Home > Flashcards > Print Preview
The flashcards below were created by user
on FreezingBlue Flashcards
. What would you like to do?
An association of two or more people who go into business as co-owners to make a profit.
Who can form a partnership?
An individual or an entity, so long as there is capacity to contract.
Do the people need to intend to form a partnership?
No, just intend to do business together.
SOF and partnership
No writing required.
Presumption of Partnership.
When people intend to share profits, there is a presumption of a partnership.
Exceptions to presumption of partnership
- receipt of money for payment of:
- (1) debts,
- (2) wages or other compensation,
- (3) rent,
- (4) annuity, retirement or health benefits,
- (5) interest related to loans or
- (6) goodwill payments.
A partnership for a limited time and a specific purpose to which the rules of partnership apply.
A purported partner is someone who is not a partner, but it treated as a partner for purposes of liability.
Purported partner and estoppel
- (1) representation that a person was a partner,
- (2) representation made by the purported partner or with the purported partners consent,
- (3) a third party reasonably relied on the representation, and
- (4) the third party suffered damages in reliance.
Purported Partner - Representation to 3rd parties.
- Representation must be made by actual partner or purported partner a statement by a third party is insufficient to hold the partnership or purported partner liable.
- There is no duty to deny the representation by the third party.
- Purported partner which is held out in a public fashion is liable to the relying party, even when the purported partner does not know the identity of the third party.
- When a partner consents to a purported partners representation, then the purported partner is treated as an agent of the consenting partner.
Liability for partnership
Each partner is personally liable for the debts and obligations of the partnership.
- A document which governs the partnership actions.
- Agreement will control any conflict with Partnership Act.
Partner as an Agent.
- A partner is an agent of the partnership.
- Must have (1) there is authority for the partners act, and (2) the acts are done in the ordinary course of business.
Accounting to the partnership for conduct.
Duty of loyalty
Engaging in deals adverse to the partnerships interest.
violation of duty of loyalty
Competing with the partnership.
violation of duty of loyalty
Can the partnership agreement eliminate the duty of loyalty?
- no, but it may be limited by
- (1) agreement that certain actions will not violate the duty of loyalty or
- (2) set up a safe harbor process so transactions which might breach the duty of loyalty can be approved.
Reckless or negligent acts by partners
Violate the duty of care to other partners
Carry out their duties with reasonable diligence.
Duty of care.
Carry out their duties in good faith and fair dealing.
Duty of care.
Partnership Profits and Losses.
Default assumption that partners split profits and losses equally, and that partners split losses in proportion to their share of the profits.
- Calculates (contributions liabilities) + (profit distributions share of profits/losses).
Demand for distribution
- A partner cannot demand a distribution
- A partnership is not required to make a distribution to its partners during the life of the partnership.
A partnership interest is a partners right to receive profits, losses and distributions.
Transfer of partnership interest
- Permitted unless restricted by agreement.
- Transfer in whole or in part, but not the right to share in management or access partnership records.
Can a creditor can enforce a judgment against a partners interest?
- Property which is acquired by the partnership
- Even when only one partner contributes, provided:
- (1) it is in partners capacity and
- (2) name of partnership is on the title.
When a question of PShip property
Intent of the partners will control.
Two Presumptions of Partnership Property
- (1) if purchased with partnership assets, then partnership property
- (2) if acquired in a partners name without partnership assets and no mention of partnership on the title, then its not partnership property.
New partners can join by unanimous consent of the other partners.
Right to manage the affairs of the business
Each partner has the equal right
Deciding issues in ordinary course of business
Ordinary business decisions are decided by majority vote.
Deciding outside the OCB
Things outside the ordinary course of business must have consent of all of the partners.
Partner entitled to compensation for services only when winding up the business.
Right to share of profits
A partner is entitled to have his account credited with his share of the profits.
Reimbursement for Contributions
- If a loan or an advance, partner entitled to reimbursement with interest.
- No right to capital contribution.
A partnership must indemnify a partner for a liability incurred in the ordinary course of the partnerships business.
If a partner uses partnership property...
the partner must compensate the other partners for personal benefit derived from partnership property.
Partner's access to books and records
During normal business hours.
Partnership v. Partner.
Breach of the partnership agreement or violation of a fiduciary duty.
Partner v. Partnership.
To enforce rights under the partnership agreement or Partnership Act.
Suit for Accounting.
Partner may sue at any time.
- When a partner ends his association with the partnership.
- Can be triggered by:
- (1) a partners notice of desire to dissociate,
- (2) a partners expulsion from the partnership,
- (3) a partners person bankruptcy,
- (4) a partners death or
- (5) a partners termination.
Power of partner to dissociate
Unilateral power and cannot be blocked by the partnership agreement.
Dissociation and end of partnership
Dissociation does not automatically dissolve the partnership.
Wrongful Dissociation in unlimited partnership
Only if it breaches an express provision of the partnership agreement.
Wrongful Dissociation in P for definite term
- Wrongful if:
- (1) the partner withdraws from the partnership without proper notice,
- (2) the partner is expelled by the court, or
- (3) partner files for bankruptcy.
Dissociation and management of Pship
Ended, except winding up affairs.
Dissociation and fiduciary duties.
Partner's interest on dissociation
A partnership must buy out a dissociated partners interest.
Actual authority after dissociation
Dissociation terminates the partners actual authority to bind the partnership.
Statement of dissociation
- Filed with state.
- Public notice of dissociation effective 90 days from notice.
- Ends apparent authority.
Partner's Actual authority.
A partner's reasonably belief that the partnership has authorized her to act through express words or conduct or through implied authority, the partner can bind the partnership.
Partners Power to Bind Partnership - Apparent authority.
- When a third party reasonably believes that the partnership has authorized the partner to act, the partner can bind the partnership.
- 3P's actual knowledge a defense
Partner's Authority to Transfer P'ship Property
- A partner has the authority to transfer property so long as the property is held in the partnership's name or held in a partner's name.
- A partnership can take action to recover property transferred without authority.
Statement of authority.
- Form filed with the state
- Clarifies the limited nature of a partners authority.
Tort liability and Partnership
A partnership is vicariously liable for tortious acts of its partners committed in the ordinary course of business.
Contract liability and Pships
The partnership may be sued for failing to meet obligations.
Joint and several liability of Pship
Partners are jointly and severally liable for all partnership obligations.
Collecting judgments against individual partners
Go after the individual partner's assets.
Collecting on judgments against a partnership.
Generally, a plaintiff must collect against partnership assets before collecting against the assets of personal partners.
Exhaustion not required to collect against individual partners when
- Plaintiff already has a judgment against the partnership.
- (1) partnership is in bankruptcy,
- (2) partner has consented to the action or
- (3) partner is independently liable for the action.
Direct execution of judgment against individual partner
(1) the partnerships assets are clearly insufficient to satisfy a claim,
- (2) when exhaustion would be burdensome, or
- (3) it is equitable to go after individual partners.
Partnership Liability for Crimes.
- Partnership can be convicted of a crime.
- Conviction does not extend to individual partners.
Dissolution of the Partnership.
- When the partners seek to end the partnership.
- Followed by winding up.
Dissolution - indefinite term
Dissolution is triggered when a partner gives notice.
Dissolution - definite term
- In a partnership for a definite term, dissolution is triggered through:
- (1) death/bankruptcy and partners decide not to continue,
- (2) when the partners agree to dissolve, or
- (3) when the term expires.
Dissolution - any term
- (1) events occur as indicated in the partnership agreement,
- (2) all/substantially all partnership activity becomes unlawful and is not cured within 90 days, or
- (3) judicial decision that it is not reasonably practicable to carry on the business.
Partnership at will
If partners continue to do business after the partnership expires, there is a presumption of a partnership at will.
Winding up of a partnership.
After dissolution, a partnership only exists for the purposes of winding up the business.
Who can participate in winding up
Any partner who has not wrongfully dissociated
Disposing of property (WU)
The partner winding up the partnership may dispose or transfer any partnership property
Discharge of Liabilities (WU)
The partner winding up the partnership may discharge liabilities
Distribution of asset (WU)
The partner winding up the partnership may distribute the assets of the partnership to satisfy partners account.
Binding effects during wind up
- Acts which are necessary to wind up
- Acts that would bind the partnership under apparent authority.
Statement of dissolution.
Notice to be filed with the state which provides notice of dissolution and limits liability to 90 days after the filing.
Priority in winding up.
Creditors are first in line for assets. Remaining assets are distributed to the partners.
- A merger is a combination of the partnership with another entity which results in one surviving entities.
- A merger requires approval by all general partners.
Where to file articles of merger
An Articles of Merger must be filed with the state.
Partners liability after merger.
Draws a dividing line after that date.
- A partnership can convert to another entity provided that the partnership follows the rules to form the new entity.
- Decision to convert must be approved by all partners.
What would you like to do?
Home > Flashcards > Print Preview