Bus Law Ch 27

Front 1

General Partnerships

Back 1

-voluntary association of two or more persons – persons include corporations, partnerships, etc.

- for carrying on a business

-co-owners – partners must share the business’s profit and management.

-for profit

Front 2

Partnership Basics

Back 2

Partnership is a separate legal entity – thus can transact business on its own behalf. Can enter into contracts and be sued or sue.

All partners are general partners – thus are personally liable for the debts of the partnership

No formalities to form – usually will have a written partnership agreement but it is not required.

Name – can use the name of the partners or a fictitious name – must register.

Duration – can be for a fixed term, accomplishment of a goal or for an unspecified term.

Front 3

Partnership Basics Cont'd

Back 3

In partnership property: Partnership property – partner’s contribute money, property or services to the partnership – these amounts are called the partner’s capital account – will also include undistributed profits - the partnership owns all property contributed by partners – partners have no rights to possess or use partnership property other than for partnership purposes.

In his partnership interest: partner has a personal property interest in the partnership consisting of the partner’s right to her share of profits (also losses). Absent an agreement to the contrary, all partners have equal rights to share in the partnership – even if they contribute different capital and services. Absent an agreement to the contrary they share losses in the same way as profits.

management: absent an agreement to the contrary, all partners have equal rights in the management of the partnership business. Decisions in the ordinary course of business require approval by a majority of partners. Major decisions – such as sale of major partnership assets or lines of business, the admittance of a new partner require unanimous approval of the partners.

Front 4

Partner Authority

Back 4

Each partner has a fiduciary duty to the other partners.

Types of Authority a partner has

-actual authority

-apparent authority

Front 5

Partner's Duties

Back 5

1: Loyalty – no self-dealing; no usurping of opportunities; no competing with the partnership, etc.

2: Obedience – must follow the partnership agreement

3: Care – must act with reasonable care

4: Inform

Front 6

Partner's Rights

Back 6

1: Remuneration - Partners do not have the right to remuneration for services unless the partnership agreement says so.

2: Indemnification – Partners have the right to be reimbursed for expenses if they are incurred in the ordinary course of business.

3: Contribution – If a partner pays more than his share of a debt the partner has the right of contribution from other partners.

Front 7

Partner Liability

Back 7

joint and several - each partner is personally and individually liable for the entire amount of all partnership debts.

Incoming partners are only liable for debts incurred prior to her admission to the amount of her capital account.

Front 8

Dissociation

Back 8

a change in the partnership caused by the removal or entrance of a partner

Front 9

Types of Dissociation

Back 9

1: Achievement of stated purpose or time limit. 2: Partner withdrawal.

3: Partner expulsion

4: New Partner

5: Mutual agreement

6: Operation of Law (death, bankruptcy of partner/partnership, illegality)

7: judicial Decree (insanity/illness of a partner, partnerships can only be carried on at a loss)

Front 10

Notice of Dissociation

Back 10

Third parties who have dealt with the partnership must be given actual notice

Third parties who know of the partnership but have not dealt with it – constructive notice

If no knowledge then no notice

Dissolution and winding up – or continuation.??

Front 11

Termination

Back 11

partnership no longer legally exists

Front 12

Limited Partnership

Back 12

At least one general partner – who has the right to manage the partnership – they have all of the same basic rights as a general partner has in a general partnership but also has the same duties.

At least one limited partner – a mere passive investor – only liable for initial contribution – are not involved with management.

Front 13

Rights of Limited Partnership

Back 13

Vote in extraordinary matters.

Share Profits and losses.

Inspect partnership books.

Transact business with the partnership.

Front 14

Limited Liability Partnerships

Back 14

All partners are limited partners – only liable up to their capital account – except for own personal negligence or negligence of subordinates; then can recover personal assets.

Used by professionals – doctors, attorneys, accountants can never eliminate professional responsibilities

Limited liability Limited Partnership – Like an LLP – but with limited partners – thus part LLP – with respect to general partners and like LP with respect to limited partners