Flashcards in Partnerships Deck (50):
What is a partnership?
An association of two or more persons to carry on a for-profit business as co-owners.
Who can enter a partnership?
Any person or entity with legal capacity.
Is specific intent needed to form a partnership?
No, just a general agreement to become business partners. Profit sharing establishes a presumption of a partnership relationship.
What is required for a partnership?
1. General intent
2. An agreement (can be conduct-based)
3. Extensive activity or profit sharing
What does profit sharing establish?
A presumption of a partnership
When is someone a partner by estoppel?
1. A representation as such
2. The person makes or consents to the representation,
3. A third party reasonably relied on the representation, and
4. A third party suffered damages on the reliance
What fiduciary duties do partners have?
The duties of loyalty and care
Can partners contract around fiduciary duties?
Yes, within reasonably bounds
Do fiduciary duties extend beyond dissolution?
Only to the extent the partner is involved in winding up the partnership's business
What is the default profit-sharing rule?
Profits are shared equally
What is the default loss-sharing rule?
Losses are shared in the same manner as profits
Can a partner demand a distribution?
No, but the profits can be credited to her account
Can a partner transfer their partnership interest?
Yes, in full or in part
Does transfer cause dissolution or disassociation?
What are the rights of the transferor partner?
The transferor partner retains all rights and duties of a partner
What are the rights of a transferee partner?
1. Receive distributions
2. See judicial order for dissolution
3. Get an accounting on dissolution
What are not the rights of a transferee partner?
No right to participate in the management or conduct of business, access to the partnership records, or demand other information
What property belongs to the partnership?
All property acquired by the partnership
When is property presumed to belong to the partnership?
When it was purchased with partnership assets or credit; other factors may include property's use, tax treatment, and the source of funding
When can someone become a new partner?
With the consent of all existing partners
What partners have management rights?
What is required for a partnership to make ordinary business decisions?
A majority vote of the partners
When must a partnership reimburse a partner?
When he takes loans made in furtherance of the partnership
When must a partnership indemnify a partner?
For personal liability incurred in the partnership's ordinary course of business
When may a partnership sue a partner?
1. Breach of PA
2. Fiduciary duty
When may a partner sue a partnership?
To enforce the partner's rights under the PA or statutory law
What causes disassociation?
1. Notice of withdrawal
2. Expulsion, unanimous vote, or bankruptcy
3. Death or a termination of an entity partner
4. Appointment of a guardian or judicial determination of incapacity
When is a partner's disassociation?
When it is breach of an express provision of the PA?
What are the effects of disassociation?
1. The partner cannot participate in the management or conduct of the business
2. The duty not to compete ends; other fiduciary duties continue with respect to post-disassociation events.
3. The partnership must buy out his interest
When can a partner bind the partnership?
When the partner acts with actual or apparent authority
When can a partner bind the partnership with apparent authority?
When they perform an unauthorized act in the ordinary course of the partnership's business, but a third party cannot hold the partnership liable if they knew or was notified the partner lacked authority
When does a partner have authority to transfer partnership property?
Transfer property held in the partnership's name or in the names of partner(s)
When can a partnership recover transferred property?
1. The transferee had reason to know it was the partnership's, and
2. The transferee knew the partner lacked authority to transfer
For what obligations is a partnership liable?
For all; partners are jointly and severally liable
Can a partnership be convicted of a crime?
Yes, and penalties may be levied on it
What is the effect of a judgment against a partnership?
Satisfied from partnership assets first, then partners'
When can a partnership convert to a limited partnership?
1. Unanimous approval
2. Articles of conversion filed with state
Are former general partners liable for obligations incurred before becoming an LP?
When can a limited partnership convert to a partnership?
1. Unanimous approval by general and limited partners
2. Cancel LP certificate
Does a conversion affect the partnership as an entity?
No, legal proceedings against it occur as though there were no change
When can a partnership merge with another?
1. Must set forth names of both entities
2. What type the surviving entity will be
3. T and C of merger
4. Manner of converting interests and obligations
5. Address of surviving entity
What approval is needed for a merger?
If general, all; if LP, as necessary
When can an at-will partnership be dissolved?
A disassociating partner gives notice of withdrawal
When can a partnership for a term or undertaking be dissolved?
1. Term expires or undertaking is completed; OR
2. All partners agree to dissolve, OR
3. Partner is disassociated and 1/2 of others agree to dissolve within 90 days
What is winding up?
The partnership disposes of and transfers property and may discharge liabilities
Who has priority over partnership assets, creditors or partners?
Can a partnership continue carrying on business after dissolution?
What distinguishes an LLP?
An LLP partner is not personally liable, only for his own misconduct
What is required to form an LP?
1. One GP and LP; LP's liability limited to capital contribution
2. Must file certificate of limited P