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27 Cards in this Set
- Front
- Back
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What is a general partnership? |
Association of two or more persons (1) to carry on a business as co-owners for profit, whether or not the parties intend to form a partnership, or (2) to carry on any purpose or activity not for profit, when the parties intend to form a partnership
All members are same, general partners; separate legal entity Intent to divide profits is an indispensable requisite of partnership; sharing of gross returns is not enough to establish a partnership Can be a joint venture – partnership for one business transaction |
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What is a hierarchy of law applied?
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1. partnership agreement
- only way to modify (1) separate legal entity from partners, (2) property acquired by partnership is partnership property, not property of partners individually, and (3) partner is not co-owner of partnership property and has no interest in it 2. DRUPA 3. common law |
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How is a partnership formed?
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1. capacity – legal capacity to contract
2. formalities – no particular formalities are required; can be express or implied - can be estopped from denying - can, but do not have to file - amendments – follow agreement or unanimous consent - SOF – in writing if cannot be performed within one year 3. legality of purpose – illegal, null and void 4. consent – unless agreement says otherwise, no one can become a partner without the express or implied consent of all partners - can be admitted without contribution 5. statement of partnership existence – not required |
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What is evidence of a partnership?
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1. title to property – need more
2. sharing of gross returns – need more 3. sharing of profits – prima facie evidence - exceptions – (1) a debt, (2) wages of an employee, (3) rent, (4) annuity or other retirement or health benefit, (5) interest on loan, or (6) consideration for sale of goodwill 4. sharing losses |
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What is partnership by estoppel?
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Liable to third parties as if they were partners
1. liability of person is held out as partner – liable to third parties who enter into a transaction with the actual or purported partnership 2. liability of one who holds another out as a partner – makes person agent with power to bind to third parties as if were partner |
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What are the rules for partnership property?
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1. partnership contribution – can be anything
2. partnership property – property acquired by partnership is property of the partnership and not of the partners individually 3. Includes – look to intent to devote property to partnership purposes - acquisition with partnership funds, use of property, improvement of property by partnership, relation of property to business, title of property, entry in partnership books, maintenance and expenses |
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What are the rights of partners in partnership property?
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1. partner is not a co-owner of partnership property and has no interest in specific partnership property
- only has a transferable, economic interest which is personal property 2. transfer of partner’s economic interest – permissible, does not cause dissociation or dissolution - transferee rights – (1) receive distributions which the transferor would otherwise have been entitled, (2) receive upon the dissolution and winding up, the net amount otherwise distributable to the transferor, and (3) seek a judicial determination to wind up the partnership business where equitable - transferor rights – retains rights and duties of a partner other than economic interest |
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What are more rights of partners in partnership property?
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- partnership is not required to give effect to transferee’s rights until given notice
- restrictions – partnership agreement may prohibit transfer of a partner’s economic interest prior to dissolution and winding up - transferee has no liability until becomes a partner 3. judgment creditor of a partner can obtain a lien on debtor’s economic interest in the partnership; cannot obtain possession or exercise legal or equitable remedies on property of partnership |
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What are the rules for relations between partners?
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1. each partner entitled to equal share in the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits
2. all partners have equal rights in the management and conduct of the partnership business (not in limited) 3. no person can become a member of a partnership without the consent of all the partners 4. ordinary course of business – only need majority; everything else – unanimous 5. partner may only use or possess partnership property on behalf of ht partnership 6. partner has power and authority to delegate to other person the partner’s rights and powers to manage and control the business |
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What are the fiduciary duties of the partners?
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1. loyalty
- accounting to the partnership for any property, profit or benefit derived by the partner in the conduct or winding up of the partnership business or derived from a use by the partner of partnership property - to refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an adverse interest to the partnership - to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership 2. due care – refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law |
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What are the rules for books and information?
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1. provide to all partners, former partners, and legal representatives of deceased partners, access to books and records of the partnership and other information concerning the partnership’s business and affairs upon reasonable demand, for any purpose reasonably related to the partner’s interest as a partner
2. includes right to examine and copy information 3. partnership can limit due to confidentially for a period of time 4. demand must be in writing 5. enforcement in Chancery |
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What are the legal actions between partners?
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1. partnership may maintain an action against a partner
2. partner may maintain an action against another partner or partnership 3. derivative action – recover judgment in partnership’s favor |
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What are the rules of relations of partners to third parties?
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1. application of law of agency
2. notice given to partner can be imputed to partnership – notice, notification and knowledge effective immediately |
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What are the rules for liability of partners?
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1. all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law
- no partner can be liable for good faith reliance on partnership agreement or records of partnership, statement of other partners, or statements of employees or officers 2. incoming partner – not liable for any obligation of the partnership incurred before the person’s admission as a partner 3. LLP – partner is not personally liable, directly or indirectly, for solely by reason of being a partner 4. partner’s own negligence – liable, usually not partnership 5. partner’s actionable conduct – partnership liable for wrongful act or omission of a partner acting in ordinary course of business 6. criminal liability – only liable if others participated |
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What are the actions by and against partnership and partners?
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1. partnership may sue and be sued in the partnership name
2. judgment against partnership is not by itself a judgment against a partner |
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What are the rules for dissociation?
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Generally partners can come and go without dissolution of the partnership
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When is a partner dissociated?
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1. after notice
2. agreed upon event 3. expulsion according to agreement 4. expulsion by unanimous consent 5. expulsion by court order 6. bankruptcy |
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What are the rules for a partner's power to dissociate?
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1. partner has the power to dissociate at any time, rightfully or wrongfully, by express will after providing notice to the partnership
2. wrongfully dissociates, liable to partnerships and to other partners for damages caused by dissociation |
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What is the effect of partner's dissociation?
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1. partner’s right to participate in management of the partnership terminates
2. partner’s duty of loyalty regarding competition terminates 3. partner’s other duties of loyalty and his duty of care continue only with regard to matters arising and event occurring before the partner’s dissociation, unless the partner participates in winding down the partnership’s business |
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What are the rules for partner's dissociation when business not wound up?
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1. partnership shall purchase dissociated partner’s interest in the partnership for a designated buyout price if a dissolution does not result from the dissociation – cash
2. for one year after partner dissociates without resulting in a dissolution and winding up of the partnership business, the partnership is bound by an act of the dissociated partner unless third party knew or had reason to know 3. generally not liable for partnership obligations incurred about dissociation 4. can file a statement of dissociation |
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What are the rules for winding up of partnership interest?
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1. See pg. 26 for events
2. partnership continues after dissolution only for the purpose of winding up its business 3. any partner may wind up partnership’s business or may make application to Chancery for supervision 4. bound by partner’s act after dissolution if (1) appropriate for winding up partnership or (2) would have bound the partnership by agency authority if the other party to the transaction did not have notice of dissolution 5. can file a statement of dissolution 6. settlement of accounts and contribution – pay obligations to creditors, pay share of amounts not paid |
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What are the rules for conversion?
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1. Foreign entities or domestic entities can covert to domestic partnership
2. file with Sec. of State certificate of conversion and statement of partnership existence |
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What are the rules for merger and consolidation?
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1. merger – 2 or more come together and one survives; consolidation – 2 or more come together and new is formed
2. unless partnership agreement says otherwise, approved by each domestic partnership 3. must file certificate of merger or consolidation |
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What is registered limited liability partnership?
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General partnership that files a statement of qualification to become a registered LLP
- existing partnership, approved by amount required in partnership agreement - must file annual reports partners are not directly or indirectly liable (contract, tort or other) |
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What is limited partnerships?
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Partnership formed by two or more person and having one or more general partners and one or more limited partners and includes a registered limited liability limited partnership; each can have classes
Liability of limited partner limited to capital contributing; GP joint and several liability - limited partners – no management |
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What is required for limited partnerships?
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1. Must file certificate with Secretary of State
- amend within 90 days after admission or withdraw of GRP 2. must file certificate to end 3. must have an agent for process in state 4. name must contain LP 5. cannot distribute if would decrease assets below liabilities |
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What are the rules for liability/rights of limited partners?
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1. limited partner is not liable for obligations of the limited partnership to third parties
2. exceptions - limited partner also a general partner - participates in control of business (see pg. 44 for examples) 3. can vote in matters involving safe harbors or others listed in partnership agreement 4. withdraw – under partnership agreement, if no provision cannot withdraw prior to dissolution and winding up - right to receive any distribution which entitled 5. no fiduciary duties to GPs |
