Partnerships Flashcards
(14 cards)
General Partnership
A general partnership is formed when two or more persons associate as co-owners to carry on a business for profit. Profit sharing creates a presumption that a person is a partner unless the profits were received to pay a debt.
Management of GP
Absent an agreement to the contrary, general partners have equal rights to manage and control the business. A majority vote wins if there is a disagreement, but a unanimous vote is required for extraordinary activities.
Admitted Partners
If a partnership admits a new partner, by unanimous vote, the newly admitted partner is not personally liable for obligations that arose before their admission. The admitted partner risks losing their investment.
Duty of Care
Each partner owes a fiduciary duty of care. The duty of care is breached when the partner engages in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.
Duty of Loyalty
Each partner owes a fiduciary duty of loyalty. The duty of loyalty is breached when the partner competes with the partnership’s business or usurps business opportunities that rightfully belong to the partnership.
Duty of Disclosure
Each partner owes a statutory duty of disclosure requiring complete and information be provided to other partners without demand.
Limited Partnership
A LP is a partnership that has at least one general partner and at least one limited partner. The general partners are liable for all partnership obligations as well as management and control of the business.
Limited Liability Partnership
An LLP is a general partnership that relieves all partners of limited liability such that each partner is only personally liable for wrongful acts they committed. If a GP converts to an LLP then partners remain jointly and severally liable for obligations that took place before the conversion.
Dissociation
Dissociation is a partner’s withdrawal from the partnership. Dissociation does not automatically trigger dissolution.
Dissolution
Dissolution is the process of the partnership winding up and liquidating of the partnership’s assets. Partners are still liable for any obligations that occur during the winding up phase.
Liability of General Partners
General partners are jointly and severally liable for all obligations of the partnership that are within the ordinary course of business. A plaintiff may seek to collect from individual partners only after exhausting the partnerships assets.
Partner’s Actual Express Authority
A partner has express actual authority when the acts are within the ordinary course of business and approved by the majority of partners.
Partner’s Actual Implied Authority
A partner has implied actual authority to take actions reasonably incidental or necessary to achieve the partner’s authorized duties.
Partner’s Apparent Authority
A partner has apparent authority for acts considered within the ordinary course of business or of the kind carried on by the partnership.
