Partnership

Front 1

How is a partnership defined?

Back 1

The Revised uniform Partnership Act (RUPA) which defines partnership as an association of two or more persons to carry on as co-owners of a business for profit. The RUPa is based on teh law of contracts and agency.

Front 2

How is a person defined under RUPA?

Back 2

RUPA defines a person as an individual, trust, corporation, partnership, association, joint venture, government, or any other legal or commercial entity.

Front 3

Is a joint venture a partnership?

Back 3

A joint venture is an association of persons with intent to engage in a single business venture for joint profit. Courts occasionally seek to distinguish a joint venture from a partnership, however, the legal consequences of joint ventures are almost identical to those of partnerships.

Front 4

Are limited partnerships governed by the RUPA?

Back 4

The RUPA defines partnerships in a way that excludes limited partnerships, however, courts will look to RUPA for guidance when no other law applies to an issue arising in a limited partnership case.

Front 5

Is a partnership a legal entity?

Back 5

Generally yes, except with respect to partners personal liabiity for partneship obligations....
Title to land may be taken in partnership name
A partnership may be on either end of a lawsuit or in names of individuals or both

Front 6

What Law governs Partnerships?

Back 6

Generally, the RUPA provides a default set of rules. Partners are free to agree- through a PARTNERSHIP AGREEMENT to abide by different rules for governing the relationships among themselves and the RUPA will govern only those issues not provided for in the partnership agreement. However, certain provisions of the RUPA may NOT BE WAIVED in the partnership agreement:
- A partner's RIGHT OF ACCESS to books and records
- DUTIES OF LOYALTY AND CARE
- Power to DISASSOCIATE as a partner
- Power of court to EXPEL a partner
- Requirement that the business BE WOUND UP in the event of either the illegality of the business or certian judicial determinatios that continuing the business is not practicable or equitable;
- Rights of THIRD PARTIES under the RUPA
- Partner's duty of GOOD Faiths and Fair Dealing

Front 7

how is a partnership formed?

Back 7

As soon as two or more people associate to carry on as co-owners a business for profit. There is no requirement that the parties subjectively intend to form a partnership only tha tthey intend to run a business as co-owners.

Front 8

What is required for the AGREEMENT?

Back 8

No formal agreement is requried to form a partnership; the parties intent may be implied from thier conduct. However, because the SOF requires contracts that cannot be performed within one year to be evidenced by a writing, if partners wish to have an enforceable agreement to remain partners for more than one year, the partners generally must execute a writing reflecting their agreement.

Front 9

Who may be a partner and what are the implications for liability?

Back 9

Anyone who is able to enter into a binding contract (same as agency); If a would be partner lacks capacity she is NOT PERSONALLY LIABLE for the obligations of the partnership or for breaches of the partnership agreement. She is, however, boudn to ethe extent of her contribution of capital to the partnership.

Front 10

What is the effect of having a partnership with an illegal purpose?

Back 10

Partnership is void; courts will not compl an accounting or settlement of a void partnerhsips affairs.

Front 11

what are the rules on consent in partnerships

Back 11

unless otherwise specified in the agreement; no one can become a partenr in a partnership without the express or implied consent of ALL PARTNERS

Front 12

Is a partnership required to file a statement of partnership authority

Back 12

They MAY but are not required to file a statement of partnership authority with the secretary of the state. The statement can give constructive knowledge of the extent of the partners' authority to enter into contracts on behalf of the partnership.

Front 13

Where do courts look for proof of partnership

Back 13

INTENT OF PARTIES
- exists even if parties just intended to be co owners

Front 14

Explain how the sharing of profits creates a Presumption of Partnership

Back 14

Person rec share of bus profits is PRESUMED to be a partner UNLESS the profits were receieved in payment:
- of DEBT
- for SERVICES as an independant contractor or WAGES OR OTHER COMPESATION of an employee
- RENT
- Annuity or other RETIREMENT OR HEALTH BENEFIT to a beneficiary or representative of a deceased or retired partner;
of INTEREST on a loan, even though the amount varies with the profits of the business; or
- for the SALE OF GOODWILL of a business, by installments or otherwise

Front 15

what is a subpartnership

Back 15

A subpartner who shares with a partner of a principal partnership profits derived from that partnership is not thereby deemed a partner of the principal partnership.

Front 16

What is evidence indicative of partnership?

Back 16

Following factors may be additional evidence that a partnership has been formed. However in contrast to the sharing of profits, these factors DO NOT raise a presumption of partnership:
1. title to property is held in JT or TIC.
2. The parties designate their relationship as a partnership;
3. The venture undertaken by the parties requires estensive activity (e.g. if A and B each contribute 100 k to buy a building of rental apts. that must be managed, it is more likely that they are partners than if they each contributed 100k to buy shares in a company that manages real estate.
4. Sharing of gross returns.
EXAM TIP
Sometimes questions will describe the relationship among the parties involved ina business and will ask about the rights of the parties among themselves or about the liabilities of the parties for obligations of the business. In such questions, you must determine whether there is a partnership; do this by considering and discussing the factors above. Remember that the sharing of profits generally raises a presumption of partnership, but the presumption can be rebutted by other factors showing a partnership was not intended.

Front 17

PURPORTED PARTNERS

Back 17

GOOD LUCK!

Front 18

What is the liability for someone held out as a partner?

Back 18

He will be liable to third parties who extend credit to the actual or apparent partnership in reliance on the representation.
- there is no duty to deny that a partnership gives rise to liabilty.

HOWEVER, when a person holds another out as a partner, he thereby makes that person his agent to bind him to third parties. (if there is a partnership, only those partners who know of or consent to this holding out will be bound).

Front 19

PARTNERSHIP PROPERTY

Back 19

GOOD LUCK!

Front 20

What are the classifications of partnership property and capital?

Back 20

1. Capital: the property or $ contributed by each partner to carry on partnership.
2. Partnership PRoperty: is everything that the partnership owns, including both capital and property subsequntly acquired in partnership transactions

Front 21

What is included n Parnership Property?

Back 21

1. Titled property (RUPA provision)- Titled property is deemed partnershipproperty if: 1. titled in partnership name; or 2 titled in the name of one or more partners and the instrument transferring title nots the titleholderer's capacity as a partner or the existence of a partnership.

Front 22

What is property presumed to be partnership property under the UPA?

Back 22

- Prop. is rebuttably presumed to be partnership property if it was purchased with partnership funds,regardess of inwhose name title is held PF include not only cash but also credit.

Front 23

What is the rule under the RUPA for a partner's separate property?

Back 23

1. if property is held in the name of one or more partners, 2. the instruent transfering title doens't indicate the person's capacity as a partner or mention the existence of a partnership and 3. partnership funds were not used to acquire the property, the property is then rebuttably presumed to be separate even if used for partnership purposes.

Front 24

What is the rule on Untitled Property?

Back 24

Common Law: In cases not goverened by the explicit RUPA provisions (property not titled), in determining whehter property is partnership property or the separate property of a partner, courts will probably continue to look to the following:
1. AQUISITION of the property with PARTNERSHIP FUNDS
2. USE of the property by the partnership in conducting the partnership's business.
3. ENTRY of the property in the partnership BOOKS
4. A CLOSE relationsihp between the property ad the business operations of he part.
5. IMPROVEMENT OF the property with partnership funds; and
6 MAINTENANCE of the Property with Partnership funs.

ALWAYS; USE; BOOKS; in CLOSE RELATIONSHIPS; IMPROVEMENT; and MAINTENENCE- Mneumnonic

Front 25

What are the rights of a partner in partnership property?

Back 25

A partner is not a co-owner of partnership property, and thus has no transferable interest in specific property of the partnerhship...
EXAM TIP
Remember that a partner has no right to use partnership property other than for the benefit of the partnership.

Front 26

PARTNER'S INTEREST IN THE PARTNERSHIP

Back 26

GOOD LUCK!
- IN general...each partner has a transferable interest in the partnership, whch consists of his share of partnership profits losses, and distributions.

Front 27

Partner's interest is?
Mneumonic: Managing Distributions Reminds(Remuneration) Indems(nity) to Contribute to Inspection Lawsuits

Back 27

1. Treated as personal property
2. Assignable;
3. Attachable,
Absent an agreement to teh contrary, a partner shares equally in the partnrship profits and must contriubute to the losses in proportion to his share of the profits. Note also that an assignment of a partner's interst in the partnership gives the assignee no rights with regard to operation. It merely entitles the assignee to which the assigning partner would otherwise be entitled. A partner may not sell is parner status w/o unanimous consent of the partners.

Front 28

RELATIONS BETWEEN PARTNERS

Back 28

1. MANAGEMENT PARTICIPATION: equal rights in the mgmt. of part. absent agreement. Ordinary bus. dec. controlled by majority of the vote, but matters outside ordinary course of bus. req. the unanimous consent of the p's.
FIDUCIARY DUTIES:2: Loyalty req's: 1. account for all profits or other benefits from partnership. 2. NOt deal with the partnership as one with adverse interest; CARE req. the partner to refrain from engaging in N, Rx, or unlawful conduct or intentional misconduct.
ACCOUNTS: each partner is deemed to have an account that is credited with an am't equal to the p's contribution plus his share of any profits and debited with the partner's share of any losses and partnership liabilities.

Front 29

relations betwen partners cont.

Back 29

REMUNERATION: Absent agreement, a partner has no right to remuneration for services rendered to the partnership except for rx compensation for services performed in winding up the partnership business. When a partner has impliedly or expressly promised to devote time to the partnership practice and fails to do so, she may be chared in an accounting for dx caused to the partnership.
INDEMNIFICATION AND OTHER PAYMENT: A partner must indemnify to every partner with regard to payments made and obligations rx incurred in carrying on the partnership business. If a partner makes payment or advance on behalf of the partnership beyond the contribution the partner agreed to make, the payment or advance constitutes a loan wich must be repaid with interest.
RIGHTS UPON DISSOLUTION: upon dissolution a partner is entitled to a settlement of her account.

Front 30

REL between partners con't

Back 30

BOOKS AND INFORMATION: Books and info to be kept in chief exec's office. Each partner has the right to inspect and copy the partnership books. Upon demand, each partner must render true and full information of all things affecting the partnership.
LEGAL ACTIONS BY AND AGAINST PARTNERS: A partnership may sue or be sued in its own name; however, to reach a parner's personal assets, there must be a judgmetn against the individual partner. A partnership may sue a partner for breach of partnership agreement or a duty owed to the partnership. A partner may sue the partnership or other partners to enforce a right created by the partnership to act or agreement, or a right otherwise belonging to a the partner.

Front 31

Partner's interest is?
Mneumonic: Managing Distributions Reminds(Remuneration) Indems(nity) to Contribute to Inspection Lawsuits

Back 31

1. Treated as personal property
2. Assignable;
3. Attachable,
Absent an agreement to teh contrary, a partner shares equally in the partnrship profits and must contriubute to the losses in proportion to his share of the profits. Note also that an assignment of a partner's interst in the partnership gives the assignee no rights with regard to operation. It merely entitles the assignee to which the assigning partner would otherwise be entitled. A partner may not sell is parner status w/o unanimous consent of the partners.

Front 32

RELATIONS BETWEEN PARTNERS

Back 32

1. MANAGEMENT PARTICIPATION: equal rights in the mgmt. of part. absent agreement. Ordinary bus. dec. controlled by majority of the vote, but matters outside ordinary course of bus. req. the unanimous consent of the p's.
FIDUCIARY DUTIES:2: Loyalty req's: 1. account for all profits or other benefits from partnership. 2. NOt deal with the partnership as one with adverse interest; CARE req. the partner to refrain from engaging in N, Rx, or unlawful conduct or intentional misconduct.
ACCOUNTS: each partner is deemed to have an account that is credited with an am't equal to the p's contribution plus his share of any profits and debited with the partner's share of any losses and partnership liabilities.

Front 33

relations betwen partners cont.

Back 33

REMUNERATION: Absent agreement, a partner has no right to remuneration for services rendered to the partnership except for rx compensation for services performed in winding up the partnership business. When a partner has impliedly or expressly promised to devote time to the partnership practice and fails to do so, she may be chared in an accounting for dx caused to the partnership.
INDEMNIFICATION AND OTHER PAYMENT: A partner must indemnify to every partner with regard to payments made and obligations rx incurred in carrying on the partnership business. If a partner makes payment or advance on behalf of the partnership beyond the contribution the partner agreed to make, the payment or advance constitutes a loan wich must be repaid with interest.
RIGHTS UPON DISSOLUTION: upon dissolution a partner is entitled to a settlement of her account.

Front 34

REL between partners con't

Back 34

BOOKS AND INFORMATION: Books and info to be kept in chief exec's office. Each partner has the right to inspect and copy the partnership books. Upon demand, each partner must render true and full information of all things affecting the partnership.
LEGAL ACTIONS BY AND AGAINST PARTNERS: A partnership may sue or be sued in its own name; however, to reach a parner's personal assets, there must be a judgmetn against the individual partner. A partnership may sue a partner for breach of partnership agreement or a duty owed to the partnership. A partner may sue the partnership or other partners to enforce a right created by the partnership to act or agreement, or a right otherwise belonging to a the partner.

Front 35

RELATIONS OF PARTNERS TO THIRD PARTIES
- IN GENERAL?

Back 35

GOOD LUCK!
- RUPA states that each partner is an agent of the partnership for the purpose of its business. Authority to bind the partnership when dealing with third parties generally mirrors agency law.

Front 36

What does the RUPA provide for relations of partners to 3rd parties?

Back 36

1. The act of any parner;
2. for apparently carrying on in the ordinary course of the partnership business or business of the kind carried out by the partnership;
3. Binds the partnership unless:
a. The partner had NO AUTHORITY to act for the partnership in the particular matter, and
b. The person with whom the partner was dealing knew or had received notification that the partner lacked authority.
EXAM TIP:
It is very important to remember that as agents of the partnership, partners have apparent authority to bind the partnership or to any K w/in the scope of the partnership business. IF a K is outside the scope of partnership business, the partnership generally will not be bound unless the partner has ACTUAL AUTHORITY.

Front 37

What is the business of the kind requirement, and what are the limitations on the doctrine?

Back 37

1. business of the kind: Note that apparent authority is not limited to merely transactions that are in fact within the ordinary course of business for the partnership in question, but extends to the transactions that would apparently be for carrying on business of the kind run by the partnership.
- Limitation: Knowledge or Notification: a partnership will not be bound by a partner's act if the partner lacked actual authority and the person with whom the partner dealt either knew or received notification of such fact.
a. Knowledge: RUPA says notification effective when it comes to the person's attention or when duly delivered. Thus, if notification limiting partner's authority is duly delivered to 3rd party, the 3rd party can't rely on apparen't authority with regard to the limitation even if the third party hasn't read the notification.

Front 38

What is the rule on transfers of partnership property?

Back 38

1. where partnership interest is indicated: Any partner may transfer property in the name of the partnership. If partnership property is held in the name of one or more partners but the partnership isn't named, transfer by the titleholders in their own names is effective. In either case, if the transferring partner lacked authority, the partnership may recover the property from the initial transferee but not from a subsequent bona fide purchaser.
2. PARTNERSHIP INTEREST NOT INDICATED: If the partnership's interest is not indicated in the instrument transferring the propery, the transfer may be made by those in whose names the property is held. If the transferee gives value w/o notice of lack of authority, she takes free of the partnership interest.

Front 39

What is the rule on Actual Authority?

Back 39

A partnership also will be bound by an act of a partner if the partner has actual authority. Basically, a partner rx believes he has based on the communication between the partnership and the partner. Such actual authority can come from the partnership agent or a vote from the partners. A majority vote is required to authorize ordinary business. A unanimous vote is requried to authorize extraordinary acts.

Front 40

What is the rule on expanding and limiting authority through a statement of authority>

Back 40

Statement of authority grants or limits authority to enter into transactions on behalf of the partnership. THe statement msut be filed with the secretary of state and, for real property transactions, with the county recorder. A grant of authority in a properly filed statement of authority is conclusive in favor of a bona fide purchaser for value. A properly filed limitation to transfer real property gives purchasers constructive knowledge of a lack of authority, but filing a limitation does not give constructive knowledge of the limitation with regard to any other transaction.

Front 41

What is the rule on notice for transfers of partnership property?

Back 41

RUPA: partner has notice of a fact when the partner 1. has actual knowledge of the fact, 2. is notified of the fact, or 3. has reason to know of the fact based on the surrounding circumstances.
1. when effective? upon delivery or coming to parner's attention.
2. Notice imputed to partnership: a partner's notice of a fact relating to the partnership is imputed to the partnership immediately unless the partner having notice is participating in fraud.

Front 42

What is the rule on Civil liability for partners?

Back 42

Type: All K's entered into in scope or with authority. All torts commited by any partner or emp'ee within the ordinary course of the partnership business or with authority.
2. Nature: JSL...Judgment not personally binding on a partner unless she has been served and the creditor has exhausted partnership assets, or exhaustion is excused by agreement or court order or becuase the partnership is bankrupt.
EXTENT: Partners are personally and individually liable for the entire amount of partnership obligations. Partner who pays more than his fair share of an obligation is entitled to contribution from other partners, and a partner who pays the whole obligation of the partnership is entitled to indemnification.
- Incoming parner is not personally liable for obligations incurred by the partnership before he arrived.
- Dissociated (outgoing) partner remains liable for obligations arising while he was a partner unless there has been payment, release or novation. An outgoing partner can also be liable for acts done after dissocation.

EXAM tip: Outgoing partnr generally remains liable for all partnership obligations incurred while he was a partner, wheras an incoming partnr generally has no liability for obligations incurred before she becomes a partner.

Front 43

What is the rule on criminal liability for partners?

Back 43

Partners not criminally liable for the crimes of other partners committed within the scope of the partnership business, unless the other partners participated in the comission of the crimes as principals or accessories.

Front 44

How is a partnr Dissociated?

Back 44

1. Notice of express will to withdraw.
2. Happening of an agred event
3. expulsion of teh partners pursuant to agreement, by unanimous vote if unlawful to continue business with the partner, or by judicial decree;
4. partner's bankruptcy;
5. partner's death or incapacity
6. appointment of a receiver;
or 7. termination of a business entity that is a partner.

Front 45

What happens to a partner upon dissociation?

Back 45

- loses right to participate in managment.
- gets boght out, and indemnify him aginst known predisassociation liabilities not incurred by the dissociating partner's acts. Partner who dissociates in violation of the partnership agreement or before the expiration of a partnership term or compeltion of an undertaking is liable for dx caused by wrongful dissociation.
- partner who wrongfully dissociates before expiration of partnership term or completion of undertaking is not entitled to payment of the buyout price until the term expires or teh undertaking is completed, unless he can establish that earlier payment will not cause undue hardship. Interest must be paid on the buyout price from date of dissociation.

Front 46

What are a dissociated partner's powers to bind the partnership and liabilities to other parties?

Back 46

1. partnership can be bound if act would have bound the partnership before dissociation and the other party to the transaction had rx believed the dissocaited partner was still a partner and did not have notice of the dissociation.
- A dissociated partner can be liable for obligations incurred by the parntership within 2 years after the partner dissociates if 1. when entering the transaction the other party reasonably believed the dissociated partner was still a partner and 2. did not have notice of the partners' dissociation. Note that a dissocated partner can cut short this period of liabilty by filing a notice of dissociation with the secreatary of state; all persons are deemeed to ahve notice of a dissociation 90 days after such a notice is filed.

Front 47

What causes DISSOLUTION?

Back 47

1. NOTIFICATION- INa partnership AT WILL any partner of intent to withdraw;
2. In a partnership for a definite term or particular undertaking 1. expiration of teh term wor completion of the undertaking 2. consent of all of the partners to dissolve; 3. within 90 days after a partner's death, bankruptcy, or wrongful dissociation, at least half of the remaining parnters wish to disolve;
3. The happening of an even that makes it unlawful for the partnership to continue.
5. Issuance of a judicial decree on application by a partner that 1. the economic purpose of the partnership is likely to be frustrated, 2. a partner has engaged in conduct making it not rx practicable to carry on the business, or 3. the business cannot practicably be carried on in conformity with the partnership agreement; and
7 Issuance of a judicial decree on application by a transferee of a partner's interst that it is equitable to wind up the partnership 1. after teh term expires or the undertaking is completed in a partnership for a definite term or particular undertaking, or at any time in a partnership at will.

Front 48

What is a partner's power to bind a partnership after dissolution?

Back 48

A partnership can be bound after dissolution by any act of a partner appropriate for winding up the partnership business. The partnership will also be liable for other acts if the party with whom a partner dealt didn't vhae the nocie of the dissolution. Such liablity can be limited by filng a statemetn of dissolution with the sec. of stae; all persons are deemed to have notice ofa dissolution 90 days after such notice is filed.

Front 49

Does the partnership continue after dissolution?

Back 49

The partnership continues to exist after dissolution until the partnership is wound up.

Front 50

Who may wind up?

Back 50

All living partners have a right ot participate in the winding up of the partnership's business except partners who have wrongfully dissolved the partnership and bankrupt partners. If all partners have died, the executor or administrator of the last surviving partner may wind up.
- WAIVING DISSOLUTIONG AND CONTINUING BUSINESS: Any time before winding up of partnership business is complete, the partners may decide to waive the dissolution and continue the partnershipby unanimous vote of teh partners who have not wrongfully dissolved. SUch waive rdoesn't affect the rights of persons who ahve relied on the dissolution vefore receiving notice of the waiver.

Front 51

What is the rule on distribution of assets?

Back 51

Order of distribution
1. Creditors, including partner creditors;
2. Partner's accounts.
Note: Where a partner is forced to pay more than his share of the partnership debts, he is entitled to contribution from the other partners who equalize the shares.

Front 52

What is an LLP?

Back 52

Limited liablity parntership... partners are not personally liable for the LLP's obligations.

Front 53

How is an LLP formed?

Back 53

Terms and conditions on which a partnership becomes an LLP must be approved by whatever vote is necessary to amend the partnership agreement or, if specificed, the vote necessary to amend the contribution obligations of partners. IF agreement is silent all partners must approve.
2. Filing: partnership must file statement of qualification with sec. of state. Statement msut be executed by at least 2 partners and contain such inforamtion as 1. name and address of partnership. 2. a statement that the partnership elects to become an LLP. 3. a deferred effective date, if any. The partnership becomes an LLP at the time of tiling the statement or on date specified.

Front 54

What are the name and liabiltiy requirements for an LLP?

Back 54

the partnership must end with the words "Registered Limitd Liability Partnership Limited Liability Partnership, RLLP, LLP.

A partner in an LLP is not personally liable for the obligations of a partnership, whether arising in contract, tort or otherwise. However, a partner remains persoally liable for her own wrongful acts.
EXAM TIP If you have to determine the liabity fo a partner in an LLP for a tort committed by a co-partner recall that a partner's liabilty is usually limited. i.e. she will not be personally liable for the co-partner's tort. but be sure to check to see if the partner engaged in the tort; if she did she will not be shielded from liability.

Front 55

What are the characteristics of a limited partnership
?

Back 55

Comprised of one or more general partners and one or more limited partneres. The general partner is personally liable for partnership obligations, while the limited partner generally does not have any liabilty beyond the liablity to make ageed-upon contributions. A limited partnership differs from a general partnership in that a limited partnership can be created only by filing a certificate of formation with the state. Like a modern partnership, a limited partnership is an entity distinct from its partners and has a perpetual duration unless otherwise provided.

Front 56

How is a limited partnership formed?

Back 56

1. Certificate: signed by all general partners setting forth the name of the partnership, names and addresses fo the agent for service of process and of each general partner, and whether the limited partnership is a limited liablity limited partnership.
2. Record office: Limited partnership must maintian in its state of organization an office with records of the certificate, any partnership agreements, the partnship's tax returns for the three most current years, etc. The partnership agreement or some other record must contain the amount and description of each partner's contribution, special rights of partners regarding distributions etc.

Agent : Limited partnership must maintain an agent in the state for service of process.

EXAM TIP: It is important to remember that a limited partnership is a creature of statute and thus can exist only on compliance with the limited partnership statute. Look for questions whre one partner want limited liabitly and the other partner tells him tha the can be a limited partner, but there is no filing with the secretary of state. Because there is no statutory compliance, a limited partnership is not created and all partners are subject to full liabilty.

Front 57

What are the name req's for partnerships and teh admission req's for general or limited partners?

Back 57

May contain the name of any partner (general or limited) Must say Limited Partnership or LP unless its LLLP (Limited liabilty limited partnership).

Front 58

What is the rule on Partner's contributions?

Back 58

A partner has no rights to distributions unless he makes a contribution in the form of any benefit ($, property, services and promises to make such contrubutions). A partner's contribution obligation is not excused by death or disabilty and may be compromised only on consent of all partners. Note if partner fails to make agreed upon nonmonetary contribution the limited partnershijp has the option has the option of seeking cash in lieu of the contriubiont.

Front 59

What are the liabilties in a limited partnership?

Back 59

General Partner: Except as provided by statute or in the partnership agreement, a general partner of a limited partnership is jointly and severally liable for all obligations of the limited partnership. Note a gen partner may also be a limited partner and have the rights of alimited partner, but such a dual capacity doesn't relieve the general partner of his duites as a general partner.
a. incoming partners: person who becomes general partner of an existing partnership is not personally liable for an obligation that the limited partnership incurred before he became a limited partner.
Limited Liability Limited Partnership: Any liabity incurred while a limited partnership is a limied liabilty limite partnership belongs to the partnership alonoe; the genral partners is not personally liable on the obligation.

Limited Liabity of Limited Partner: A limited partner is not personally liable for an obligation of the limited partnership solely by reason of being a limited parner. Note that earlier lmited partnership acts made limtied partners personally liable if their names were used in the partnership name or they participated in the management or control of the partnership. The UIPA no longer includes such provisions.

Front 60

What are the duties of partners?

Back 60

1. General Partner: A general partner owes the limited partnership limited fiduciary duties of care and loyalty, similar to those owed by a partner in a general partnership. A general partner does not automatically violate the duty of loyalty merely becasue the general partner's conduct furthers his own interests.

Limited Partner: Generally, Limited partners owe no fiduciary duty to the partnership and thus is free to compete with the partnership and have interests adverse to those of the partnership, unless the partnership agreement provides otherwise.

Front 61

What are the rights shared by the general and limited partners?

Back 61

Distribution: RUPA provisions vary similar to distribution provisions for corps. Distributions msut be made on the basis of the partners' contributions (proportionately), and a limited partnership may not make a distribution if after makign the distribution the limited partnership would be unable to pay its debts as they become due or the limted partnership's toatal assets would be less than the sum of its total liabilities, including sums needed to satisfy superior preferential rights upon dissolution.

Liability for improper distributions: A gen. partner who consents to an improper distribution is personally liable to the limited partnership fo rthe amt. that the distribution exceeds what could properly have been distributed. Any partner who receives an improper distribution knowing that it is improper may be forced t return the improper amount to the partnership. However, no personal liabilty for an improper distribution arises if the distribution appeared to have been proper based on reasonably prepared financial statements.

Front 62

Rights shared con't...

Back 62

Right to assign partnership interest: A partner's right to distributions is personal property that may be transferred, in whole or in part. Such a transfer gives the transferee only the right to receive the transferred distibutions and to demand an accounting thereon. The transfer does not make the transferee a partner or give the transferee any rights as a partner. Moreover, the transfering partner remains a partner, and the transfer does not constitute a dissociation or casue a dissolution. However, transfer of a partnre's entire transferable interest in the partnership is a ground for expulsion.

Front 63

Rights shared Con't.

Back 63

Right to transact business with the partnership: a partner may lend money to and transact other business with the limited partnership.

Right to dissolve: Any partner may apply for a decree of dissolution of the limited partnership whenever it is not reasonably practicable to caryon the business in conformity with the partnership agreement.

Direct action against limited partnership by partner: a partner may maintain a direct action against the limited partnership or another partner for legal or equitable relief to enforce her rights and interests.

Derivitive action: A partner maintains a derivative action to enforce a right of a limited partnership if the partner first maks a demand on the general partners to bring an acton to enforce the right and the general partners do not bring the action within a reasonable time; or a demand would be futile.

Front 64

What are the rights specific to General Partners?

Back 64

Each gen. partner has equal rights in managment and conduct of the limted partnership's activities. Generally, any matter relating to the activites of the limtied partnership may be exclusively decided by teh general partner or, if there is more than one genral partner, by a majority of the general partners. However, teh approval of all general partners and all limited partners is requried to 1. amend the partnership agreement. 2. convert the partnership to a limited liablity limited partnership; 3. dispose of all or substantially all of the limited partnership's property outside the usual and regualr course ofthe partnership's activites; 4. admit a new parter ; or 5 compromise a partner's obitligation to make a contribution or to return an improper distribution.
Right to information: A general partner's right to information is similar to that of a partner ina general partnership.
Indeminfication. A general partenr is not entitled ot remuneration for sercies performed for the partnership. However, teh limited partnership must indeminfy a general partner for liablities that she incurs in the ordinary course of the activities of the partnership.

Front 65

What are the rights specific to limited partners?

Back 65

1. Management rights: Limited partners may participate in the management and control of teh limited partnership. Participation does not casue a limited partner to become personally liable for an obligation of the limited partnership.
Right to information: Each limited partner has the right to inspect and copy any partnership records required to be maintained.

Front 66

What is the rule on Dissociation in a Limited partnership?

Back 66

Events taht cx dissociation of a partner in a general partnership will also casuse dissociation of a partner (general or limited) in a LP. Note that a Limited partner has no right to dissociate before termination of the limited partnership. A general partner's right to dissociate is similar to the right of a partner to dissociate in a general partnership.
1. Effect on Limited partner: After dissociation, a limited partner is treated as a transferee of the limited partner's transferable interest.

Effect on General partner: The effects of dissociatoin of a general partner in a limited partnership are similar to those in a general partnership.

Front 67

What are the rules of dissolution and distribution for a LP?

Back 67

1. Dissolution in General: A limited partnership may be judicially dissolved upon application of a partner if it is no longer reasonably practicable to carry on the limited partnership in conformity with the limited partnership agreement. A limited partnership may also be administratively dissolved by the secretary of state for failure to pa fees or file an annual report, but the partnership may apply for reinstantement by curing the defect w/in 2 years of the dissolution. Otherwise, a limited partnership may be dissolved only upon the occurence of one of the folowing
1. The happening of an event specified in the agreement.
2. The consent of all general partners and limited partners holding a majoirity of the right to receive distributions
3. After dissociation of a general partner, upon sonsent of partners owning a majoirty in interst if another general partner remains; if no general partner remains, after 90 days unless the partners admit a new general partner; and
4. Ninty days after dissociation fo the last limited partner, unless a new limited partner is admitted within the 90 days.

Front 68

What is the rule on winding up an LP?

Back 68

A limited partnership continues after dissolution only for the purpose of winding up its activities. In winding up, the partnership must discharge liabilities, settle and close partnership activities, and marshal and distribute its assets.

Front 69

Who has the power to bind a partnership after dissolution?

Back 69

After dissolution, a partnership will be boudn by any acts of a general partner that are appropriate for winding up the partnership. The partnership can also be bound by acts of a general partner that are not appropriate for winding up if the acts would have bound the partnership before dissolution and the aprty with whom the general partner dealt did not have notice of the dissolution.

Front 70

What is the rule on distributing LP assets upon winding up?

Back 70

Assets distributed:
1. 1st to creditors;
2. An surpluss must be paid in cash as a distribution.
- IF limited partneship assets are insufficient to satisf all obligations to creditors, each person who was a general partner when the obligation was incurred must constirubte to the partnership to satisfy the obligation. The contribution due is in proportion to the right to receive distributions in effect when the obligation was incurred. If a person does not contributethe full amount required, the other persons required to contribute must pay the additional amount necessary to discharge the obligation, in propotion to the right to receive distributions when the obligation was incurred. A person who pays an addtional contribution may recover from any person whose failure to contribute necessitated the additional contribution, but may not recover more than the amount additionally contributed.

Front 71

What is the rule on conversion and merger of LP's?

Back 71

May convert or merge with another form of business entity upon the consent fo all partners and a filing of a certificate (of conversion or merger) with the sec. of state.