Flashcards in Partnership Deck (21)
what is the effect of dissolution on partnership authority?
terminated all authority of any partner to act for the partnership
*except authority necessary to wind-up partnership affairs/ unfinished business
what are the 3 levels of priority that must be satisfied during "winding-up" phase?
1. 1st: creditors (including paying off internal loans fr partners)
2. 2nd: full re-payment to its own partners for capital contributions
3. 3rd: profits & surplus, if any, shared equally among partners (unless partners agree otherwise)
How long does a partnership retain liability on new business during dissolution/ winding-up phase?
until notice of dissolution is given to all known & potential creditors
what is the winding up period of partnership dissolution?
period b/w dissolution & termination where remaining partners liquidate partnership assets to satisfy creditors
what are examples of material changes a court will use to justify dissolution of a partnership?
1. partners withdrawal/ death
2. partners incompetency
3. partners bankruptcy
4. violation of partnership agreement
When will a GENERAL PARTNERSHIP be automatically dissolved?
any MATERIAL change in the partnership caused by DEATH or WITHDRAWAL of any single GENERAL PARTNER
When may an assignee become a LIMITED partner?
if assignor gives assignee that right according to agreement OR ALL partners consent in WRITING
If a SUCCESSOR decides not to join partnership, what are her rights?
right to receive a share of compensation deceased/ withdrawn partner would have received upon departure fr partnership
When will a SUCCESSOR have a right to JOIN a partnership? (2)
1. prescribed by partnership agreement
2. all partners CONSENT in WRITING
*usually occurs upon death or withdrawal of existing partner
What are the 3 general rules for the ASSIGNMENT of partnership INTERESTS to 3 rd parties?
1. specific P assets (land, equip.) may not transfer w/o partnership authority
2. Profits & surplus (may transfer to 3rd parties)
3. Share in Management (cant transfer to 3rd party)
What are a partner's fiduciary responsibilities?
1. fiduciaries of each other
2. Owe a duty of loyalty
-no usurping partnership opps
- no secret profits
*an action for accounting is the only form of action that 1 partner can bring against other for breach of duty
How long do OUTGOING partners retain liability of future debts?
until notice of withdrawal is given to all known & potential creditors
* death of outgoing P terminates all liability
Are incoming partners liable fr prior debts?
NO, but $ incoming partners pay into partnership maybe be used to pay prior debts
What are the 3 general rules for partners liability?
Every General Partner is liable for
1. own actions
2. actions of other partners when w/in scope of partnership
3. actions of employees w/in scope
How are partnership profits handled?
How are partnership losses handled?
Shared like profits (equally)
How are partnership salaries handled?
Partners get NO salary. They receive compensation for winding-up partnership business (dissolution)
What 3 types of K's are partnerships bound by?
1. K's entered by partners w/ authority
2. K's for usual business of partnership (w/in scope)
3. K's for business outside partnership scope that ALL partners ratify
What torts are partnerships bound by?
Torts committed by partners in the scope of the partnerships business
In a LIMITED PARTNERSHIP, what are GENERAL partners personally liable for?
Personally liable for ALL partnership obligations
*also has right to manage
**limited P's NOT liable for partnership obligations & NO right to manage