Flashcards in partnership Deck (70):
what 5 areas are tested on partnership?
1) general partnership FORMATION
2) liabilities of general partnerships to 3rd parties
3) right and liabilities b/w general partners
4) general partnership dissolution
5) alternative unincorporated business orgz
are there any formalities requirements for general partnerships?
no formalities are required
what is the default business organization?
general partnership b/c no formalities are needed.
can a partnership be formed on accident
def of partnership
1) association of
2) 2 or more persons who
3) are carrying on as co-owners of business
4) FOR PROFIT
What is the the main thing that creates presumption of partnership?
sharing of profits.
- Contribution of $ or services in return for a share of profits creates a presumption of a general partnership exists `
-ONLY RETURN OF SHARE OF PROFITS not a salary or wage
what is the agency rules in partnership?
1) partners are agents of partnership for apparently CARRYING ON USUAL PARTNERSHIP BUSINESS
when is the partnership liable for each partners torts?
when w/i the scope of partnership business
when is a partnership liable for each partners k's?
for each partners authorized contracts
what is each general partner PERSONALLY liable for?
all debts of the partnership AND for each co-partners torts
what is an incoming partner liable for pre-existing debts>
incoming P's are generally not liable for prior debts, but any capital paid into partnership by incoming partner can be used by partnership to satisfy prior debts
what is a dissociating (withdraw) partner's liability for subsequent debts?
retain liability on future debts
what are the 2 ways that a dissociating partner can get out of liability for subsequent debts?
1) actual notice of their dissociation is given to creditors or
2) until 90 days after filing with state a NOTICE OF DISSOCIATION
what is general partnership liability by estoppel
one who represents to a 3rd party that a general partnership exists will be liable as if the general partnership exists
are general partners fiduciaries of each other and the partnership?
what do general partners owe to other partners and the partnership
duty of loyalty, which means they cannot
1) self deal
2) usurp partnership opportunities or
3) make secret profits
what is the partnership remedy if a partner breaches duty of loyalty
an action for accounting
what is an action for accounting
general partnership may recover loses cause by the breach of loyalty including
1) indeminify and also
2) partnership may disgorged (take away) profits made by breaching partner
what is the general rule about property of partnership
it is relatively hard to transfer
what is specific partnership assets?
land or leases or equipment owned by partnership.
can specific partnership assets be transferred by partner?
no. MAY NOT be transferred by individual partners w/o partnership authorizes
what can a partner do with share of profits?
personal property owned by individual partners and therefore it MAY be transferred by individual partners to 3rd party
is share of profits personal property of each partner?
can individual partners transfer their share of profits to 3rd party?
if a partner transfers there share of profits to a 3rd party, is that 3rd party now a partner?
is the share to manage the partnership transferable?
NO. owned only by the partnership itself and MAY NOT be transferred by individual partners.
(Cannot sell right to vote or leave in inheritance)
what is the default rule for how management is run in partnership
ABSENT an agreement, each partner is entitled EQUAL control (vote)
how much of partners need to vote for the ordinary course of business?
when is unanimous voted required?
for fundamental partnership matters
(outside the ordinary course of business)
what is the rule for salary for partnership?
absent an agreement parts GET NO SALARY
what is the x/c where partners get a salary?
partners do receive compensation from helping windup business
how to partners share profits?
ABSENT an agreement, profits are SHARED EQUALLY
how are partners share losses?
ABSENT an agreement, losses SHARED LIKE PROFITS
What is dissolution
in absence of an agreement that sets forth events of dissolution a general partnership dissolves upon the notice of EXPRESS will of any 1 partner to dissociate
are partners forever?
no limited life span, end when any 1 partner gives notice of express will of partner to disassociate
what is the real end of partnership called?
what is winding up
period b/w dissociation and termination in which remaining partners liquidate assets to satisfy creditors
what is partnership's liability for old business
the partnership and therefore its individual general partners retain liability on
all transaction entered into wind up old business by satisfying creditors who existed when winding up began
what is partnership's liability for new business
partnership and therefore individual general partners retain liability on brand new transactions during winding up period until
1) actual notice of dissolution given to creditors OR
2) 90 days after filing statement of dissolution with the state
what 2 areas MUST be paid in full?
2) all capital contributions paid by partners
what is the order of priority of distributions
each level must be paid FULLY to satisfy before beginning next level
1) ALL creditors
2) all capital contributions paid by partners
3) profits if any
who are creditors that need to be paid in full?
all creditors includes all outside non-partner creditors and ALL partners who have lent $ to partnership and therefore become creditors
what is the second level that must be paid in full
partnership MUST repay all capital continuations paid into the partnership by partners
what is the overall rule for prority of distribution
each partner must be repaid their
1) loans and
2) capital contributions PLUS
3) partners shares of any profits -
any partners share of loses
what are limited partnerships
partnership with at least 1 general partner and at least 1 limited partner
does a limited partner have liability
what is the formation requirements for limited partnership
must file with state limited partnership certificate which includes names of all general partners
what is the liability and control of general partners in a limited partnership?
right to manage business but have personal liability to all debts and obligations of partnership
in IL do limited partnerships have any management rights?
yes, limited partners may manage w.o giving up limited liability status
wha is the liability for resgistred limited liability partnerships
no partner is liable for debts and obligations of partnership not even general partners
what is the formation requirement for registered limited liability partnerships
must register with state by filing statement of qualification and annual reports
what is disassociation and how is it done
change in relationship of the partners, caued by any partner ceasing to be associated in the carrying out of the business.
- P is dissociated from the Partnership upon notice of the partner's express will to withdraw as a partner
what is dissolution of partnership and what must happen
Partnership is dissolved and its business must be wound up when a partner at will notifies the partnership of his intent to withdraw.
- Business must be wound up
Is a partnership bound by a partner's act after dissolution if the act is appropriate for winding up the partnership business?
is a partnership bound by partner's post-dissolution act- even an act that is not appropriate for winding up the partnership?
yes, IF the party with whom the partner dealt with did not have notice of dissolution.
when will a partnership be bound by a partners post-dissolution act, such as entering into K, even if it is not appropriate for winding up the partnership business
When the other contracting party does not have notice of the dissolution
are partners jointly and severally liable for partnership obligations
YES, absent an agreement.
what is the nature of liability for each partner to the partnership for torts and contracts
liability is joint and several (1 or more partners may be sued) for ALL obligations of the partnership.
- each partner personally and individually liable for the entire amount of partnership obligations.
is a partner personally binded by a judgment before the C goes to partnership
NO. A judgment is not personally binding on a partner unless she has been served and the C has exhausted the partnership assets, or exhaustion by agreement.
what if a Partner pays more than their fair share of the obligation
entitled to contribution from the other partners, and a partner who pays the whole obligation of the partnership is entitled to indemnification.
what does Notice of a partners express will to withdraw from partnership do
1) disassociation and
is a partnership become a new partnership when it becomes a LLP
NO. A partnership is generally treated as a legal entity distinct from the individual partners; thus a "new" partnership is not formed when a partnership becomes an LLP. the LLP continues to be the same partnership entity that existed prior to filing the statement of qualification
what must a person do to go after the partners individual of obligation
must secure a judgment AGAINST INDIVIDUAL PARTNERS (in addition to the existing judgment against the partnership)
- GR must go after partnership assets before it can recover from the partners' individual assets
what are partners liable for
partners are jointly and severally liable for ALL obligations of the partnership
-each partner is personally and individually liable for the entire amount of all partnership obligations
what does it mean for partners to be jointly and severally liable for all of partnership obligations
each partner is personally and individually liable for the ENTIRE amount of ALL partnership obligations
can a partner dissociate at any time
what if a partner wrongful dissociates
can dissociate at any time, but will be deemed to have wrongfully dissociated if the dissociation is in breach of an express term of the partnership agreement.
- A partner who wrongfully dissociates is liable to the partnership for any damages caused by the dissociation and is not entitled to wind up the affairs of the partnership
what is partner liable to partner who wrongfully dissociates
A partner who wrongfully dissociates is liable to the partnership for any damages caused by the dissociation and is not entitled to wind up the affairs of the partnership
what effect does wrongful dissociation of partner of partnership for dissolution
A partnership dissolves and must be wound up upon a partner's intent to withdraw from an at will partnership, even if dissociation is wrongful
- However, at anytime after the dissolution of a partnership and before the winding up of the partnership's business is completed, the PARTNERS MAY DECIDE BY UNANIMOUS VOTE TO CONTINUE THE PARTNERSHIP BUSINESS.