Wa Barbri - Partnership

Front 1

DEFINE

partnership

Back 1

Partnership is an association of two or more persons to carry on as co-owners a business for profit

Front 2

FORMATION

of partnership

Back 2

NO formality, explicit statement, writing, consideration, filing necessary to form; oral formation OK


Intent: shown by profit sharing, loss sharing, contributions, agreements, extensive activity, business name

Front 3

Partnership duration

Back 3

At will partnerships (no agreement of duration; any partner can end rightfully)

OR definite term for a particular undertaking (e.g., written agreement to operate a business for 5 years; ending early is a breach - SOF might apply here too)

Front 4

Partner interest in partnership property

Back 4

Partners not entitled to “salary”; only entitled to an interest in the partnership (profits and loss)

Front 5

Rights and powers of partnership

Back 5

Can be divided any way partners choose; default rules provide for equality in management rights, profits, distributions on on liquidation, access to books and information, and losses shared same as profits

Front 6

Partnership fiduciary duties

Back 6

Partners owe fiduciary duties of loyalty and care; obligation of good faith and fair dealing

Loyalty: promote best interests of partnership, avoid secret profit, disclose business opportunities

Care: avoid intentional misconduct and knowing violation of law; avoid gross negligence/recklessness

Front 7

Partnership liability

Back 7

Each partner: liable personally, but secondarily, for all partnership debts

Secondary liability: creditor must first exhaust partnership assets before collecting from partners

Personal liability: joint and several, meaning creditor can collect entire amount of debt from partners

Any partner who pays more than others is entitled to contribution from the other partners

Front 8

Steps to END a partnership

Back 8

Dissociation

Dissolution

Winding up

Termination

Front 9

DEFINE

dissociation

Back 9

Change in legal relationship of partners; does not mean partnership will be dissolved

Triggers: exit of partner, death/bankruptcy, expulsion of partner by the other partners or judicial decree

Dissociation before completion of term/undertaking is wrongful and basis for damages owed

Consequences of: no rights to participate in partnership; entitled to payment for interest; indemnified

Front 10

DEFINE

dissolution
(partnership)

Back 10

In partnership at will, dissolution results from any dissociation event unless partners waive dissolution and continue

In partnership for term, dissolution occurs 1) after death/bankruptcy/dissociation of member IF partners choose to dissolute, 2) upon expiration of term, or 3) if all partners agree

Front 11

DEFINE

winding up

Back 11

After dissolution partners required to finish all pending business transactions

Front 12

DEFINE

termination of partnership

Back 12

Only occurs after dissociation, dissolution, and winding up COMPLETED

whoever wound up entitled to
renumeration for expenses

Front 13

Distributing partnership assets

Back 13

Must follow this order: CPCP

Creditors debt

Partner debts

Capital returned to partners

Profits to partners

Front 14

3 types of limited liability companies

Back 14

Limited Liability Partnership

Limited Partnership

Limited Liability Company

Front 15

FORMATION/liability for

Limited Liability Partnership

Back 15

Filing: must file “statement of qualification” with Secretary of State; must identify partnership as LLP

Liability: Partners liable for their own debt and torts; partners not liable for partnership debts

Front 16

FORMATION/liability for

Limited Partnership

Back 16

Filing: must file “certificate of limited partnership” with Secretary of State; no filing = personally liable

Name must include “limited partnership”; may include name of limited partner


Classes of partners: general partners = personally liable for partnership debts and ow fiduciary duties of care and loyalty, and obligation of food faith; limited partners = not personally liable for partnership debts and only an obligation of good faith, not fiduciary duties

Front 17

DEFINE

limited liability company

Back 17

Hybrid of partnership and corporation; has one or more owners, called members

Front 18

FORMATION

limited liability company

Back 18

Formation: “certificate of formation” must be filed with Secretary of State; essential to status

Name must include “Limited Liability Company” or abbreviation

“LLC Agreement” is optional/not filed, but establishes rules of governance, control, allocation of profits

Members: if LLC agreement doesn’t specify otherwise, members only admitted by unanimous vote; cannot withdraw unless all other members agree; members may sell/transfer membership interests

All members must consent before sold/transferred becomes member or LLC dissolves in 90 days

Front 19

Liability for limited liability company

Back 19

Separate legal entity

Responsible for its own contract and tort obligations; members not liable

Front 20

LLC management and voting

Back 20

Management: Default is “member-management”; each member participates/is an agent for business; LLC agreement can provide otherwise

Voting: based on proportion of ownership, not equality; more money in = more control; must have majority interest to control vote (i.e., A has 60%, B 20%, C 20% = A controls votes)