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30 Cards in this Set
- Front
- Back
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Partnership: big picture
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- Formation
- Rights & Liabilities - Dissociation / Dissolution |
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Definition: partnership
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- Legal entity of an
- association of two or more people who own a - business for profit. |
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Definition: partnership capital
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amount contributed by each partner to the partnership
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Definition: partnership property
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property owned by the PARTNERSHIP. Presumed to be partnership property if it was purchased with partnership funds and the partnership's name appears in the title to the property.
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partnership: formation
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Requirements:
- agreement: express or implied (no writing ok!) - INTENT - legal purpose |
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how to add a new partner
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requires unanimous consent of all existing partners
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non-partner who holds herself out to be a partner: liable to third parties?
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YES - if they rely on her representation
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partner who holds someone out to be a partner when they're not: liable to third parties?
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YES - agency theory
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partnership: characteristics
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- can transfer INTEREST in partnership (including profits & property!)
- cannot transfer partner STATUS without unanimous consent of other partners - creditor can seek judgment against partner's interest |
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rights of partners
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- participate in business DECISIONS
- indemnification for reasonable COSTS - inspect the BOOKS - SUE another partner for breach - WITHDRAW from partnership (written notice) - seek DISSOLUTION of partnership - SETTLE partnership account upon dissolution |
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right to participate in business decisions: what kind of vote?
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- ordinary course of business: majority vote
- outside ordinary course: unanimous |
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sue another partner for breach: of what?
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breach of:
- partnership agreement - duty of loyalty - duty of care |
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partner's fiduciary duties
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- duty of loyalty
- duty of care |
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liabilities of partners: list
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- liability for acts of another partner: depends
- liability to 3rd parties: depends - liability for crimes: NEVER |
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liability for acts of another partner
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Yes, unless:
- partner had no authority (actual or apparent!) - 3rd party knew partner had no authority |
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liability to 3rd parties
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- current partners: joint & several liability for contracts & torts committed by any partner or employee
- new partner: not liable for old obligations - former partner: still liable (unless it's resolved or signed release) |
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LLP
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Partners not personally liable!
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limited partnership
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- general partner
- limited partner: only liable for capital he invested and share in the profits Requirements: - statutory - limited partner rights - limited partner's name not included - 6 months notice to withdraw - if you act like general partner then you're liable like general partner! Can cure with certificate of limited partnership |
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limited partner rights
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- vote on specific matters
- inspect records - bring derivative action (like stockholder derivative suit!) |
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how a partner can dissociate
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- withdraw
- expelled by vote/court order - partner's bankruptcy - death or incapacity - appointment of a receiver - termination of business entity that was a partner |
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Dissociated partner: entitlements
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- be bought out
- indemnification of debts & liabilities |
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Partnership liability for dissociated partner
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Within 2 years:
- act would have bound partnership prior to dissociation - other party REASONABLY believed partner was still a partner and had no notice of dissociation |
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dissociated partner: liability to other parties
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Within 2 years: liable for partnership debts if other party REASONABLY believed partner was still a partner and had no notice.
Avoid liability by filing with the state! Assume there's notice after 90 days! |
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how to dissolve partnership
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- withdrawal
- expiration of the term - unanimous written consent - within 90 days of death of 1 partner: majority vote - partnership becomes illegal - court order (partner can request) - partnership continues until it is "wound up" |
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Liability after dissolution
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Partners still liable after dissolution if 3rd party didn't have notice.
Avoid liability by filing with the state! Assume there's notice after 90 days! |
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dissolution: distribution of assets
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Order of priority:
- creditors - general partners (debt) - limited partners (debt) - former partners (debt) - general partners (initial contribution) - limited partners (initial contribution) - all partners (remaining profits & property) |
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can you transfer interest in a partnership?
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YES - including profits & property!
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can you transfer partner status?
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yes - must have unanimous consent of other partners (like adding a new partner)
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can a creditor seek judgment against a partner's interest?
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yes
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Can a business partner assign his share of the profits to a third party?
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Yes!
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