answer 6

unlimited

Question 7

A limited partner is?

Answer 7

partner contributes capital and shares in profits, but typically takes no part in the control or management of the business.

Question 8

The dissolution of a partnership is the change in the relationship of the partners caused by

Answer 8

any partner ceasing to be associated with the carrying on the business

Question 9

What is dissolution?

Answer 9

The point when the partners cease to carry on business together

Question 10

Winding up is the process of?

Answer 10

Settling partnership affairs after dissolution

Question 11

Termination?

Answer 11

The point in time when all partnership affairs are wound up.

Question 12

Reconstitution allows

Answer 12

For the remaining partners to continue the business

Question 13

Dissolution events that do not violate the P’Ship agreement

Answer 13

(1) For partnerships for a term (or specific undertaking): the termination of the definite term or particular undertaking specified in the agreement, such as the expiration of the term.
(2) For partnerships at will: the express will of any partner
(3) The agreement of the parties to dissolve because a partnership is a voluntary association
(4) The expulsion of any partner from the business as provided in the partnership agreement.

Question 14

Partners can expel other partners if

Answer 14

The P’Ship agreement gives the partners a right to do so.

No right by default

Question 15

Death of a partner

Answer 15

Dissolves partnership

Question 16

Effect of bankruptcy of a partner or partnership

Answer 16

Dissolve partnership

Question 17

If the business becomes unlawful, effect?

Answer 17

Dissolve Partnership

Question 18

Court will grant a dissolution if (3)

Answer 18

the business of the partnership: can only be carried on at a loss

2) a partner has been: declared incompetent in any judicial proceeding or is shown to be of unsound mind
3) a partner becomes: incapable of performance of duties under partnership agreement

Question 19

A dissolution not in contravention of p’ship gives what right to each partner

Answer 19

to liquidate and get paid out if there are net profits or contribute if there are net losses.

Question 20

After dissolution, a partner can still bind by what acts

Answer 20

a partner still has the ability to bind the partnership only while engaging in any act appropriate for winding up partnership affairs.

Question 21

When does partnership liability end?

Answer 21

At termination of partnership

Question 22

Winding up is the process by which

Answer 22

a. Assets are sold
b. Debts are Paid
c. Balance is distributed to partners

Question 23

Outside creditors

Answer 23

those owing to creditors other than partners (paid first)

Question 24

Inside Creditors

Answer 24

Loans made by partners to company

Question 25

Capital Contribution

Answer 25

What partners initally puts in and is repaid in winding up

Question 26

Order of payment in winding up?

Answer 26

1. Outside Creditors 2. Partner Creditors 3. Capital Contributions 4. Surplus paid out

Question 27

What happens when a limited partner withdrawals? General partner?

Answer 27

1. Limited partner can leave without dissolution. | 2. General partner leaving dissolves.

Question 28

3 characteristics of a general partnership

Answer 28

(1) a general partner’s right to co-manage the business; (2) a general partner’s fiduciary duties to the other partners and the partnership itself; and (3) the sharing of profits and losses.

Question 29

What governs the relation among partners & between the partnership?

Answer 29

In general, relations among the partners & between the partners and the partnership are governed by the partnership agreement or if the agreement is silent: NC Uniform Partnership Act

Question 30

What governs if a partnership agreement is silent?

Answer 30

N.C. Uniform Partnership Act

Question 31

What can a partnership agreement not do? (4)

Answer 31

1. Restrict access to books and records 2. disclaim duty of loyalty, 3. disclaim duty of care, 4. and right to dissociate

Question 32

Rights of partners to conduct partnership business

Answer 32

Unless agreed otherwise, 1. each partner has a right to manage and conduct the partnership’s business 2. Each partner is an agent of the partnership in the conduct of it's business 3. A partner's action outside the ordinary course of business requires the consent of all general partners

Question 33

If a partner's action is outside the ordinary course of business, can they bind the partnership

Answer 33

Only if they get the consent of all of the general partners

Question 34

What does the duty of care require of partners?

Answer 34

Partners must refrain from engaging in grossly negligent or reckless conduct, intententional misconduct, or knowing violation of the law

Question 35

What does the duty of loyalty require of partners?

Answer 35

The partners must account for any benefit and hold as trustee any profit derived from any transaction connect with the partnership’s business or any use of the partnerships property

Question 36

What are the partnerships fiduciary duties? When are they discharged?

Answer 36

Loyalty and care | Discharged at termination or withdrawal

Question 37

Rule when Partnership Agreement does not provide a profit split formula

Answer 37

Unless agreement, each partner is entitled to share equally in the profits

Question 38

Rule when Partnership Agreement does not provide a profit loss split formula

Answer 38

Unless agreed, partner’s share in losses in proportion to their profits

Question 39

When a limited partner participates in the management or control of the business, do they lose liability shield?

Answer 39

No, they do not become personally liable.

Question 40

What is the liability of a minor who enters into a partnership?

Answer 40

Up to the amount of contribution

Question 41

What must a limited liability partnerships name contain

Answer 41

L.L.P, R.L.L.P, LLP, RLLP or the words spelled out

Question 42

The liability of a partner in an LLP?

Answer 42

1. Liable for debts arising out of their own negligent or wrongful acts; 2. Not liable for debts and obligations of the LLP

Question 43

What is an incoming partner's liability for debts owed before arrival?

Answer 43

Liable for the prior debts up to the amount of capital contribution.

Question 44

When is a partnership liable for torts?

Answer 44

When they occur in the ordinary course of busienss

Question 45

A partner acting with apparent authority can

Answer 45

Bind the partnership if in the ordinary course of business

Question 46

How can a partnership dissolve when one of the partners assign their interest to a third party?

Answer 46

Unanimous consent of the original partners

Question 47

If partners are liable for debts and one of the partners is insolvent, what happens?

Answer 47

The remaining partners are reapportioned their share of debts as if the other partner never existed

Question 48

When a partner leaves a partnership there are entitled to

Answer 48

Their share of profits - losses incurred by breach (if applicable)

Question 49

What events will automatically dissolve a partnership?

Answer 49

Death of a partner Bankruptcy of a partner or the pship Business becomes illegal