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Partnerships, Agency, and other unincorporated business entities > Partnerships > Flashcards

Partnerships Flashcards

1
Q

Elements of a partnership

A

An association of 2 or more persons to carry on as CO-OWNERS A BUSINESS FOR PROFIT.

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2
Q

Factors that lead to a partnership

A

Ability to exercise control

Profit: creates a presumption of partnership

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3
Q

When is sharing profits not a presumption of a partnership?

A

When it is just salary, rent, repayment of a debt or interest on a loan

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4
Q

When is a writing required for a partnership?

A

Only when it triggers the Statute of Frauds (partnership for more than 1 year)

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5
Q

What if there really is no partnership but they refer to each other as partners in front of you and you rely on that?

A

Partnership by estoppel (only applies to contract cases)

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6
Q

What if a statement of partnership is filed with the superior court clerk?

A

You don’t have to prove partnership, the filed document conclusively establishes the existence of a partnership.

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7
Q

When is property PRESUMED to belong to the partnership?

A

Registered in partnership’s name
Bought with partnership funds
Characterized as such in the partnership agreement

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8
Q

What can a partner do with partnership property?

A

Very limited. Can only use partnership property for partnership purposes. This right is NOT transferable – meaning a creditor of one partner can’t get at partnership property.

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9
Q

What can a partner do with his INTEREST in the partnership

A

Partner can assign or devise. Creditor can get at the INTEREST. Basically like a right to the proceeds.

Remember: This won’t make the transferee a partner.

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10
Q

How are profits and losses split (default?)

A

Equally - partners can agree to split them differently though

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11
Q

What if partners agree among themselves that Rachel won’t be liable for any loss? Can a third party recover from her?

A

Yes. You can’t limit your personal liability as against third parties. Rachel could recover from the other partners pursuant to the agreement though.

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12
Q

Who has control of management in a partnership?

A

All partners have equal rights – majority of votes wins if there is a dispute unless they have provided otherwise.

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13
Q

Does a partner have a right to compensation for her day to day work?

A

No, unless otherwise agreed

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14
Q

Duties of partners to the partnership

A

Duty of care
Duty of loyalty
Duty of full disclosure

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15
Q

How do you admit a new partner?

A

All partners must unanimously agree unless otherwise agreed

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16
Q

What if a new partner joins… what is he liable for?

A

Can lose up to his economic interest in partnership for past dealings. Personally liable for everything going forward.

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17
Q

What if a partner retires. Is he still personally liable?

A

Yes, unless a creditor releases you.

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18
Q

Contractual agreements: partnerships. Who is the principal and who is the agent?

A

principal: partnership

partner entering into contract: agent

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19
Q

When a partner does something he doesn’t have actual authority to do, what do you look for?

A

Apparent authority - use agency principles to see if because of the partner’s title and prior conduct, the agent appeared to have authority

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20
Q

What if a partner sells property without authority?

A

Partnership can get it back from the initial transferee but not a BFP

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21
Q

Is a partnership liable for a partner’s tort?

A

Yes, if the conduct was committed in the ordinary course of the partnership’s business.

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22
Q

Can a third party sue an individual partner if the partnership breaches?

A

Yes. Personally liable - joint and several liability

23
Q

What is the difference b/w an LLP and a general partnership?

A

In an LLP, partners are only personally liable for their own torts (not the torts of others)

24
Q

What actions are required to become an LLP (limited liability partnership)?

A
  1. file election with the superior court where the LLP has an office
  2. pay a fee
  3. include the words “limited liability partnership” or LLP at the end of the name
  4. in GA, does not have to be a professional partnership
  5. no insurance requirement
25
Q

What is the difference b/w dissolution of a partnership and termination?

A

Dissolution is not the end - there is still a winding up period for the partnership

26
Q

How can a partnership dissolve?

A
  1. end of a defined term
  2. achieve a stated purpose
  3. express will or withdrawal of a partner
  4. expulsion of a partner
  5. by operation of law
  6. entry of judicial decree
27
Q

Partnership at-will

A

No set time frame

No penalty for dissolving

28
Q

What if it’s a partnership for a set term and you dissolve early?

A

You are allowed, but you will face breach of contract/wrongful dissolution damages

29
Q

Will a partnership be liable on contracts entered into during a winding up?

A

Yes - if the contract involves old business OR if partner enters into new business and the third party doesn’t have notice that it’s been dissolved

30
Q

What type of notice are prior creditors entitled to?

A

Personal notice

31
Q

What type of notice are people who knew of the partnership before dissolution entitled to?

A

Newspaper notice

32
Q

If a partner enters into new business during winding up period, is she entitled to contribution?

A

Only if the partner didn’t know about the dissolution

33
Q

Who gets paid during winding up? Priority?

A
  1. third party creditors
  2. partners who loaned money to partnership
  3. partners for their capital contributions
  4. partners for profits
34
Q

What if you want to continue partnership after one partner dissolved? What happens to creditors?

A

Others can consent to continue.

Creditors automatically become creditors of the continuing partnership.

35
Q

What must you give to the dissolving partner?

A

His share of the partnership plus interest or his pro rata share of profits
- but remember he may be liable for breach if wrongful dissolution occurred

36
Q

What is a limited partnership?

A

1 or more general partners (personal liability)

1 or more limited partners (no personal liability)

37
Q

How do you form a limited partnership?

A

File a certificate of LP with the secretary or state
Pay a fee
Certificate must include:
- partnership name
- name and address of agent for service of process
- name and business address of each GENERAL partner
- latest date upon when the limited partnership will dissolve
- must be signed by all general partners

38
Q

How much can a limited partner lose in an LP?

A

Only their capital contribution. No personal liability

39
Q

Can a limited partner be liable in an LP if he actively participates in management?
How else can a limited partner be personally liable?

A

GA: not personally liable if you actively participate unless the limited partner misled a creditor into thinking she was a general partner
If he lets partnership include his name in title.

40
Q

What if you forget to file the certificate?

A

You are a general partnership. You can file the certificate and then limited partners will have limited liability from that point forward. (personally liable for the past)

41
Q

How can a limited partner get out of a LP?

A

Only if the LP agreement allows! (roach motel!)

42
Q

What if a limited partner promises to contribute to the LP?

A

Only enforceable if in writing. Partners can agree to reduce the liability of the limited partner even if creditor relied on the contribution.

43
Q

General partners in an LP - what type of liability?

A

Joint and several personal liability

44
Q

How can a general partner shield himself from personal liability?

A

Register his limited partnership as a LLLP - limited liability limited partnership

45
Q

How is a limited partnership different than a general partnership when winding up?

A 
All creditors (including partners who've given loans) are treated the same
Capital returned to limited partners
Profits split according to contributions (NOT SPLIT EVENLY LIKE A PARTNERSHIP)
46
Q

How do you form an LLC?

A

You form a limited liability company by filing articles of organization with the secretary of state
Pay fee

47
Q

What must an LLC’s articles of organization include?

A
  1. statement that the entity is an LLC
  2. the name of the LLC, which must include an indication that it is an LLC
  3. street address of LLC’s registered office and name of registered agent
  4. names of all MEMBERS
48
Q

Who manages the LLC?

A

Members (unless some other agreement)

49
Q

Benefits of an LLC?

A

Taxed like a partnership

No personal liability for torts of others

50
Q

How are profits and losses shared in an LLC?

A

On the basis of contribution

51
Q

If there are managers in an LLC, what duties are owed to the LLC?

A

Fiduciary duties of care and loyalty

52
Q

What are the two most ideal forms of organizations in GA?

A

LLP: limited liability partnership (same as general partnership in most ways except no vicarious liability)
LLC: limited liability company (no vicarious liability, taxed like a partnership, run by members)

53
Q

What if an organization wants to convert into a different type? Partnership –> LLC?

A
  1. get consent from all owners (or according to governing documents)
  2. file appropriate documents

Partnerships, Agency, and other unincorporated business entities (2 decks)

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