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Flashcards in Partnerships Deck (145)
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1

What is a partnership?

A partnership is an association of two or more persons to carry on a for-profit business as co-owners.

2

Who is a "person" under the UPA?

For purposes of a partnership, the UPA defines a “person” as an individual or a legal entity such as a corporation, a limited liability company (LLC), a trust, an estate, or a partnership.

  • The person must have the capacity to contract.
  • The persons involved in the partnership are partners.

3

How do you satisfy the "intent" requirment under the UPA?

To form a partnership, at least two persons must intend to carry on a business for profit as co-owners, but it is not necessary that such persons have the specific intent to form a partnership.

The co-owners’ subjective intent not to form a partnership does not prevent the association from being a partnership.

4

Under the UPA, what distinction does a written partnership agreement have against an oral partnership agreement?

Although a written agreement is not necessary to form a partnership, a partnership agreement is subject to the Statute of Frauds, which requires that contracts that cannot be performed within one year must be in writing.

5

What is required on the Statement of Partnership?

In Georgia, a partnership may file a statement of partnership in the office of the clerk of the superior court of any county. All the partners must sign the statement, which must be witnessed and notarized.

The statement must contain:

  1. the name of the partnership,
  2. the location of the principal place of business of the partnership,
  3. the names and places of residence of all partners,
  4. the term for which the partnership is to exist,
  5. any limitations on the authority of any of the partners to act on behalf of the partnership,
  6. any special authority to act on behalf of the partnership, and
  7. an account of any property belonging to the partnership.

6

May partners amend a Parternship Statement?

The statement of partnership may be amended by the partners at any time.

7

What evidentary weight and role does a filed Partnership Statement provide?

The filing of a statement of partnership is conclusive evidence that a partnership exists.

8

What type of activity illistrates a partnership?

Passive co-ownership of property by itself does not create a partnership. Courts will consider the amount of related activities toward a business’s end goal when determining if a partnership exists.

9

What key test applies to determining whether a parternship exists?

The key test applied to ascertain whether a business arrangement is a partnership is whether there is a sharing of the profits from the business. If so, such an arrangement is generally presumed to be a partnership, and the persons who share in the profits are partners.

Note, however, that the sharing of gross returns rather than profits does not create such a presumption.

10

What exceptions exist for the key test that determines whether a partnership exists?

Profits from payments recieved from:

  1. A debt, including installment payments;
  2. Wages, salary, or other compensation paid to an employee or independent contractor;
  3. Rent;
  4. Annuity or other payment to a deceased partner’s surviving spouse or representative;
  5. Goodwill payments stemming from the sale of a business, including installment payments; and
  6. Interest or other loan charges.

are not considered shared profits under the partnership profts test.

11

What is the effect does joint ownership of property have on whether a partnership exists?

Joint ownership of property (e.g., a tenancy in common) does not by itself establish a partnership, even when the joint owners share profits made from the use of the property.

12

What is a "subpartnership"?

A subpartnership, which is not a true partnership, refers to an agreement between a partner and a third party that the third party will share in the partner’s profits from the partnership.

13

What claim to profits does a subpartner possess?

The third party subpartner does not become a member of the partnership and has only a contractual claim against that partner for his share of the partnership’s profits.

14

What is a "joint venture"?

A joint venture is not a clearly defined legal entity. Frequently, courts use the term “joint venture” to describe a partnership for a specific, limited purpose.

15

What body of law applies to joint ventures?

Courts usually apply partnership rules to a joint venture when the association has a business, rather than a personal, purpose.

16

Under what legal theory may a person not a partner be treated as a partner?

If a partnership does not exist, then a person generally cannot be liable to a third party as a partner.

Even when a partnership does not exist, a person may sometimes be treated as a partner of a purported partnership.

There are situations in which someone who is not a partner of an established partnership may still be treated as one. The person is characterized as a purported partner or a partner by estoppel.

17

Liability of a purported partnership requires what elements?

For liability as a purported partner to be imposed, the following elements must be established:

  1. There must be a representation—orally, in writing, or implied by conduct—that a person is a partner in an actual or purported partnership;
  2. The purported partner must make or consent to the representation;
  3. A third party must have reasonably relied on the representation; and
  4. The third party must have suffered damages as a result of that reliance.

18

What is the "duty to deny" regarding purported partnerships?

A person who, without her consent, is held out by another as a partner is not under a duty to deny that representation.

Merely being named by another person in a statement of partnership is not enough to create liability as a partner. Further, failing to file or amend a statement of dissolution does not create liability as a partner.

19

What is the "public holidng out" requirment of a purported partnership?

If the person has, in a public manner, represented or consented to being held out as a partner, then she is liable to third parties who reasonably rely even if they did not know of the representation.

It is not a defense that the purported partner was unaware that she had been held out as a partner to the specific person who relied.

20

What legal theory supports the "public holding out" requirement?

When a person falsely represents that another is her partner, the purported partner constitutes an agent of the person making the representation. The purported partner is also an agent of any partner of an existing partnership who consents to the representation.

21

Under Georgia law, is a parternship legally distinct from the partners?

In Georgia, a partnership is a legal entity that is distinct from its partners. Therefore, a partnership may acquire and hold title to property, as well as sue and be sued in its own name.

Nevertheless, partners are personally liable for the partnership’s obligations.

22

What laws and rules govern a partnership?

If the partners have entered into a formal agreement, the agreement, rather than the UPA, generally governs the relations among the partners and between the partners and the partnership when there is a conflict between the agreement and the UPA.

23

What legal relationship does a partner have with the partnership?

A partner is an agent of the partnership for its business purposes.

As an agent, the partner can bind the partnership to a contract with a third party as long as the contract apparently is in the carrying on of the business in the usual way.

The partnership is not bound on a contract only if the partner had no authority and the third party knew that he lacked authority.

24

What fiduciary duties does a partner have with the partnership and the other partners?

  1. The duty of loyalty
  2. The duty of due care

25

Under the UPA, what generally is the duty of loyalty?

Under the duty of loyalty, a partner is required to refrain from usurping a partnership opportunity or otherwise using partnership property or business to derive a personal benefit without accounting to and obtaining the consent of the partners.

26

Under the UPA, are loans by a partner to the partnership allowed?

A partner, in addition to contributing capital to the partnership, may make a loan to the partnership.

The lending partner is treated as any other creditor of the partnership, including having the right to receive interest, subject to other applicable laws.

27

Under the UPA, what are the limitations to the duty of loyalty?

A partnership agreement may not eliminate the duty of loyalty.

Nevertheless, the agreement may identify specific types or categories of activities that do not violate this duty, if they are not manifestly unreasonable.

28

Under the UPA, who does the duty of loyalty apply to?

The duty of loyalty generally applies to partners, including partners involved in the winding up of the partnership.

29

Does the duty of loyalty apply to prospective partners?

The duty of loyalty applies to prospective partners during the period of partnership formation.

30

Does the duty of loyalty apply durring the dissolution of the partnership?

Upon the partnership’s dissolution, the duty does not apply unless the partner is engaged in winding up the partnership business.

When a partner or the representative of the last surviving partner is engaged in winding up the partnership business, this duty is generally applicable.