Partnerships & LLCs Flashcards
(35 cards)
What is a partnership
An association of two or more persons to carry on as co-owners a business for profit. Partnership law is based on the law of contract and agency. Florida partnerships are governed y the Revised Uniform Partnership Act (RUPA).
Except with respect to partners’ personal liability for partnership obligations, is a partnership a legal entity distinct from its partners?
yes
Is title to land allowed to be held in the partnership name
yes
May a partnership sue or be sued in the partnership name?
yes
How does the governing law of a partnership work?
Generally, the RUPA provides a default set of rules. Partners are free to agree–through a partnership agreement–to abide by different rules for governing the relationships among themselves, and the RUPA will govern only those issues not provided for in the partnership agreement. Note, however, that certain RUPA provisions cannot be waived (e.g., the duty of loyalty, the right of a court to expel a partner).
What level of agreement is needed for partnership formation
No formal agreement is required to form a partnership; the parties’ intent may be implied from their conduct
Is writing required to form a partnership; what is the consequence if no writing is used
No writing is required to form a partnership. However, because of the Statute of Frauds, if partners wish to have an enforceable agreement to remain partners for more than one year, they generally must execute a writing reflecting their agreement
What is the capacity requirement for partnership formation
Anyone who is capable of entering into a binding contract may be a partner. A would-be partner who lacks capacity is liable only to the extent of his capital contribution, but the partnership with such person is not void; it will continue to exist until steps are taken to dissolve it
What happens if a partnership is formed to achieve an illegal purpose
A partnership formed to achieve an illegal purpose is void, and the court will not compel an accounting or a settlement of a void partnership’s affairs
What consent is required for one to become a partner in the partnership
Unless otherwise agreed, no one can become a partner without the express or implied consent of all partners
How can one find proof of partnership existence
Since no formalities are required to form a partnership, it is sometimes difficult to determine whether the relationship between the parties is a partnership or something else. To determine whether a partnership exists, courts generally look to the intent of the parties. If they intended to carry on a business as co-owners, there is a partnership even if they did not subjectively intend to be partners. Where the parties’ intent is uncertain, the court considers certain rules.
Where the parties’ intent to form a partnership is uncertain, the courts consider what five things?
(i) the sharing of profits raises presumption of partnership unless the share was received as payment of a debt, for services rendered, as rent payment, as an annuity or other retirement benefit, as interest on a loan, or for the sale of goodwill of a business (this is the loan factor that raises a presumption of partnership); (ii) Title to property is held in joint tenancy or in common; (iii) the parties designate their relationship as a partnership; (iv) the venture undertaken by the parties requires extensive activity (e.g., if A and B each contribute $100,000 to buy a building of rental apartments that must be managed, it is more likely that they are partners than if they each contributed $100,000 to buy shares in a company that manages real estate); and (v) sharing of gross returns
What is the liability of a person who by words or conduct represents himself as a partner or consents to being represented by another as a partner
He will be liable to third parties who extend credit to the partnership in reliance on the representation
Is it true that a person held by another as a partner is not liable as a partner unless he actually consents to the holding out (the mere failure to deny a representation of partnership would not give rise to liability as a purported partner)
Yes
What is the liability of a person who holds another out as a partner
He thereby makes that person his agent to bind him to third parties. (If there is a partnership, only those partners who know of or consent to this holding out will be bound.)
What is includable in partnership property
There is no restriction on what may be partnership property, and sometimes it is not always obvious whether property is partnership property or the individual property of a partner. The RUPA has a number of provisions concerning ownership of titled property (both titled personal property and real property)
Under the RUPA, titled property is deemed to be partnership property if: one of what two things
1) it is titled in the partnership name; or 2) it is titled in the name of one or more partners and the instrument transferring title notes the titleholder’s capacity as a partner or the existence of a partnership
Under the RUPA, when is property presumed to be partnership property
if it was purchased with partnership funds, regardless of in whose name title is held. “Partnership funds” includes not only the partnership’s cash, but also the partnership’s credit.
Under the RUPA, if property is held in the name of one or more partners and (what two things), the property is presumed separate property, even if the property is used for partnership purposes
(i) the instrument transferring title does not indicate the person’s capacity as a partner or mention the existence of a partnership and (ii) partnership funds were not used to acquire the property
In cases not governed by the explicit RUPA provisions (e.g., in cases of property that is not titled), in determining whether property is partnership property or the separate property of a partner, courts will probably continue to look to the following common law criteria which tend to indicate that the property was intended to be partnership property (6)
a. Acquisition of the property with partnership funds; b. Use of the property by the partnership in conducting the partnership’s business; c. Entry of the property in the partnership books as a partnership asset; d. A close relationship between the property and the business operations of the partnership; e. Improvement of the property with partnership funds; and f. Maintenance of the property with partnership funds
What are the rights of a partner in partnership property
A partner is not a co-owner of partnership property and has no transferable interest in specific property of the partnership. Thus, a partner’s creditor may not reach partnership property to satisfy the personal obligations of a partner.
What is a partner’s interest in the partnership
Each partner has a transferable interest in the partnership, which consists of his share of partnership profits, losses, and distributions. Absent an agreement to the contrary, a partner shares equally in the partnership profits and must contribute to the losses in proportion to his share of the profits. 1. the interest in the partnership is treated as personal property; 2. the interest is transferable without dissolving the partnership or causing the transferring partner’s dissociation; and 3. It is attachable
Does the transfer of a partner’s interest give the transferee rights with regard to the operation of the partnership?
No. It merely entitles the transferee to receive profits to which the transferring partner would otherwise be entitled. Also note that a partner may not sell his partner status (i.e., may not make another a partner) without the unanimous consent of the other partners
A Minor lacks capacity to be a partner and thus is not personally liable for partnership debts. However…
He is bound to the extent of his capital contribution
