Home > Flashcards > Print Preview
The flashcards below were created by user
on FreezingBlue Flashcards. What would you like to do?
What is a partnership and what factors indicate a partnership?
A partnership is an association of 2+ persons to carry on as co-owners of a business for profit, whether or not they intended to form a partnership or not.
Factors: Capital contribution; Right to control; Sharing profits (includes profits as wages, rent, repayment of a debt, or interest on a loan, but not sharing gross receipts)
What is a joint venture?
Joint Ventures are treated like partnerships, but require an express agreement on how the losses will be shared.
What is partnership by estoppel?
If no partnership is formed, parties may still be liable as if they are partners to protect reasonable reliance by 3rd party (like apparent authority)
What rights does a partner have in partnership property?
Extremely limited rights;
A partner can use partnership property only for partnership purposes;
This right is not transferable;
Partner cannot pledge the partnership interest as collateral for a personal loan or devise the partnership interest to a family member, and a judgment creditor cannot attach partner's interest in the partnership property.
What is a partner's economic interest in the partnership?
Economic interests in the partnership is the partner's share of the profits.
This is transferable and can be assigned, devised, or attached.
What happens if a partner transfers his interest in the partnership?
A transfer of partnership interest does not render the transferee a partner.
Can a partnership interest be community property?
A partnership interest is community property if acquired during the life of the community.
How are partnerships governed?
Partnerships are governed by state statute, but partners may contract around these law via a partnership agreement.
How are partnership profits and losses shared?
Profits and losses split equally (not in proportion to capital contributions).
Who has management rights in a partnership?
Partners have equal management rights.
Matters or ordinary business are decided by a majority interest.
What duties do partners owe each other?
Partners owe a duty of care, loyalty, and good faith.
Partners cannot eliminate these duties, but may set standards if not manifestly unreasonable.
Partners must render full information about the partnership on request.
Are partners entitled to be indemnified for paying partnership debts?
How is a new partner elected? What are a new partner's liabilities?
New partners can join the partnership if the current partners unanimously consent.
New partners are liable for debts incurred by the partnership prior to admission.
Who is the Principal and who is the Agent in a partnership?
Principal is the partnership. Agent is the partner.
What happens if a partner conveys real property without authority?
The partnership can get the property back from the initial transferee (who should have checked on authority), but not from a subsequent BFP (who had no reason to check).
What is a partner's personal liability for partnership obligations in (1) a general partnership, and (2) a LLP?
General partnership - partner personally liable, but defendant must first exhaust partnership resources.
LLP - partner not personally liable unless it's their own tort.
How can you form a LLP/PLLP?
File a certificate with the SOS and pay an annual fee; include the phrase "limited liability partnership" in the name for notice purposes.
How can a partner withdraw from the partnership?
Notice of express will to withdraw; occurrence of an agreed-upon event; a partner's expulsion, death, bankruptcy, or incapacity; appointment of a trustee, receiver or liquidator for a partner; or redemption of a transferee's interest
What is the liability of a withdrawing partner to existing creditors, subsequent creditors, and other partners?
Existing Creditors - partner still liable to existing creditors unless released by a creditor.
Subsequent Creditors - partner liable to subsequent creditors who were unaware of the withdrawal, but partner can protect himself by notifying potential creditors of the withdrawal.
Other Partners - a partner liable to other partners if withdrawal was wrongful (however, most partnerships are at will).
How can a partnership terminate?
- Business becomes illegal
- All assets sold outside the usual course
- Judicial decree
- Term is up or undertaking is accomplished
- Unanimous consent (or in a partnership at will, when a majority in interest agree to wind up)
How are partnership assets distributed upon termination of the partnership?
First, to creditors (including partners who are creditors).
Second, to partners for what is in their capital accounts (contributions - profits - losses)
If partnership assets are insufficient to cover liabilities, creditors must split the assets pro rata; the rest of the debts and capital contributions are partnership losses, which the partners bear equally
What is a limited partnership and how is it formed?
A limited partnership is a partnership with one or more general partners (generally liable) and one or more limited partners (liability limited to their investment).
Formation requires the filing of a certificate of formation with the SOS along with a fee, and must have a written LP agreement. Also, LP's promise to contribute must be in writing, and LP's may withdraw only if the agreement permits.
Name of partnership must include "limited partnership" etc.
When would limited partners be liable for the partnership beyond their capital contributions?
When a limited partner takes part in "control" of the partnership. This can happen where an LP's conduct led someone to reasonably believe she was a GP.
"Control" does NOT include employment by LP, advising the GP, guaranteeing a note for LP, serving as an officer or director of the corporate GP.
How can GPs of a LP shield themselves from liability?
Limited Liability/Limited Partnership (LLLP) which shields general partners from personal liability just like a LLP
Formula: LP (shields limited partners) + LLP (shields general partners) = LLLP
What is a LLC and how is it formed?
Limited Liability Company
Formed by filing certificate of formation with SOS and paying a fee. Name must include LLC, etc.
How are profits and losses shared in a LLC?
Split profits and losses in proportion to capital contributions.
What is the Management of LLCs?
Can be structured like a corporation or a partnership, but managers run LLC.
Series LLC: can partition its assets/liabilities among separate (independent) series
What is the liability for members of an LLC other than the tortfeasor?
Tortfeasor and LLC are liable for torts in the ordinary course of business, other members are not.
The LLC is liable as the principal on contracts