Partnership

Front 1

Partnership is

Back 1

an assoc/n of 2 or more persons with intent to carry on as co-owners a bus for profit.

Front 2

Partnership law is based on law of

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K & agency.

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Governing law of partners

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Revised Uniform Partnership Act (RUPR) provides default but partners are free to set up own rules through PARTNERSHIP AGREEMENT

Front 4

partnership agreement

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K defining the partners' rights & duties toward one another--not 3rd parties.

Front 5

How partnership formed?

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Parties w/ Kual capacity agree expressly or through conduct. No writing required but SoF applicable if parties wish to have an enforceable agreement lasting more than 1 yr.

Front 6

To prove existence of a partnership courts look to

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INTENT OF THE PARTIES

Front 7

To prove intent of parties, what conduct raises presumption of partnership?

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sharing of profits

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To prove intent of parties, what factors provide evid but does not raise presumption of partnership

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1. holding prop in joint tenancy or in common
2. parties designate their re/ship as a partnership
3. venture requires EXTENSIVE ACTIVITY
4. SHARING OF GROSS RETURNS

Front 9

Classifications of partnership property

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partnership capital &
partnerhsip property

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Partnership capital is

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$ or prop contributed by ea partner for purpose of carrying on the partnership's bus.

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Partnership property is

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everytg the partnership owns including both partnership cap & prop subsequently acuired in the partnership bus.

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Under RUPA, prop DEEMED to be partnership prop is

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titled in the partnership name or in the name of one or more partners & the instrument refers to the partnership

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Under RUPA, prop PRESUMED to be partnership prop is that

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purchased w/ partnership funds

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Under RUPA, prop presumed to be separate prop is

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1. held in name of one or more partners
2. instrument transferring title does not indicate person's capacity as a partner or refer to the partnership and
3. partnership $ was not used to aquire the prop

Front 15

CL criteria to determine whether untitled prop is partnership or sep prop.

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1. use of PARTNERSHIP $
2. USE OF PROP BY THE PARTNERSHIP
3. ENTRY IN THE PARTNERSHIP BOOKS as a partnership asset.
4. close RE/SHIP B/N PROP & BUS.
5. IMPROVEMENT OF PROP W/ PARTNERSHIP $
6. MAINTENANCE OF PROP W/ PARTNERSHIP $

Front 16

Gen view of partner's interest in the partnership

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Ea partner has a transferable int in the partnership wh consists of his share of profits, losses & distributions. Unless agreement to contrary, partner shares equally in profits & losses. A partner may not sell his partner status w/o unanimous consent of the other partners.

Front 17

3 characteristics of the nature of partner's interest in the partnership

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1. treated as personal property
2. transferable w/o dissolving partnership &
3. attachable

Front 18

What rights do partners have to participate in management?

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Absent a diff agreement, partners have EQUAL RIGHTS in management of the partnership bus.

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What 2 fiduciary duties do partners have?

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Duty of loyalty
Duty of care

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Duty of loyalty requires each partner

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1. to account for all profits & benefits derived in connect/n w/ the partnership bus.
2. not deal w/ the partnership as one w/ an adverse interest &
3. not compete w/ the partnership

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Duty of care requires each partner

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to refrain from engaging in neg, reckless or unlawful conduct or intentional misconduct.

Front 22

Issues around remuneration

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partner has not right to remuneration for services except for reasonable compensation for servcies performed in winding up partnership bus. When partner has promised to devote time to partnership & fails to do so, that partner may be charged in an accounting for damages caused to partnership.

Front 23

Issues around indemnification or other repayment

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A partnership must indemnify every partner w/ regard to payments made in carrying out partnership activities. If payment beyond what was agreed, the payment of advance is considered a loan.

Front 24

Upon dissolution, partner is entitled to

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a settlement of his account

Front 25

issues around books & info

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Books must be kept at the partnership's chief executive office. Upon demand, ea partner must render full info of all things affecting the partnership.

Front 26

In a suit against a partnership

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to reach a partner's personal assets, there must be a judgment against the ind. partner.

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A partnership may sue a partner for

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breach of the partnership agreement or of a duty owed to the partnership,

Front 28

A partner may sue the partnership

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to enforce a right created by partnership act, partnership agreement or otherwise belonging to partner.

Front 29

Summary list of partnership rights (unless partnership agreement otherwise.

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Management--equal right
Distribution--profits & losses equally
Remuneration--no except dissolution
Indemnification--Yes for expenses on behalf of partnership
Contribution--Yes where partner has paid more than his share of partnership liability.
Inspection--right to inspect & copy the books
Lawsuits--generally a partner may sue his partnership & the partnership my sue a partner in an action at law or inequity.

Front 30

In general, the authority of a partner to bind the partnership roughly follows __________

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law

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Partnership & apparent authority

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1. the act of ANY PARTNER
2. for apparently carrying on IN THE ORDINARY COURSE the partnership bus or BUSINESS OF KIND carried out by partnership
3. binds the partnership UNLESS
4. the partner had NO AUTHORITY to act AND
5. the 3rd party KNEW OR HAD RECEIVED NOTIFICATION that partner lacked authority (subjective knowledge).

Front 32

Actual authority can come from

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partnership agreement or vote of the partners.

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Voting requirements for a partnership

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Maj for ordinary bus
Unanimous for extraordinary acts.

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statement of authority

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grants or limits a partner's authority to enter into transactions on behalf of partnership. For real prop transfers, must be filed w/ Sec of State. Grant is conclusive in favor of BFP. Limitation gives constructive knowledge only w/ regard to land transfers.

Front 35

Under the PUPA, a partner has notice of a fact when the partner

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1. has actual knowledge of the fact
2. is notified of the fact or
3. has reason to know the fact based on the surrounding circumstances.

Front 36

Types of civil liability of partners

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1. All K liability arising w/in scope of partnership business
2. All tort liability committed w/in the ordinary course of partnership bus.

Front 37

Nature of partnership liability

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joint & several

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Extent of partnership liability

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Ea partner is personally & individually liable for the entire amt of partnership obligations.

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Liability of incoming partner

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not personally liable for obligation incurred before he became a partner

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Liability of outgoing (disassociated) partner

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remains liable for obligations arising while he was a partner unless there has been payment, release or novation. Outgoing partner can also be liable for acts done after dissociation.

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do partner have any crim liability?

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No unless principals or accessories.

Front 42

Dissociation is

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change in the re/ship of the partners caused by any partner ceasing to be associated in carrying on of the bus. Does not necessarily cause a dissolution & winding up.

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Events of dissociation include

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1. notice of the partner's express will
2. happening of an agreed event
3. expulsion of the partner
4. partner's bankruptcy
5. death or incapacity
6, appointment of a receiver
7. termination of a bus entity that is a partner.

Front 44

Consequences of dissociation include

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ceasing of rights to participate in management. Partnership must buy partner out, indemnify him against known predissociation liabilities & post dissociation liabilities not incurred by him. A partner whose dissociation beaches partnership agreement is liable to partnership for damages.

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A dissociated partner can bind a partnership for TWO YRS after dissociation if

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1. ACT WOULD HAVE BOUND THE PARTNERSHIP before &
2. other party to the transaction REASONABLY BELIEVED the dissociated partner was still a partner & DID NOT HAVE NOTICE.

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Dissociated partner can be liable to 3rd parties for TWO YRS after dissociation is

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1. When entering the transac/n the other party REASONABLY BELIEVED the person was still a partner and DID NOT HAVE NOTICE OF DISSOCIATION.

Front 47

How can dissociated partner cut short period of liability

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filing NOTICE OF DISSOCIATION w/ Sec of State--then all persons deemed to have notice 90 days after it is filed.

Front 48

Dissolution generally requires the partnership bus

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to be wound up

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Winding up partnership (or corp) is

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process of settling accounts & liquidating assets in anticipation of a partnership's dissolution.

Front 50

Under RUPA, what events trigger dissolution?

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1. notice by any partner of intent to w/draw
2. In partnership for a definite term, expiration of term, consent of all partner or w/in 90 days after death, bankruptcy or wrongful dissociation & AT LEAST 1/2 OF THE REMAINING PARTNER WISH TO DISSOLVE
3. happening of an event agreed to in partnership agreement
4. happening of an event that makes partnership unlawful to continue
5. Issuance of a judicial decree that frustrates ec purpose or partner has engaged in conduct making it not reasonably practicable
6. Issuance of a judicial decree on application by a transferee of a partner's int that it is equitable to wind up the partnership after term expires--or any time.

Front 51

Partnership can be bound after dissolution by

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any act of a partner appropriate for winding up the bus Also if 3rd party did not have notice. Such liability can be limited by filing notice of dissolution w/ sec of state. Then constructive notice deemed 90 days after filing.

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Partnership continues after dissolution until______________

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partnership is wound up.

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Who may wind up?

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all living partners except partner who have wrongfully dissolved & bankruptcy partners. If all partners have died, the legal rep of the last surviving partner may wind up.

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May partners waive dissolution & continue the business

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Yes anytime before winding up complete. Requires unanimous vote of partners who have not wrongfully dissolved.

Front 55

Order of distribution of assets in partnership wind up

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1. creditors, including partners who are creditors and
2. partners' accounts

Front 56

A partner who is forced to pay more than his share of debt is entitled to

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contribution from the other partner to equalize.

Front 57

Limited liability partnership

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Partnership in which a partner is not personally liable for neg act committed by another partner or an employee.

Front 58

A partnership can become an LLP

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by vote necessary TO AMEND THE PARTNERSHIP AGREEMENT or UNANIMOUS

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To create an LLP

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1. partnership must file a statement of qualification w/ the sec of state
2. partnership name must END w/ Registered Limited Liability Partnership or Limited Liability Partnership or appropriate initials

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Limited partnership is comprised of

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one or more gen partners & one or more limited partners. Gen partner(s) is liable for partnership obligations, while the limited partner(s) are only liable for the amt of their contribution.

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Formation of limited partnership requires

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1. certificate of limited partnership
2. records office which includes partnership's tax returns (3 yrs.)
3. agent for service of process

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Name of limited partnership

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must contain name of ANY partner & the words limited partnership of LP unless limited liability limited partnership lllp

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Liability of general partner in LP

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jointly & severally liable for all obligations of the limited partnership

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Liability of incoming general partner in LP

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NOT liable for obligations before he became a partner

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Liability of limited partner in LP

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NOT personally liable for an obligation of the limited partnership solely by reason of being a limited partner.

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Fiduciary duties of a general partner in a LP

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Duties of care & loyalty

Front 67

Duties of limited partner in a LP

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Generally, no fiduciary duty

Front 68

Rights of both general & limited partner in a LP

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1. distribution (if partner receives KNOWING it is improper, may be forced to return.
2. right to assign partnership interest (but transfer of entire transferable interest grounds for d/c)
3. Right to transact bus w/ partnership
4. right to dissolve
5. right to sue partnership or ind partner for legal or equitable relief to enforce rights & interests.

Front 69

Derivative action in LP

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Gen or limited partner may sue to enforce a right of a limited partnership if the partner 1st make a demand on the general partners to bring an ac/n to enforce the right & the gen partners do not bring the ac/n w/in a reasonable time or demand would be futile.

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Rights specific to general partners in LP

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1. Management rights--usually exclusive--or if more than one gen partner, by a MAJ.
2. Information
3. No right to remuneration for services performed for the partnership.
4. Right to indemnification for liabilities incurred in ordinary course of activities of the partnership.

Front 71

Approval of ALL GEN & ALL LIMITED PARTNERS in LP is required to:

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1. amend the partnership agreement
2. convert to a LLLP
3. dispose of all or most of the partnership's prop outside the usual course of bus
4. admit a new partner
5. compromise a partner's obligation to make a contribution or return an improper distribution

Front 72

Rights specific to limited partners in LP

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1. No but may if otherwise provided in agreement, participation does not cause a limited partner to be personally liable for an obligation of the LP
2. right to information

Front 73

Dissociation of LP

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similar to a general partnership. Limited partner has NO RIGHT to dissociate before termination of the LP

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Ways dissolution of LP may occur

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1. administratively by Sec of State (e. failure to pay fees)
2. judicially upon application of a partner b/e no longer reasonable or impossible to carry out LP agreement
3. happening of an event specified in the partnership agreement
4. consent of all gen & limited partners--"MAJ in interest"
5. dissociation of a gen partner
6. 90 days after dissociation of the last limited partner

Front 75

Does LP continue after dissolution

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yes to wind up, and partnership MUST d/c all liabilities, settle activities, distribute assets, etc.

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Power to bind partnership after dissolution of LP

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ONLY general partner acts which are APPROPRIATE FOR WINDING UP

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Distribution of assets upon winding up LP

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1. first to creditors (including partners who made loans to LP)
2. second any surplus must be paid in case as a DISTRIBUTION
3. General partners (in proportion to right to receive distribution) responsible for satisfying debts if assets not enough. Right to contribution

Front 78

A LP may convert to or merge w/ another business entity upon

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1. CONSENT OF ALL PARTNERS
2. FILING OF A CERTIFICATE W/ SEC OF STATE.