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56 Cards in this Set

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  • Back
Definition of Partnership
asscoation of two or more persons to carry on as coowners a business for profit. Must be voluntary, cannot be created by law.
Can a person become a partner without the other partners consent?
No (unless the partnership agreement provides otherwise) and an agreement to enter into a partnership is not specifically enforceable.
Will a court force a partner to stay in partnership?
What is a partnership at will?
One formed for an indefinte period as opposed to a partnership at term.
What is an indispenable characteristic of partnerships.
Profit sharing
How are the profits and losses distributed?
Usually equally between the partners unless there is some other agreement.
Can an agreement not to share losses be evidence of anything?
Yes, it can be evidence that there was no intent to form a partnership.
Must each partner make a capital contribution?
No, while this is the norm, it is not necessary for the formation of a partnership.
Does co-ownership of property indicated a partnership exists?
No. Even if co owners share profits. Except that the ownership establishes a partnership when the co owners have indicated in a partnership agreement that the property is partnership property.
Explain the right to share in control.
It is inherent in the concept of co-ownership. This coupled with profit sharing indicates a partnership exists. If either of these is missing there is no partnership. Limited control sharing does not preclude the existence of a partnership.
Are there any formalities required to form a partnership?
No. Partnership can be formed by conduct.
What is the effect of the partnership agreement?
It governs the relations between partners and partners and the partnership.
Who can be partners?
Any "person" with legal capacity. Including individuals, corporations, busness trusts, estates, trust, partnerships, associations, joint venture, or any other legal or commercial entity.
Is a partnership name required?
No. However may lead to question of fact as to whether a partnership or individual person is involved. AZ statute says that if a person transaccts business as a merchant or trader and fails to disclose the name of other persons interested in the business by a sign in letters easy to read placed conspicously at the place where the business is transacted, or if he tranacts business in his own name; all the propety used or acquired in the business except exempt property is treated in favor of his creditors as his own prperty.
Can a partnership used a fictitious name?
Yes, however, AZ statute regulates. Requires filing in a with county recorder the names and addresses of the individuals involved.
What is a Purported partner?
A person who purports to be a partner or consents to beind represented by another as a partner.
What is the liability of a purported partner and the partnership in this situations?
Pruported partner is liable to who the representation is made whehter or not the purported partner was aware of the reprensentation. The consenting partners in the partnership and the purported partner are joint and severally liable.
What are the requirement for a limited partnership?
Must have at least one general partner and at least one limited partner.
What statute governs limited partnerships in AZ?
AZ Limited Partnership Act
Can a limited partnership be created informally?
No. a certificat of limited partnership must be executed by all general partners and filled in the office of the AZ secretary of state. Limited partners need not be anmed in the certificate.
What is the requirment for enforceability of a promise to contribute made a limited partner?
It is not enforceable unless it is in writing and signed by the limted partner.
How are the profits and losses shared in a limited partnership?
According to the partnership agreement or by contributions made.
Upon withdrawal what is the limited partners liability upon return of contribution?
He is liable for one year for the amount returned the the extent necessary to discharge the partnership's libabilities to creditors during the period his contribution was held by the partnership. The period is extended to 6 years if retrun of contribuiton was made in violation of the pertnership agreement.
What is the liability of a limited partner who allows his name to be used in the name of a limited partnership?
He is liable to creditors who extend credit to the limited partnership without actual knowledge that the limited partner is nota a general partner.
What if the limited partner participates in the control of the business?
Then he is lieble to person who transact buisness with the limited partnership reasonable believing, based ont the limted partner's conduct, that the limted partner is a general partner.
What if a person erroneously believes himself to be a limited partner?
He is not a general partner and he can fix the mistake by filing a certificate of limited partnership or withdrawing. However, he is liable as a general partner to any third party to who in good faith beleived he was a general partner before he withdraws or fixes the mistake.
What are the rights of assignee of a partnership interest?
Unless otherwise provided in the partnership agreement, a partnership interest is assignable in whole or in part. Assignment does not dissolve the partnership nor make the assignee a partner. it simply entitles the assignee to sheare in the profits and lossess and sitributions to which the assignor was entitled.
What is the effect of a conversion from gen partnership to lim partnership and vice versa?
The partnership is basically the same entity as it was before except for the change in liability between among the partners. The partnership property reamnd vested in the converted entity.
What are the rules for partnership merger?
A lim partnership may be merged with one or more partnerships. the plan ofmaerger must be approved by the vote required by the law of the state or foreign jurisdiction. Or if no applicable law approved by all f the partners or number specified in the PA.
What is the nature of a limited liability partnership?
All the partners have limted liability.
How does a limtited or general partnership become a limited liability partnership?
By filing a statement of qulification in the office for the AZ Secretary of State.
What is the nature of a limited liability company?
LLC can be set up to resemble a partnership or a corp.
How is a LLC formed?
One of more persons must sign and file articles of organization with the ACC.
What is a Business Trust?
Similar to a corp where the benis have limited liabilty but, do not have all the rights and control of shareholders. Usually limited to a certain number of years. A bisness trust is permitted as a recongnized from of associaton for the conduct of business in AZ.
What is a joint venture?
It is an entity formed to carry out a single undertaking or serires of related undertakings. It is generally held that partnerhip law applies to joint ventures.
When is property partneship property?
If it is acquired in the name of the partnership or one or more partners with an indication in the instrument that property title is being transferred to the person in his capacity as partner.
Whne is property presumed to be partnership property?
When it is purchaed with partnership assets.
When is property presumed to be separate property?
when it is acquired and without any indication in the instrument that it is being tranferred to a partner/s in their partnership capacity or to the partnership. This is true even if the property is used for partnership purposes.
Can a partnership recover property from a transferee?
Yes only if the partnership proves that it was not bound and the partner who made the transfer lacked actual or orpparent authority and, the transferee knew that the person who executed the transfer did not have authority.
What happens when land owned by a partner is to become partnership property but no conveyance was ever made?
The partnership nevertheless has an equitable title to the land.
Can a partner assign his interest?
Yes, in whole or in part. Upon transfer the transferor retains the rights sn duties of a partner other than the interest in distributions.
Can a partner maintain an action agains the partnership or other partners?
Yes, for legal or equitable relief to enforce his partnership rights.
What percentage of partners are needed to bind the partnership in the management and conduct of the partnership business?
A majority if the action in one in the ordinary course of business.

Unanimity if outside the ordinary course of business.
What happens if a deadlock occurs?
A partner can petition the court for dissolution.
What is the power of a partner to bind the partnership?
A partner is an agent of the partnership and has the power to bind the partnership in matters concerning the partnerships ordinary course of business unless the partner had not authority to act in the particular matter and the person with whom the partner was dealing knwo or had notice of that lack of authority.
Explain what is within the implied powers of a partner
Anything in the ordinary course of business
Explain the statement of partnership athority?
It provides assurance that a partner is authorized to act on behalf of the partnership. Must be certified and recorded. If real property must be "held in the name of the partnership" or statement of authority is ineffective. Also provides constructive notice to an otherwise BFP of real property but not of non real property transactions.
What are a partners fiduciary duties?
Duty of loyalty and duty of care.
Explain the duty of loyalty
1. Duty to account and hold as trustee property, profits and benefits to the company

2. refrein from dealing with the partnership in the conduct of winding up

3. refrain from competeing
Explain the duty of care
Limited to refaining from engaging in grossly negligent or reckless condiuct, intentional misconduct, or a knowing violation of law.
Can the partnership agreement eliminate the obligation of good faith and fair dealing?
No, my presecribe the standards by which the performance of the obligation is to be measured.
How does a person become a partner?
With consent of all the partners (unless PA says otherwise).
What is the liability of partners?
Joint and severally liable. Each partner is personally liable for torts, debts, and contracts.
What is the partner's power to dissacociate?
He has the power to dissacociate at anytime rightfully or wrongfully. A partner who wrongfully dissacociates is liable to for damages caused.
When is a partnerships dissassciation wrongful?
1. it is in breah of a provision f the PA
2. before expiration term if partnership for term or undertaking
Upon liquidation how are the assets distributed?
First to creditors, then to the partners. A partner must contribute the excess of any charges to satisfy any outstanding partnership obligations and cover losses.