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Flashcards in Partnerships Deck (131)
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1

Factors to determine who is a partner:

(1) Capital investment - a capital contribution is not required

(2) Control - the right to control may be enough, even if control is never exercised [Owners usually have the right to control operations.]

(3) Profit - a person who is entitled to receive a share of the firm's profits is presumed to be a partner ("prima facie evidence"). [Most important factor!]

2

Rob Camiletti's bakery owes Pillsbury money, but Rob & the firm are broke. Pillsbury claims Rob's main squeeze, Cher, is a partner because she gets 20% of the profits. Is this true?

Cher is presumed to be a partner because she shares in profits; BUT she can rebut with other evidence (i.e., can't control).

3

Rob Camiletti's bakery owes Pillsbury money, but Rob & the firm are broke. Pillsbury claims Rob's main squeeze, Cher, is a partner because she gets profits as wages, rent, repayment of a debt, or interest on a loan. Is this true?

No presumption in any of these cases; BUT Pillsbury can try to show from other evidence that Cher is.

4

Rob Camiletti's bakery owes Pillsbury money, but Rob & the firm are broke. Pillsbury claims Rob's main squeeze, Cher, is a partner because she gets 20% of gross receipts. Is this true?

No presumption; BUT Pillsbury can try to show from other evidence that Cher is.

5

Is a writing required to form a partnership?

Partnership law does NOT require one, but the Statute of Frauds may.

6

Ice T and Ice Cube form a partnership to record two rap albums. Is a writing required?

No

7

Ice T and Ice Cube form a partnership to last for 2 years. Is a writing required?

Yes, because falls within the Statute of Frauds (can't be performed in 1 year).

8

Is a Registration Statement required to form a partnership?

A partnership MAY file a registration statement with the Department of State, but it's a prerequisite to filing other statements.

9

If no partnership was formed, parties may still be liable as _______________ to protect reasonable reliance by third parties.

Purported partners

10

Grace applies to a bank for a loan. Will lets Grace say he's her partner, even though he's not. Is Will liable to the bank if it loans money to Grace based on her statement?

Yes. Will let Grace hold him out as her partner, therefore he is liable AS IF he really were. She created the impression.

11

Grace applies to a bank for a loan. Will lets Grace say he's her partner, even though he's not. Can the bank recover from Grace if it loans money to her based on her statement?

Yes. The one who does the holding out is liable.

12

Grace applies to a bank for a loan. Will lets Grace say he's her partner, even though he's not. Can Grace's other creditors recover from Will based on the statement?

Only if Will let Grace make the statement publicly.

13

If property is acquired in the partnership's name or in a partner's name if the instrument transferring title indicates he is acting for a partnership (e.g. mentions "a partnership" or representative capacity).

Property is partnership property

14

If partnership funds are used to pay for property.

Property is presumed to be partnership property

15

If property is acquired in his name without partnership funds and there is no sign he's acting for a partnership.

Property is presumed to be a partner's property

16

AB Partnership acquired a truck in A's name. A paid with her own money. The partnership uses the truck for deliveries. Is the truck partnership property or A's separate property?

Presumed to belong to A under Rule 3 if instrument doesn't indicate A was acting in representative capacity.

17

Partnership's rights in partnership property

Totally unrestricted [it owns the property!]

18

If the partnership owns a truck, may the partnership pledge it as collateral for a loan?

Yes, the partnership can do what it wants with its own property.

19

If the partnership owns a truck, may a creditor of the partnership attach it?

Yes, the partnership creditor can get at partnership property.

20

Partner's rights in partnership property

Very limited! He can use it only for partnership purposes, unless the other partners consent. That right can't be transferred.

21

If the partnership owns a truck, may A use it on her vacation?

No, unless B consents (belongs to the partnership NOT partners).

22

A and B form a partnership. They acquire a truck in the partnership's name and use it for deliveries in the regular course of business. Which of the following is true?

(A) A has the right to use the truck for both business and personal purposes.
(B) A has the right to sell his one-half interest in the truck.
(C) Personal judgment creditors of A may attach A's one-half interest in the truck.
(D) None of the above

(D) None of the above

Partners only right in partnership property is to use for partnership business.

23

The right to receive a share of the profits (e.g., a 25% stake).

A partner's economic interest in the partnership

24

Is a partner's economic interest in the partnership transferable?

Yes. A conveyance redirects the flow of profits; it does NOT confer any other rights or impose any obligations.

25

A and B form a partnership. The partnership owns a truck. Bank obtains a judgment against A for defaulting on a personal loan. Which of these statements is correct?

(A) Bank may attach the truck
(B) Bank may attach A's interest in the truck
(C) Bank may attach A's interest int he partnership
(D) None of the above

(C) Bank may attach A's interest in the partnership

Can attach to economic interest in partnership itself like it can attach to A's other financial assets.

26

A, B, and C are partners. B assigns his interest in the partnership to D. The partnership loses $50,000 in an ill-fated venture. Which of the following is correct?

(A) B must share in the loss
(B) D must share in the loss
(C) Neither B nor D must share in the loss
(D) Both B and D must share in the loss

(A) B must share in the loss

All an assignment does is redirect the flow of share of profits, NOT obligations. B is still responsible for the partnership's losses.

27

Can partners waive access to books, duties of loyalty and care, or the power to dissociate or expel a partner?

No

28

Rachel, Phoebe and Monica form the RPM Partnership. Rachel contributes 60% of the capital; the others contribute 20% each. Unless otherwise agreed ("UOA"), how will profits be split?

Equally, NOT in proportion to capital contribution.

29

Rachel, Phoebe and Monica form the RPM Partnership. Rachel contributes 60% of the capital; the others contribute 20% each. Unless otherwise agreed ("UOA"), how will they share the losses?

Unless otherwise agreed, in the same proportion as profits (so equally!). But, they can agree to split profits and losses differently.

30

Rachel, Phoebe and Monica form the RPM Partnership. Rachel contributes 60% of the capital; the others contribute 20% each. If they agree Rachel won't bear any loss, is she free from liability to a third party?

No! Partners cannot limit rights of 3rd parties without that party's consent, BUT effective among partners themselves.