Partnerships

Question 1

What are the 3 types of Partnerships?

Answer 1

(1) General Partnership

(2) Limited Liability Partnerships

(3) Limited Partnerships

Question 2

Define Partnership

Answer 2

A partnership is formed when 2 or more people

associate to carry on a for-profit business

as co-owners

Question 3

What formalities are needed to create a Partnership?

Answer 3

No formal agreement is needed. Parties only need to intend to associate as co-owners

Can be inferred from their conduct.

Question 4

Where Parties’ intent is unclear, what 3 factors do Courts look at?

Answer 4

(1) Profit Sharing - (not debts, but profits).

(2) Sharing control

(3) Capital Investment

Question 5

Do individual Partners have an interest in Partnership property?

Answer 5

No

Question 6

What duties do Partners owe the Partnership and fellow Partners?

Answer 6

Loyalty - must refrain from competing w/ Partnership and dealing with adverse party

Obedience

Care

Complete and accurate information

Remember, L.O.C.C

Question 7

Do Partners have a right to check books and information?

Answer 7

Yes, each Partner has a right to inspect and copy partnership financial information

Question 8

Who/what is liable for contract liability?

Answer 8

All Partners are liable for Ks they expressly authorize and

Ks made by a Partner in the scope of the Partnership.

Question 9

Can Partners be liable for Torts committed by the other Partner?

Answer 9

Yes, if the tort was committed in the ordinary course of the Partnership

Or, with authority of the Partnership

Question 10

What is the nature and extent of liability?

Answer 10

All Partners are jointly and severally liable.

An action can be brought against any one or several of the Partners as individuals or against the Partnership.

Question 11

What is Dissociation?

Answer 11

Any Partner ceasing to be associated

in carrying on the Partnership business

Question 12

What is the effect on the Partnership as a result of Dissociation?

Answer 12

Terminates dissociated Partner’s legal relationship with Partnership, including rights to profits and management

Question 13

Upon a Partner’s dissociation from the Partnership, what happens to his shares?

Answer 13

If the Partnership continues, it must buy-out and purchase the dissociated Partner’s interest

Question 14

What is Dissolution?

Answer 14

Termination of Partnership

Question 15

Once a Dissolution is determined, what is the next phase?

Answer 15

Upon dissolution, Partnership must wind up business activities and distribute assets

Question 16

When can dissolution occur in an At-Will Partnership?

Answer 16

Any Partner can dissolve at any time by providing a notice of dissolution

Question 17

Does a Partnership continue while winding up?

Answer 17

Yes, it continues until winding up is complete

Question 18

What is the distribution of asset ordering upon dissolution of the Partnership?

Answer 18

Once assets are reduced to cash, liabilities are paid first to Creditors

Then, Partners individually

Question 19

Define LLP

Answer 19

A LLP limits a Partners personal liability for the Partnership’s obligation and actions

Question 20

How do you form an LLP?

Answer 20

Any Partnership can become an LLP upon:

Approval by Partners by vote; and

Filing a statement of qualification which contains Partner names, addresses, LLP election, effective date

Question 21

What is the liability of Partners in an LLP

Answer 21

A Partner in an LLP is not personally liable for Partnership obligations of any sort.

However, every Partner remains liable for her own acts or acts that she supervises or directs.

Question 22

Define LP

Answer 22

An LP contains 2 types of Partners - General and Limited Partners - and contains 1 or more of each type.

Question 23

In an LP, what are the rights, obligations, and duties of GP and LPs?

Answer 23

General P - manage and control day-to-day operations

Limited P - usually passive investors with limited authority

Question 24

In an LP, what are the liabilities of GP and LPs?

Answer 24

General LP - personally, jointly, and severally liable for all Partnership obligations

Limited LP - liable only to the extent of their investment

Question 25

How do you form a Limited Partnership?

Answer 25

Filing a Certificate of Limited Partnership with the State.

Cert. must contain names and addresses of each GP and their signatures.