Partnerships

Question 1

What is a partnership?

Answer 1

When two or more persons or entities intend to carry on a for-profit business as co-owners.

Do NOT need the intent to form a partnership.

* generally this is inferred through sharing of profits

• this is an objective determination, we are not concerned about parties’ subjective intent.

Question 2

Do you need a written agreement to form a partnership?

Answer 2

No.

Question 3

What is the profit sharing test?

Answer 3

If there is profit sharing, there is a presumption that there is a partnership.

Question 4

What is a partner by estoppel

Answer 4

A person will be treated as a partner if: there is a representation that the person is a partner, the person makes or consents to the representation, a third party reasonably relies on the representation, and the third party suffers damages as a result.

* detrimental reliance on a partnership’s existence.

Question 5

Partners are ___ of the partnership

Answer 5

Agents

Question 6

Partners owe duties of ____ and ___

Answer 6

Loyalty and Care.

Loyalty– must not compete, usurp, or advance an adverse interest

Care—
* required to act as a reasonable partner, cannot engage in grossly negligent/reckless conduct, or knowing violation of the law.

Question 7

A partner ___ transfer his or her rights in the partnership

Answer 7

Can. This does not cause dissolution or dissociation.

Question 8

Property acquired by partners or partnership is presumed to belong to the ____

Answer 8

Partnership.

Question 9

A new partner must get the consent of __ the existing partners.

Answer 9

All.

Question 10

A ____ of partners must approve ordinary business decisions while ___ partners must approve matters outside the ordinary course.

Answer 10

Majority; all.

Question 11

A partner ___ derive a personal benefit from the use or possession of partnership property.

Answer 11

Cannot.

Question 12

A partner is ___ to the partnership for damages caused by wrongful dissociation.

Answer 12

Liable. A dissociation is wrongful only if in breach of provision of the partnership agreement or before the completion of the undertaking.

Question 13

A partnership must indemnify a dissociated partner against all partnership liability incurred when?

Answer 13

Before or after the dissociation.

Question 14

A partnership is ____ for a partner’s torts in the course of the partnership business or when acting with partnership authority

Answer 14

Liable– this is what distinguishes a general partnership form an LLC.

Question 15

Partners are ____________ for all partnership obligations?

Answer 15

Jointly and severally liable. A judgment is first satisfied from the partnerhsips assets then the partners assets.

Question 16

A dissociation from a partnership at will causes?

Answer 16

The partnership to dissolve.

Question 17

Before winding up is complete, a partnership ____ resume carrying on its business as if dissolution had never occurred.

Answer 17

May.

Question 18

At formation, an LP must have

Answer 18

at least one general partner and one l**imited partner.

***
the general partner will be fully liable, whereas the LP will not be. Chiefs and Indians.

⇢ but look out for a LP acting as a general partner, this can create liability by estoppel (provided that the belief is reasonable).

Question 19

When is a partner liable for a contract entered into by another partner?

Answer 19

As partners are agents of the partnership, a partner will be bound if that agent (co-partner) acted within the scope of agency created by the partnership.

1. Actual Express authority- created by the partnership agreement, or partner authorization (meeting, etc) P⇢P
2. Actual Implied: Partner reasonably believes that an action is necessary to carry out his express authority. P⇢P
3. Apparent authority: when a partner acts in the ordinary course of the partnership business and 3rd party reasonably believes the partner has authority to act.
   p⇢3rd party