Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
14 Cards in this Set
- Front
- Back
General partnership formation |
Definition: A general partnership is an association of two or more persons who are carrying on as co-owners of a business for profit.
Establishing a partnership:
How do you get actual authority to act on behalf of the partnership?
|
|
Liabilities of general partners to third parties |
Contract liability
Fraud on third party
Torts
Breach of trust
Criminal liability A partner will not be criminally liable for the crimes of other partners committed within the scope of the partnership business, unless the other partners participated in in the commission of the crime either as principals or accessories. Each general partner is personally and individually liable for the entire amount of all partnership obligations, whether arising in contract or tort
General partnership liability by estoppel
|
|
Rights and liabilities between general partners 1) General partners are fiduciaries of each other and the partnership |
General partners owe to each other and the partnership a duty of loyalty
Generally partners cannot sue or be sued by his partnership, but... (i) As a remedy for breach, can bring an action for accounting (equitable action) which allows partnership to:
(ii) One partner may sue the other at law when no complex accounting is required or when a single fully closed but unadjusted transaction is involved. Indemnification: partnership must indemnify every partner with regard to payments made and personal liabilities reasonably incurred in the ordinary and proper conduct of business. Contribution: Where one partner has been required to pay or satisfy more than her share of a partnership debt, she may require the other partners to contribute their pro rata shares. |
|
Rights and liabilities between general partners 2) Partners' rights in partnership property and liquidity |
Rule: partners do not have a right to use partnership property other than for the benefit of the partnership. Partners' interest in the partnership is treated as personal property and can be assigned and attached. Specific partnership assets
Share in management
Share of profits (remaining after liquidity)
CONTROLLING FACTOR: If partners' intent was to devote the property to partnership purposes then it's partnership property. Can also look to whether partnership or personal money was used, but that doesn't control. What happens when a partner dies?
|
|
Rights and liabilities between general partners 3) Management |
Absent an agreement, each partner is entitled to EQUAL CONTROL (one partner, one vote). Ordinary matters are governed by majority vote, but fundamental partnership matters require unanimous consent. |
|
Rights and liabilities between general partners 4) Salary (remuneration) |
Absent an agreement, partners get NO SALARY Exception: partners get compensation for helping to wind up a partnership business. |
|
Rights and liabilities between general partners 5) Partner's share of profits and losses |
But remember the profits made in the course of the partnership belong to the partnership |
|
General partnership dissolution 1) Definitions |
Dissolution
Termination The real end of the partnership is called "termination" Winding up The period between dissolution and termination in which the remaining partners liquidate assets to satisfy the partnership's creditors |
|
General partnership dissolution 2) Partnership's and partners' liability during winding down |
After dissolution, a partner partners do not have authority to act as an agent for either the partnership or for any other partner. EXCEPT...
Old business The partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business by satisfying creditors who existed when winding up began. New business (partner will be individually liable) Partners retain liability on brand new transactions during winding up until personal notice of dissolution is given to known creditors (current and past) and publication notice is given to all potential creditors. |
|
General partnership dissolution 3) Priority of distributoin |
Each level of priority must be fully satisfied before beginning the next level. Order of priority:
What happens if partnership runs out of money to repay?
|
|
Continuance of business after dissolution |
The remaining partners have a right to continue the partnership business after dissolution if:
|
|
Alternative unincorporated business organizations 1) Limited partnerships |
Definition: A partnership with at least one general partner and at least one limited partner Formation:
Name of partnership
Liability
Rights of both general and limited partners
Rights specific to general partners: Right to manage the partnership Rights specific to limited partners
|
|
Alternative unincorporated business organizations 2) Registered Limited Liability Partnerships (RLLP) |
Definition General or limited partnerships engaged in professional services (likea law firm)
Formation
Liabilities No partner, not even general partners, is liable for the debts an obligations of this partnership, EXCEPT liabilities arising out of the partner's own negligent or wrongful act or out of the negligent or wrongful act of a person under partner's direct supervision and control |
|
Alternative unincorporated business organizations 3) Limited Liability Companies (LLC) |
Definition
Formation
Control
Limited liability Members, managers, and agents of an LLC are not personally liable for obligations of the LLC Limited liquidity A full membership interest may not be transferred without consent of a majority of the membership interest or as provided in the operating agreement. Limited life The company will dissolve upon a vote of the majority of the membership interest or as provided in the operating agreement |