Agency & Partnership

Front 1

General Partnership

Back 1

General Partnership – A GP is formed when two or more people agree to run a business for profit. Partners generally share in both profits and liabilities.

Front 2

Limited Partnership

Back 2

Limited Partnership – A partnership which consists of general and limited partners is a limited partnership. General partners may manage the partnership and have general liability; conversely, limited partners may not manage the partnership in exchange for liability limited to the extent of their investment into the partnership, assuming the limited partner has filed all necessary limited liability forms with the state. Limited Partners may request to inspect and copy any records the LP is required to keep (during normal business hours).

Front 3

Partner Duties

Back 3

Partner Duties - Each partner is a fiduciary and agent to the general partnership and general partners. Thus, the laws of agency apply to the partners when acting in furtherance of and conducting business for the partnership. This fiduciary relationship brings with it a duty to exercise reasonable care, and a duty of loyalty, which requires each partner to refrain from self-dealing, usurping principle opportunities, or keeping secret profits.

Front 4

Partner Liability

Back 4

Partner Liability – Each partner is personally liable for the debts and obligations of the partnership. Agency principles apply since partners are the agents of the partnership for carrying on usual partnership business. Liabilities for torts and contracts extend to partners if committed or executed by fellow partners within the scope of usual partnership business (torts) or with authority to perform the transaction (contracts).

Front 5

Default Rules of Partnership

Back 5

Default Rules of Partnership - In absence of an agreement governing the partnership, the default rules of partnership will be applied by the court. These rules allow for each partner equal power to manage the partnership, an equal share of the profits, and an equal share of any liabilities. Absent an agreement, partners cannot revoke power or privileges of other partners. Further, salaries are not paid (split of profits).

Front 6

Dissolution of General Partnership

Back 6

Dissolution of GP - Upon dissolution of a GP, there is a specific order in which assets and debts must be distributed. First, creditors and general partners who loaned money to the partnership must be paid. Second, general partners who made capital contributions are paid. Lastly, any surplus or profits will go the general partners or the general partners may be liable for any remaining debt.

Front 7

Assets

Back 7

Assets – No individual partner may transfer land, leases, or equipment without partnership authority.

Front 8

Reimbursement

Back 8

Reimbursement – A partner is entitled to be repaid by the partnership for contributions to property/assets.

Front 9

Successors

Back 9

Successors – upon the death or withdrawal of a partner, the successor of the deceased or withdrawn partner has a right to join the partnership if permitted by the partnership agreement or all the partners consent in writing; if the successor does not join the partnership, the successor has a right to receive a share of compensation which the deceased or withdrawn partner would have received upon departure.

Front 10

Assignees

Back 10

Assignees may become a limited partner of the partnership if the agreement between the assignor and assignee gives the assignee the right (if the partnership agreement allows), or all partners consent in writing; further, the assignee is entitled to receive, to the extent assigned, the distributions and allocations of profits and losses to which the assignor would have been entitled.

Front 11

Dissolution - Termination

Back 11

Dissolution – Termination: Dissolution only begins the process of ending a partnership, but termination is the actual end of the partnership. Upon dissolution, a partner’s actual authority to bind the partnership terminates, except as is necessary to wind up the business.

Front 12

Winding-Up

Back 12

Winding-Up is the period between dissolution and termination in which the remaining partners liquidate partnership assets to satisfy the partnership’s debts and obligations.

Front 13

Agency

Back 13

Agency – A relationship created by contract or by law where a principle grants authority to an agent, to act on behalf of and under the control of the principle to deal with a third party. An agent has a fiduciary duty to its principle, including a duty of due care, to obey reasonable instructions, and a duty of loyalty, which requires the agent to refrain from self-dealing, usurping the principle’s opportunities, or keeping secret profits.

Front 14

Authority

Back 14

Authority – A principle is liable on the contracts entered into by their agent on their behalf, so long as the agent has authority. Authority can come in three forms: actual authority, apparent authority, and ratification.

Front 15

Actual Authority

Back 15

Actual Authority – The authority that the agent reasonably believes that they have based upon the manifestations of the principal. Actual authority can be express or implied.

Front 16

Express Actual Authority

Back 16

Express Actual Authority is the authority given from the four corners of the agency agreement.

Front 17

Implied Actual Authority

Back 17

Implied Actual Authority is the authority that the agent reasonably believes that they have based upon necessity in order to carry out their express authority, customs of the position held by the agent, and by prior dealings with the principle.

Front 18

Apparent Authority

Back 18

Apparent Authority is the authority that a third party reasonably believes that the agent possesses based upon the manifestations of the principal. One form of manifestation by the principal would be the position that the principal has placed the agent in is one that is typically associated with the grant of authority.

Front 19

Ratification

Back 19

Ratification occurs where after the agent has entered into a contract, the principal has knowledge of it and accepts its benefits.

Front 20

Termination of Agency Relationship

Back 20

Termination of Agency Relationship (LOC-BUD) – An agency relationship shall terminate upon one of the following: 1) lapse of time (stated or reasonable if not specified); 2) an occurrence of a specified event (i.e. house was sold); 3) a change in circumstance including the destruction of subject matter, insolvency of principal or agent, change in law; 4) Agent’s breach of Fiduciary Duty; 5) Unilateral Termination by Either Party; 6) Death or incapacity of Principal or Agent (unless durable power of attorney exists)