Partnership Formation & R/ships Flashcards
Intent req’d to create a p/ship?
Two or more persons or entities must intend to carry on a for-profit business as co-owners but do NOT need the specific intent to form a P/ship.
What is the profit sharing test?
If there is profit sharing, it is presumed to be a p/ship.
What are the elements of a p/ship by estoppel?
A person may be treated as a purported partner if:
* There is a representation (oral, written, or implied by conduct) that a person is a partner in p/ship
* The person makes or consents to the representation
* A 3d party reasonable relied on the representation
* The 3rd party suffered damages as a result of that reliance.
Liability for a purported partner in p/ship by estoppel?
- If p/ship is liable, purported P is liable as if she were a P.
- If p/ship is NOT liable, purported P is jointly & severally liable with those who consented to the representation
What is the duty of loyalty among partners?
No competing w/ PS business, advancing an interest adverse to PS, or usurping a PS opportunity.
What exceptions exists to the duty of loyalty among partners?
The PS agreement can designate certain activities as NOT violating the duty (but can’t eliminate the duty altogether) and may provide a safe harbor allowing other P’s to authorize or ratify a transaction b/t a P and the PS after full disclosure of material facts.
What is the duty of care required among Ps?
Duty to refrain from engaging in grossly negligent or reckless conduct, intentional conduct, or a knowing violation of the law.
How long do the duties exist?
Upon a P’s disassociation or the dissolution of the PS, the duties do not apply unless the P is engaged in winding up the PS’s business.
How are profits and losses distributed if no PS agreement?
Each P is entitled to an equal share of profits and losses; if PS agreement only specifies division of profits, then the losses are shared in same manner as profits.
Transferring a PS right to a 3rd party?
A P can transfer all or part of the PS interest; the transferor P retains all rights and duties of a P (except for an interest in distributions); transfer does NOT cause dissolution or dissociation
What are the transferee’s rights in the PS?
- Right to receive distributions
- Right to seek judicial order for dissolution
- Right to an accounting upon dissolution
No right to participate in the managementor conduct PS business, access PS records, or demand other info.
Property ownership by a PS?
- All property acquired by the PS belongs to the PS and not to the individual Ps
- Property may be acquired and titled in the name of the PS or in the name of one or more Ps who indicate their capacity as Ps or the existence of the PS.
What factors to consider if ownership of property is unclear as to whether it is PS property or not?
- property’s use
- tax treatment of the property
- source of funds used to maintain or improve the property
Adding a new partner?
Must secure consent of ALL partners
What are the management rights of each partner?
They have equal mgmt rights and actual authority to conduct usual and customary PS matters, unless there is reason to consult other Ps.
A majority of Ps needed to make ordinary PS business decisions; consent of ALL Ps for matters outside the ordinary course of PS’s business or for amendments to the PS agreement.
