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Flashcards in Unincorporated BAs Deck (20):
1

P’SHIP PROPERTY

Title, funds

Partnership’s name >>> Partnership property
- OR acquired in a partner’s name but it’s clearly on BEHALF of the p’ship
- Source of funds doesn't matter

Partnership funds >>> PRESUMED partnership property

Personal funds >>> PRESUMED personal property

2

P'SHIP PROPERTY

Partners can only use p’ship property for:

Partners can only use p’ship property for p’ship purposes
- UNLESS all partners consent

3

PARTNER RIGHTS / DUTIES

DUTY of loyalty

DUTY of good faith, care

^ Which can be eliminated?

DUTY of loyalty
(1) Account to the p’ship any benefits received
(2) Don’t deal in ways ADVERSE to the p’ship
(3) Don't compete with the p'ship
* CANNOT eliminate this duty

DUTY of good faith, care
- CAN eliminate

4

New partners:
- How many partners have to vote for bringing in the new partner?
- Liability for
- PRE-existing p’ship debts:
- FUTURE p’ship debts:

New partners:
- Default rule—requires UNANIMOUS consent of all partners

- Liability for
- PRE-existing p’ship debts: New partner is liable, but only to the extent of his cap contribution
- FUTURE p’ship debts: New partner is liable via cap contribution AND personally liable

5

Assignment/transfer of membership interests
- Includes what?

Assignment/transfer of membership interests
- Includes right to income
- Includes right to inspect books for PROPER PURPOSE
- Does NOT include right to participate in mgmt

6

CONTRACT LIABILITY

TEST: P’ship bound if:

Actual

Apparent

CONTRACT LIABILITY

TEST: P’ship bound if partner had AUTHORITY

Actual
- DEFAULT: all partners have authority to carry on ordinary business
- P’ship agreement, vote of partners

Apparent
- Partner’s title
- Prior consent, prior dealings with the TP

7

PARTNER SALE OF REAL ESTATE:
- If P didn’t have authority ...

REAL ESTATE:
- If P didn’t have authority, P’ship can GET THE PROP BACK—but only from the INITIAL buyer, not a subsequent BFP.

8

TORT LIABILITY

TEST:

TORT LIABILITY

TEST:
- P’ship liable for PARTNERS’ torts if committed in the ORDINARY COURSE of p’ship business
- P’ship liable for EMPLOYEES’ torts if SERVANT and SOE

9

WITHDRAWAL

How to withdraw:

WITHDRAWAL

How to withdraw:
- Notice of withdrawal
- An agreed-upon event
- Expulsion (wrongful behavior)
- Death, bankruptcy, incapacity

10

WITHDRAWAL

Apparent authority lingers for how long?

ONE YEAR lingering apparent authority
- Bind p’ship to TP for one year after withdrawal
- P’ship can protect itself by notifying creditors

11

WITHDRAWAL

LIABILITY of the withdrawn partner
- EXISTING debts:
- SUBSEQUENT debts:
- To OTHER PARTNERS:

LIABILITY of the withdrawn partner
- EXISTING debts:
- Still liable, unless released
- SUBSEQUENT debts:
- Liable if TP unaware of the withdrawal
- Withdrawn P can notify to avoid this
- To OTHER PARTNERS:
- Has to pay other partners damages if she wrongfully withdrew (e.g. before the term was up or the goal was accomplished)

12

WINDING UP

How many partners have to consent to the windup?

WINDING UP

Only need a majority in interest, if p’ship at WILL

Need consent of ALL partners to wind up a term/goal p’ship

13

WINDING UP

Distribution of p’ship assets after winding up
- What's the order of priority b/w CR's, partner CR's, and the partners' accounts?

Distribution of p’ship assets after winding up
(1) Creditors (including P creditors)
- CR’s split pro rata if there’s not enough to pay them all off
(2) Partners’ capital accounts (contributions + profits - losses)

14

WINDING UP

Creditors’ rights to:
- P’ship property
- Partners’ individual property

WINDING UP

Creditors’ rights to:
- P’ship property
- CR’s of the p’ship itself have priority over CR’s of the individual partners in this property.
- Partners’ individual property
- CR’s of the p’ship can pursue the personal property (partners are individually liable for p’ship debts).
- But the partners’ individual CR’s are on par with the p’ship creditors in this property.

15

WINDING UP

Extending the winding up date

Extending the winding up date
- IF p’ship for term, goal
- UNANIMOUS consent needed
- Implied consent if p’ship continues for 90 days past end date

16

LIMITED PARTNERSHIPS

LP not personally liable unless participated in CONTROL of the p’ship.
- Safe harbors—these are NOT control:
- RELIANCE TEST:

- Safe harbors—these are NOT control:
- Acting as an AGENT of the p’ship (e.g. GP asks an LP to execute a K, or take out a loan on behalf of the p’ship)
- Advising GPs
- Employed by the p’ship
- Officer/director of the GP
- Guaranteed a note of the p’ship

- RELIANCE TEST:
- LP is liable to the extent that she does something with the apparent authority of a GP—does something that would lead a TP to believe she was a GP (e.g. signing for a loan on the p’ship’s behalf at the bank—the bank, TP, relied on her apparent authority as a GP).

17

LIMITED PARTNERSHIPS

LP’s generally contribute capital
- Promise to do so is only enforceable if:
- _______________ can discharge the obligation

LP’s generally contribute capital
- Promise to do so is only enforceable if in WRITING
- Unanimous consent of the partners can discharge the obligation

18

LLC

Profits/losses
- DEFAULT RULE: (share how?)

Management structure?

Profits/losses
- DEFAULT RULE: split according to cap contribution—not equally, like a p’ship

Management
- Flexible
- Can be structured like a p’ship or a corporation

19

LLC

Assignment/transfer of membership interests
- includes what?

Assignment/transfer of membership interests
- Includes right to income
- Includes right to inspect books for PROPER PURPOSE
- Does NOT include right to participate in mgmt

20

How do you form each of the following?
- GP
- LP
- LLP
- LLC

GP - just need an agreement, can be oral

LP, LLP, LLC:
- COF
- Pay fee
- Change name
- Designate a registered agent and a registered office