Partnership Flashcards
(34 cards)
What is a general partnership?
An association of two or more persons to carry on as co-owners of a business for profit.
“Persons” can be natural people, corporations, or organizations
What is the liability for a general partnership?
General partners have joint and several liability for partnership debts and obligations
What is prima facie evidence that a partnership exists?
Sharing profits
What is not deemed sharing profits?
- receiving payment of a loan
- collecting rent
- earning a salary
What is required for formation of a limited partnership?
Agreement sufficient for partnership
AND
Filing a certificate of limited partnership signed by all general partners listed on the certificate.
When is a limited partnership formed?
On the date the secretary of state files the certificate
OR
if parties ask for a later date (as long as not more than 3 months after filing)
What is the liability for limited partnerships?
Limited partners don’t have personal liability–they’re passive investors. No management of the business
What is required for an LLP?
- licensed professionals in law, accounting, architecture
- Majority vote of partners (for a GP to convert to LLP)
- proper registration + fee
(Note: LPs can never become LLPs)
Once formed, an LLP…
… is like a general partnership for all purposes except liability
What is the general rule for partnership business?
The partnership agreement governs
When is an action taken outside of the ordinary course of business a partnership action?
When ALL general partners agree
What is a general partner’s right to co-manage the business?
GPs have an equal right to manage the business (unless the partnership agreement specifies otherwise)
For what actions is partnership consent required?
To sell, lease, exchange, or otherwise dispose of all, or substantially all of the GP’s property
What is a limitation on a partnership agreement?
No partnership agreement may limit a partners access to the books and records of the partnership
What are the duties of partners?
Duty of care
Duty of loyalty
What is the duty of care for partnerships?
Partners must not engage in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.
What is the duty of loyalty for partnerships?
Can’t compete with the partnership’s business
Can’t deal w/ partnership if dealing is adverse to the partnership’s interest;
Must account for any benefit and hold as trustee any profit derived from any transaction connected w/ partnership’s business or use of partnership property
What is a limited partner’s only duty?
Good faith and fair dealing
How are profits and losses split in a partnership?
Absent contrary agreement, profits are split equally, and losses are shared in the same proportion as profits
What is a general partner’s liability for torts?
All general partners in a GP or LP are jointly and severally liable for a partner’s torts when
- the tortious act was committed in the ordinary course of business; OR
- within authority of the partnership
For what is an incoming partner not liable?
An incoming partner is not personally liable for obligations arising from before admission as a partner
Describe a limited partner’s liability
Limited partners are not personally liable for obligations of the partnership. Their liability is limited to their capital contribution.
What is the exception to limited partners not being personally liable?
Limited partners can be liable if they participate in management and control of the partnership.
BUT this liability can only be incurred w/rt persons who
A) transact business with the LP;
B) who have actual knowledge of the LP’s participation in control of the business; AND
C) have a reasonable belief that the partner was a GP at the time of the transaction
What is the general rule for dissociation of a partnership?
In general, a partner’s power to dissociate is exercisable at any time (not waiveable).
