∑(6) Fl(Psh) F12

Front 1

MC6 FL(PSHP) F12

Back 1

MC6 FL(PSHP) F12

Front 2

Definition of a partnership?

Back 2

An association of two or more persons to carry on as co-owners of a business for profit.

Front 3

Formation of a Partnership?

Back 3

To form a partnership you need a partnership agreement, which may be express or implied.

Implied agreement:
1. intent to enter into a business as co-owners for profit
2. an agreement to share profits and losses AND
3. a mutual right of control over the business

A partnership agreement is a contract, so contract rules apply.

Front 4

Who is a partner?

Back 4

Receipt by a person of a share of business profits is prima facie evidence they are a partner.
Except: if payments of profits are received in payment for wages, rent, consideration from sale of asset, repayment of principal or interest on debt.

Front 5

What is Partnership Property?

Back 5

1. property held in the partnership name
2. property intended by the parties to be partnership property
Factors that weigh heavily but are not determinative: property brought in or acquired by the partners, property acquired by partnership funds, property the partnership pays taxes on or insurance on or repairs, etc.

Front 6

What are a partner's rights in partnership property?

Back 6

A partner has an equity interest in partnership property. A partner is a tenant in partnership of partnership property.

1. Partners may not possess partnership property for personal use without consent of other partners.

2. A partner's interest in specific partnership property may not be attached except on a claim against the partnership.

3. Partners may not assign their interest in specific partnership property except in connection with assignment of rights of all partners in property.

4. A partner's interest in specific partnership property is no subject to dower, curtesy, or allowances to widows, heirs, or next of kin.

5. Upon death of a partner, his rights in specific partnership property vest in surviving partners.

Front 7

What is a partner's interest in his share of the partnership?

Back 7

The partner's interest in his or her share of partnership profits or surplus. This is a personal property interest.

Front 8

Can you assign a partnership interest?

Back 8

Yes, a partner may transfer, sale, or otherwise assign their interest in a partnership. However, the assignment only creates a righ tot receive profits the assigning partner would have otherwise been entitled to. The assigning partner is still a partner.

Front 9

How can a creditor reach a partner's partnership interest?

Back 9

Can't receive a direct assignment. Instead, must seek a court order, called a CHARGING ORDER.

Front 10

Generally, how are rights and obligations of partners determined?

Back 10

By the language of the partnership agreement.

Front 11

Non-waivable rights and obligations of partners?

Back 11

Can't be waived in the partnership agreement:

1. duty of loyalty and care (fiduciary duty)

2. liabilities to third parties for partnership obligations

3. right to an accounting

Front 12

Default rule: what is a partner's share in the profits and losses of the partnership business?

Back 12

Equal, unless partnership agreement says otherwise.

Front 13

Who gets to manage / how are decisions made about the partnership?

Back 13

Unless partnership agreement says otherwise...

All partners have an equal right in management and control of the business.
Matters in connection with normal day-to-day business are determined by majority vote. Other matters are determined by unanimous consent.

Front 14

Can a partner sue the partnership?

Back 14

Generally, a partners can't sue or be sued by the partnership and one partner can't sue another for breach of the partnership agreement or other partnership matters.

Front 15

What is a partner's right to an accounting?

Back 15

An accounting is an equitable proceeding to determine and resolve all transactions and financial matters in connection with a partnership. Based upon a final accounting, a partner may have a legal claim against another partner.

Front 16

When might an accounting occur?

Back 16

1. generally as a final settlement upon dissolution and winding up of partnership affairs

2. a partner may also demand a formal accounting:
a) if he or she is wrongfully excluded from business or possession of partnership property
b) if the agreement provides for such an action OR
c) whenever other circumstances make it just and reasonable

3. a formal accounting may be used to settle disputes over violations of fiduciary duty

Front 17

What are partners' duties to each other?

Back 17

Fiduciary duty to the partnership and to the other partners in connection with the partnership business. Includes:

1. duty of loyalty, good faith, fair dealing

2. duty of trust and confidence

3. duty to indemnify for losses incurred as a result of misconduct

Front 18

Indemnification?

Back 18

The partnership must indemnify partners for payments made and liabilities reasonably incurred in connection to the partnership business.

Front 19

Contribution?

Back 19

Unless otherwise agreed,
partners must contribute to the partnership amounts necessary to meet the obligations and liabilities of the partnership.

Front 20

What is a partner's right to information?

Back 20

Partner has right to access and inspect the books and receive full and true information on all things affecting the partnership.

Front 21

What is a partner's right to distribution of partnership profits?

Back 21

Partner not automatically entitled to partnership profits. Unless otherwise provided in the agreement, the draw (cash distribution) is determined by majority vote of the partners.

Front 22

Are partners entitled to remuneration?

Back 22

No. Unless otherwise agreed, partners are generally not entitled to compensation for services.

Front 23

How to agency rules apply to partners?

Back 23

Every partner is an agent of the partnership. Partnersihp is bound by act of any partner apparently carrying on in the usual way of business of the partnership.

Front 24

Actual Authority?

Back 24

Express actual authority can be conferred by the express or implied consent of the other parties.

Front 25

When is actual authority insufficient?

Back 25

UNANIMOUS CONSENT is required for:
1. assignment of partnership property for the benefit of creditors
2. disposing of the goodwill of the business
3. confessing a judgment
4. submitting claims to arbitration
5. or doing any other act that would make it IMPOSSIBLE TO CARRY ON THE ORDINARY BUSINESS OF THE PARTNERSHIP.

Front 26

Implied Actual Authority?

Back 26

Partners have implied actual authority for all things necessary, usual, and proper to accomplish express responsibilities or reasonably incident to express authority.

Front 27

Apparent authority?

Back 27

A partnership may be bound by a partner's acts if 3rd party with whom the partner dealt reasonably believed the actor is authorized and the belief is traceable to a manifestation of the principal.

Front 28

Ratification?

Back 28

Unauthorized act of a partner may still bind the partnership if the co-partners subsequently ratify it. Ratification can be express or implied by conduct that would only make sense if partners had ratified.

Front 29

What is partnership by estoppel?

Back 29

A person who is not a partner,
who represents himself as a partner or consents to another making such a representation,
may be liable to any person who has in good faith extended credit to the partnership based upon such representations.

The other partners may be liable
for a non-partner's conduct if:
1. they carelessly or intentionally cause the third party to believe he is a partner or
2. knowing of such belief did not take reasonable action to notify the third party

Front 30

Partner liability for torts and wrongful acts?

Back 30

Partners are jointly and severally liable to third parties for loss or injury from wrongful acts or omissions of any partner acting in the ordinary course of business or with the authority of his or her co-partners.

Partners liable even if innocent or had no knowledge of the wrong.

Front 31

Partner liability for breach of trust?

Back 31

Partners are joint and severally liable for any one partner's improper receipt and misapplication of any money or property if the partner is acting within the scope of apparent authority or for misappropriation of money or property in the custody of the partnership that was received in the course of business from a third party.

Front 32

Partner contract liability?

Back 32

Under the Uniform Partnership Act, partnerships are JOINTLY LIABLE for other debts and obligations of the parties (all partners would have to be sued).

Front 33

Liability of incoming / new partners?

Back 33

Liable for all obligations of the partnership arising before their admission. However, the liability arising before the new partner's arrival can be satisfied only out of partnership property.

Front 34

Liability of departing partner?

Back 34

Withdrawing partner remains liable to third parties who extended credit while the partner was a member of the partnership.

Front 35

Special issues w/ real property transfers:
1. Title and Conveyance requirement?

2. Bona fide purchaser?

Back 35

1. Real property owned in the partnership name must also be conveyed in the partnership name. The name on the title and conveyance must match. (or things will be messy)

2. A conveyance of a partnership property to a bona fide purchaser is valid even if the conveying partner had no actual authority. A BFP is one who takes for value and w/out knowledge that the partner exceeded his authority.

Front 36

Definition of dissolution?

Back 36

The change in relation of partners caused by any partner ceasing to be associated with the partnership.

Examples of events that cause dissolution:
1. w/drawal
2. death
3. or bankruptcy
of a partner

Front 37

Definition of termination?

Back 37

when all partnership affairs have been wound up

Front 38

Definition of Winding Up?

Back 38

the process of winding up partnership affairs; i.e. the period of time after dissolution but before termination

Front 39

Rightful v. Wrongful dissolution?

Back 39

1. Rightful or Proper Dissolutions:
end of a specific pd of time specified in partnership agreement
at will if there is no spec. time in partnership agreement
bona fide expulsion of a partner
death of a partner
bankruptcy of a partner

2. Wrongful dissolutions
withdrawal in violation of a partnership agreement
willful or persistent breach of partnership agreement
wrongful expulsion of a member
*any partner who wrongfully dissolves the partnership is liable to the other partners for damages for breach of contract.

Front 40

Dissolution by court decree?

Back 40

A partnership may be dissolved by court decree upon application of a partner upon a court finding of:
1. incapacity or misconduct of another partner
2. that it is not reasonably practicable to carry on the partnership

Front 41

Effect of dissolution on partner's authority?

Back 41

Dissolution of a partnership terminates the authority of any partner to act as agent for the partnership except for purposes of winding up partnership affairs

(note apparent authority might still be found)

Front 42

Continuation of the business?
By partnership agreement?
After wrongful dissolution?

Back 42

The partnership agreement may provide for continuation of the business. Thus, a termination of the disolved partnership may not be required.

After a wrongful dissolution, the other partners may continue the business. However the partner who wrongfully dissolved may be entitled to an effective cash buy out. The amount of any damages recoverable by the remaining partners will be subtracted from the payment due the departing partner.

Front 43

What happens to creditors when the partnership business continues after dissolution?

Back 43

The creditors of the old partnership remain creditors of the new partnership.

Front 44

Partner's liquidation rights in dissolved partnership?

Back 44

Unless otherwise agreed in the partnership agreement, upon any dissolution that was not in violatio nof the partnership agreement, any partner can demand a liquidation of the partnership. Gives partners the right to force sale of partnership assets. Proceeds are first used to satisfy partnership liabilities. Any surplus is then distributed to partners according to his or her respective partnership interests.

Front 45

What happens w/ the estate of a deceased partner?

Back 45

The deceased partner's interst in partnership property vests in the partnership. However, the executor of teh deceased has the right to demand cash value of the value of the dead partner's interest.

Front 46

Payment of Creditors Upon Dissolution and Termination?

Back 46

Unless otherwise provided in the partnership agreement, if the partnership has insufficient assets to pay off creditors, each partner must contribute equally the amount necessary to satisfy partnership obligations.

Front 47

Distributions to Partners Upon Dissolution and Termination?

Back 47

Priority of payment rule: in settling accounts after dissolution, partnership property is distributed in the following rank order:
1. payments to creditors other than partners
2. debts owed to partners
3. amounts owed to partners based upon their capital contribution; and amounts owed to partners based upon their proper share

Front 48

Definition of a limited partnership?

Back 48

A partnership formed by one or more persons and having one or more general partners and one or more limited partners.
A general partner may be a corporation, trust, or other entity.

Front 49

Formation of a limited partnership?

Back 49

1. Does not require a written partnership agreement.

2. Limited partnership required to file a Certificate of Limited Partnership with the Secretary of State

3. The partnership name must include the words 'limited partnership' or 'LLC' etc.

Front 50

What is the limited liability of limited partners?

Back 50

a limited partner is not liable for the limited partnership's debts and obligations

Exception: is limited partnership participates in the (day to day) control of the business, he or she loses the right to limited liability. However, a limited partners who participates in control is liable only to persons who transact with the partnership reasonably believing that the limited partner is a general partner.

Front 51

Liability of general partners in a limited partnership?

Back 51

liable for wrongful acts, breach of trust, and other debts and obligations of the partnership under the same rules applicable to partners of general partnerships.

Front 52

Share of profit, loss, and distributions in a limited partnership?

Back 52

Unless otherwise provided in teh limited partnership agreement, a partner's share of profit, loss or distribution shall be based on proportion of the partner's contribution as stated in partnership records.

Note this is different than a general partnership where, unless provided otherwise in the agreement, partnership share equally.

Front 53

Assignability of partnership interests in limited partnerships?

Back 53

A limited partner may assign a partnership interest. The assignment does not dissolve the limited partnership. Unless the assignor gives the assignee the right in accordance with the partnership agreement, the assignee does not become a limited partner and is only entitled to the limited distribution the assignor would have been entitled to.

Front 54

Dissolution of limited partnership?

Back 54

occurs when:
1. end of a definite term
2. per limited partnership agreement
3. written consent of all partners
4. w/drawal of a general partner
*unless at least one general partner remains and the limited partnership agreement permits continuation of partnership business or
-unless all partners agree in writing within 90 days to continue the partnership business and to the appointment of one or more general partners

Front 55

Parnerships and taxes?

Back 55

A partnership is a pass through entity, not a taxable entity. It must file an information return, but not a tax return. It pays only a single tax on profits - paid by the individual partners (unlike corporations which are a double tax entity)

Front 56

Partnership taxes: the partner's distributive share of profit or loss?

Back 56

Whether or not they actually receive it, partners must pay taxes on their share of partnership profits.
Subject to certain limitations, partners may take their share of partnership losses into account o their individual tax returns. The partners, not the partnership pays the taxes.

Front 57

Effect of sale of partnership property on taxes?

Back 57

Upon sale of partnership property, the partnership will use the proceeds to compute gain or loss that would typically be used by a taxable entity.
The individual partners will each report their appropriate gain or loss on their individual returns.

Front 58

LLPs and LLCs

Back 58

Limited Liability Partnerships and Limited Liability Companies are alternative business forms that offer limited liability to all members and the tax benefits of a pass through entity.

Front 59

PARTNERSHIP

Back 59

An association of two or more persons to carry on as co-owners a business for profit.

Front 60

JOINT VENTURE

Back 60

An association of persons with intent to engage in a single business venture for joint profit.

Front 61

PARTNERSHIP - LEGAL ENTITY

Back 61

A partnership is a legal entity distince from the individual partners.

TITLE TO LAND: Title to land may be taken in the partnership name.

LAWSUITS: A partnership may sue or be sued in the partnership name alsone or in the names of the individual partners, or both.

[Note] NOT a separate entity for purposes of taxation.

Front 62

Revised Uniform Partnership Act (R.U.P.A.) PROVISIONS THAT MAY NOT BE WAIVED

Back 62

Partners can use PARTNERSHIP AGREEMENTS to establish different rules for governing their relationship. But the following provisions may NOT be waived:

(i) PARTNERSHIP REGISTRATION;
(ii) RIGHT OF ACCESS to books and records;
(iii) duties of LOYALTY and CARE;
(iv) the power to DISSOCIATE as a partner;
(v) the power of a court to EXPEL a partner;
(vi) the requirement that the partnership BE WOUND UP in the event of either the illegality of the business OR certain judicial determinations that continuing the business is not practicable or equitable;
(vii) RIGHTS OF THIRD PARTIES;
(viii) a partner's duty of GOOD FAITH AND FAIR DEALING; and
(ix) the LAW APPLICABLE TO LIMITED LIABILITY PARTNERSHIPS

Front 63

WHO MAY BE A PARTNER

Back 63

Anyone may be a partner who is capable of entering into a binding contract.

If the would-be partner lacks capacity, she is NOT PERSONALLY LIABLE for the obligations of the partnership or for breaches of the partnership agreement. BOUND to the EXTENT OF her CONTRIBUTION OF CAPITAL.

Front 64

LEGALITY OF PURPOSE

Back 64

A partnership may be formed ONLY TO ACHIEVE A LEGAL PURPOSE; a partnership formed to achieve an ILLEGAL PURPOSE IS VOID.

The courts will compel neither an accounting nor a settlement of a void partnership's affairs.

Front 65

CONSENT

Back 65

Unless the agreement provides otherwise, NO ONE CAN BECOME A PARTNER in a partnership without the express or implied CONSENT of ALL PARTNERS.

Front 66

JUDGMENT CREDITORS

Back 66

G/R: must exhaust partnership assets BEFORE levying on a partner's individual assets

Front 67

PARTNERSHIP LIABILITY

Back 67

1)Partners are jointly liable for ALL contractual obligations of their partnership.
2) Where one partner defrauds a 3P, the partnership will be liable if the partner is acting WITHIN THE SCOPE of teh partnership business.

Front 68

LIMITED PARTNERSHIP

Back 68

A limited partnership is composed of one or more general partners and one or more limited partners.

Differs from a general partnership in two basic ways:
(i) a limited partnership is unknown at common law and is created UNDER SPECIFIC STATUTORY AUTHORITY; and
(ii) the liability of a limited partner for a partnership is generally LIMITED TO THE CAPITAL THAT she CONTRIBUTES.

Note: A limited partner is NOT PERSONALLY LIABLE, directly or indirectly, by way of contribution or otherwise, for an obligation of the limited partnership solely by reason of being a limited partner, even if the limited partner participates in the management and control of the limited partnership.

Front 69

CERTIFICATE OF LIMITED PARTNERSHIP

Back 69

A certificate of limited partnership SIGNED BY EACH GENERAL PARTNER must be filed with the Department of State setting forth, among other things:

(i) the name and mailing address of the limited partnership;
(ii) the name and address of the agent for service of process;
(iii) the name and address of each GENERAL partner (the limited partners' names need not be included); and
(iv) whether the limited partnership is a LL limited partnership.

*Legal existence begins AT THE TIME OF FILING, unless otherwise provided in teh certificate.

Front 70

PARTNERSHIP PROPERTY

Back 70

Property acquired by a partnership is property of the PARTNERSHIP and NOT of the partners individually.

A partner is not a co-owner of partnership property and has NO interest in partnership property. Rather, each partner has an interest in teh partnership, which consists of his share of the profits and losses, and is treated as personal property.

Front 71

PARTNER LIABILITY TO 3P

Back 71

Under the R.U.P.A., a partner who dissociates without a dissolution and winding up of the business is liable to any 3P to a transaction entered into by the partnership within one year after dissociation, ONLY IF the 3P at the time of entering into the transaction:

(i) reasonably believed the dissociated partner was then a partner;
(ii) did not have notice of the partner's dissociation; and
(iii) is not deemed to have had notice or knowledge.

Note: A 3P is deemed to have notice of the dissociation 90 days after a statement of dissociation is filed.

Front 72

DISSOCIATED PARTNERS

Back 72

Under the R.U.P.A., a partner is dissociated from the partnership upon notice of the partner's EXPRESS WISH TO WITHDRAW.

Note: Dissociation is wrongful from a partnership for a definite term before expiration of the term.
Note: A partnership for a definite term is DISSOLVED if within 90 days after a partner's wrongful dissociation AT LEAST HALF THE REMAINING PARTNERS WISH TO WIND UP THE PARTNERSHIP.

Front 73

ASSIGNEE

Back 73

An assignee is entitled only to the profits the assigning partner would receive.

Note: An assignee only has a right to an accounting upon DISSOLCUTION of a partnership.

Front 74

WHEN A PARTNER MAY SUE

Back 74

Under the R.U.P.A., a partner may bring an action against the partnership for legal or equitable relief to enforce any right:

(i) created by the partnership act;
(ii) created by the partnership agreement; or
(iii) otherwise belonging to the partner, including rights arising independently of the partnership (i.e., a partner may sue on contracts where the partner stands in the position of a customer of the partnership).