Partnerships

Front 1

FOUR TYPES OF UNINCORPORATED BUSINESS PARTNERSHIPS

Back 1

1. General Partnership

2. Limited Partnerships

3. Limited Liability Partnerships

4. Limited Liability Companies

Front 2

GENERAL PARTNERSHIP FORMATION

Back 2

A general partnership is an association of two or more persons who are carrying on as co owners of a business for profit.

There are no formalities to becoming a general partnership.

Front 3

PARTNERSHIP LEGALITY OF PURPOSE

Back 3

A partnership may be formed only to achieve a legal purpose; a partnership formed for an illegal purpose is void, and the courts will not compel an accounting or settlement of a void partnership's affairs.

Front 4

STATEMENT OF PARTNERSHIP AUTHORITY

Back 4

A partnership may, but is not required to, file a statement of partnership authority with the secratary of state.

(Remember no formalities are required to form a general partnership)

Front 5

SHARING OF PROFITS PRESUMPTION

Back 5

A person who recieves a share of the profits of a business is presumed to be a partner unless the profits were received as payment of a debt, for services, wages or other compensation, rent, annuity, interest on a loan, or for the sale of good will.

Front 6

PARTNERS AND MANAGEMENT

Back 6

All partners have equal rights in the management of the partnership business.

This can be modified by agreement.

Front 7

PARTNERSHIP FIDUCIARY DUTIES

Back 7

The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care.

Front 8

PARTNERSHIP DUTY OF LOYALTY

Back 8

Under the duty of loyalty to the partnership a partner must:

1. Account to the partnership for profits, property, opportunities, or other benefits derived by the partner in conjunction with the partnership business.

2. To refrain from dealing with the partnership as or on behalf of a party having an interest adverse to the partnership

3. To refrain from competing with the partnership.

Front 9

PARTNERSHIP DUTY OF CARE

Back 9

Under the partner's duty of care to the partnership a partner must:

refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.

Front 10

PARTNERSHIP REMUNERATION

Back 10

Absent an agreement to the contrary, a partner is not entitled to pay or salary, except for reasonable compensation for services rendered in winding up the partnership's business

Front 11

PARTNERSHIP INDEMNIFICATION

Back 11

The partnership must indemnify partners for payments reasonably made and obligations reasonably incurred by a partner in carrying on the business of the partnership

Front 12

PARTNERSHIP AS ENTITY

Back 12

A partnership is an entity distinct from its partners.

Front 13

JOINT PROPERTY NOT CONCLUSIVE

Back 13

Joint tenancy, tenancy in common, tenancy by the entireties, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.

Front 14

PARTNER AS AGENT OF PARTNERSHIP

Back 14

Each partner is an agent of the partnership for the purpose of its business.

An act of a partner for apparently carrying on in the ordinary course the partnership business binds the partnership, unless the partner had no authority to act for the partnership in the particular matter.

Front 15

PARTNERSHIP LIABILITY

Back 15

A partnership is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of business of the partnership or with authority of the partnership.

Front 16

PARTNER LIABILITY

Back 16

All partners are liable jointly and severally for all obligations of the partnership

Front 17

PARTNER'S SHARE OF PROFITS AND LOSSES

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Each partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner's share of the profits.

Front 18

ACTIONS AGAINST THE PARTNERSHIP

Back 18

An action may be brought against the partnership and any or all of the partners in the same action or in separate actions.

Front 19

JUDGMENT AGAINST PARTNERSHIP

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A judgment against a partnership is not by itself a judgment against a partner unless there is also a judgment against the partner.

Front 20

PARTNERSHIP CRIMINAL LIABILITY

Back 20

The mutual agency of partners is not sufficient tomake other partners criminally responsible for the crime of a partner committed within the scope of the partnership business, unless other partners participated eitehr as principals or accessories.

Front 21

PARTNER'S RIGHTS UPON DISSOLUTION

Back 21

Upon dissolution, a partner is entitled to a settlement of her account.

Front 22

LIMITED PARTNERSHIP TRANSFERABILITY

Back 22

A general partner may not freely transfer its interest in a limited partnership.

Limited partners are generally free to transfer their interests.

Front 23

LIMITED PARTNERSHIPS

Back 23

A limited partnership is a partnership with at least one general partner and at least one limited partner.

Front 24

LIMITED PARTNERSHIP DISSOLUTION

Back 24

Limited partners may withdraw freely without dissolution of the partnership occurring.

Dissolution occurs if any general partner withdraws UNLESS all of the remaining partners agree in writing to appoint at least one new GP(if necessary) and continue within 90 days of the withdrawal of the general partner.

Front 25

LIMITED PARTNERSHIP FIDUCIARY DUTY

Back 25

Duty – Limited Partners are not fiduciaries.

General Partners are always fiduciaries of each other and the partnership and may never:
1. engage in self-dealing
2. usurp partnership opportunities
3. earn undisclosed profits at the partnerships expense

Front 26

LIMITED PARTNERSHIP LIABILITY

Back 26

General partners are liable personally for all limited partnership liabilities

limited partners are not liable personally for obligations of the business.

LPs must pay consideration for their interest in the partnership to gain this limitation on liability.

Front 27

LIMITED PARTNERSHIP FORMATION

Back 27

The partnership must file a limited partnership certificate with the appropriate state agency that includes the names of all general partners.

Front 28

LIMITED PARTNERSHIP MANAGMENT

Back 28

General partners may exercise substantial managerial control while limited partners may not.

Front 29

CERTIFICATE OF LIMITED PARTNERSHIP

Back 29

A certificate of limited partnership must be filed with the secratary, and must set forth:
1. the partnership name
2. the name and address of the agent for service of process
3. the name and business adress of each general partner
4. the latest date on which the limited partnership is to disolve.

Front 30

NAME OF LIMITED PARTNERSHIP

Back 30

The partnership name may not contain the name of a limited partner unless it is also the name of a general partner, or the partnership had been carried out uner that name before the admission of that limited partner.

Front 31

LIMITED PARTNERS CAN BE HELD LIABLE IF:

Back 31

They are also a general partner or if she participates in the control of the business and the person dealing with the limited partnership reasonably believes that she is a general partner.

Front 32

LIMITED PARTNER DUTY TO OTHERS OUTSIDE THE BUSINESS

Back 32

LPs must explicitly disclose their LP status when dealing with other parties, so that such parties are on notice that the individual negotiating with them carries limited liability.

Front 33

LIMITED PARTNERS RIGHT TO VOTE

Back 33

The partnership agreement may grant to all or a specified group of the limited partners the right to vote on a per capita or other basis upon any matter.

Front 34

LIMITED PARTNER CONTROL SAFE HARBOR

Back 34

A limited partner does not participate in the control of the business spolely by providing services for the partner.

Substantial managerial control will subject them to liability.

Front 35

LIMITED PARTNER NAME USED IN PARTNERSHIP TITLE

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A limited partner who knowingly permits his name to be used in the name of the limited partnership is liable to creditors who extend credit to the limited partnership without actual knowledge that the limited partner is not a general partner.

Front 36

LIMITED PARTNERSHIP DISTRIBUTION OF ASSETS

Back 36

Upon winding up the assets are distributed first to creditors, then to partners for any debt owed to them, then for return on their contribution and finally any remaining assets as profits.

Front 37

ERRONEOUS BELIEF OF LIMITED PARTNERSHIP

Back 37

One who erroneously beleives she is a limited partner will not be held liable as a general partner if she filed an appropriate certificate and withdraws from future equity participation.

She will be bound if she transacts business before withdrawal and filing of the certificate.

Front 38

RIGHT TO ASSIGN A PARTNERSHIP INTEREST

Back 38

A partner may assign her interest (not her rights). Upon an entire assignment she ceases to be a partner.

An assignee may become a limited partner if the assignor had the authority to convey that right or the remaining partners consent.

Front 39

LIMITED PARTNERSHIP RIGHTS TO SHARE IN PROFITS AND LOSSES

Back 39

A partner is entitled to share in profits and losses specified in the agreement. If not specified then based on value of contribution.

Front 40

LIMITED PARTNER DERIVATIVE ACTIONS

Back 40

A limited partner may bring an action in the right of a limited partnership to recover a judgment in its favor if general partners with authority to do so have refused to bring the action or if an effort to cause those general partners to bring the action is not likely to succeed.

Front 41

LIMITED PARTNER RIGHT TO INSPECT RECORDS

Back 41

Each limited partner has the right to:
1. Inspect and copy any of the partnership records

2. Obtain from the general partners from time to time upon reasonable demand(a) information regarding the state of the business and financial condition of the limited partnership; (b) the limited partnership's federal, state and local income tax returns for each year; and (c) Other information regarding the affairs of the limited partnership as is just and reasonable.

Front 42

LIMITED LIABILITY PARTNERSHIPS LIABILITY

Back 42

Partners are not personally liable for L.L.P. obligations.

A partner remains personally liable for her own wrongful acts.

Front 43

LIMITED LIABILITY PARTNERSHIPS FILING

Back 43

Limited liability partnerships must file a statement of qualification stating:

1. The name of entity
2. The street address of the chief executive office
3. The name and street address of its agent for service of process
4. A statement that it is applying for status as a limited liability partnership;
5. A delayed effective date, if any.

Front 44

DISSOCIATION

Back 44

Dissociation is a material change in the GP caused by any single partners express will to withdraw from the partnership. In a partnership at will a dissolution occurs.

Front 45

LIMITED LIABILITY COMPANIES FORMATION

Back 45

LLCs must file articles of organization and an operating agreement with the state.

Front 46

LIMITED LIABILITY COMPANIES LIABILITY

Back 46

No partner maty be held personally liable. Members have limited liability.

Front 47

LIMITED LIABILITY COMPANIES MANAGEMENT

Back 47

Members can manage or the articles of organization may delegate control to a team of managers.

Front 48

LIMITED LIABILITY COMPANIES LIQUIDITY

Back 48

Members may transfer interest only through unanimous approval of members or another percentage specified in the articles.