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24 Cards in this Set
- Front
- Back
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Partnership
General Partnership Formation |
1) Formalities -- NO
2) Partnership -- association of 2 or more persons carrying on as co-owners of business for profit 3) Sharing of Profits -- contribution of money or services in return for share of profits creates a presumption of GP |
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Partnership
General Partnership Liabilities to Third Parties |
similar to agency
GPs are really just agents of partnership |
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Partnership
Individual Partner Liability |
1) liability for debts of partnership
2) each partner's torts |
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Partnership
Incoming Partner Liability for Prior Debts |
Generally not liable for prior debts BUT any money paid in by an incoming partner can be used by the partnership to satisfy prior debts
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Partnership
Dissociating Partner |
Generally retain liability even on future debts until notice of dissociation given to creditors
OR until 90 days after filing notice of dissociation with the state |
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Partnership
General Partnership Liability by Estoppel |
***KEEP AN EYE OUT FOR THIS***
One who represents to a third party that GP exists will be liable as if a GP exists (hypo example p. 11 of lecture) |
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Partnership
Boilerplate Rule Statement |
As a rule, general partners are liable for a partnership debts, including co-partner torts.
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Partnership
Rights and Liabilities between General Partners |
General partners are fiduciaries to each other and the partnership
Partners owe a Duty of Loyalty to other partners and partnership -- they may not: -self-deal -usurp partnership opportunities -make secret profits of partnership opportunities |
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Partnership
Remedies for Partner Breach of Duty of Loyalty |
1) Action for Accounting
2) Disgorge Properties |
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Partnership
Partnership Rights in Partnership Property (3 general types) |
1) Specific Partnership Asset (land, leases, equipment owned by partnership itself)
--> MAY NOT be transferred by any individual partner without partnership authority 2) Share of Profits and Surplus (personal property owned as such by individual general partners) --> MAY BE transferred by individual partners 3) Share in Management (only owned by the partnership itself) --> MAY NOT be transferred by an individual partner |
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Partnership
Classification of Partnership Property Ownership |
Whose money was used to buy property? --> TRACING
Partnership Money Used --> Partnership Property Personal Funds Used --> Personal Property |
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Partnership
Management Agreement DEFAULT RULE |
Control = Equal
(one partner, one vote) UNLESS agreement otherwise |
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Partnership
Salary DEFAULT RULE |
No salary UNLESS agreement otherwise
EXCEPTION -- when partners help to wind up partnership business |
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Partnership
Share of Profits and Losses |
Profits - shared equally UNLESS agreement otherwise
Losses - shared just like profits UNLESS agreement otherwise |
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Partnership
Dissolution |
"In the absence of an agreement that sets forth events of dissolution,
general partnership dissolves upon notice of express will of any one general partner to dissociate" |
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Partnership
Termination |
Real end of partnership
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Partnership
Wind-up |
Period between dissolution and termination
During this time, Partners liquidate partnership assets to satisfy partnership debts |
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Partnership
Dissolution -- Liability |
Partnership and its general partners retain liability on:
1) old business with existing creditors 2) new business transactions during winding up until: --notice of dissolution given to creditors OR --90 days after filing of statement of dissolution with the state |
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Partnership
Dissolution Priority of Distribution |
FIRST -- all creditors must be paid
---outside, non-partner trade creditors --inside, all partners who have loaned money to partnership and have become creditors thereby SECOND -- all capital contributions by partners must be paid LAST -- Profits and surplus, if any |
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Partnership
BIG PICTURE of Partner Liability at Dissolution |
Each partner must receive:
1) loan 2) capital 3) share of profits (if any) LESS share of losses (if any) |
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Alternatives to Partnership
Limited Partnership |
Partnership with at least one general partner and and least one limited partner
Must file a LIMITED PARTNERSHIP CERTIFICATE (includes names of all general partners) LIABILITY two-tiered: -General partners --> all limited partnership liability but have the right to manage the business -Limited partners --> limited liability = not liable for limited partnership obligations; but in most states, including CA, may not managed the business without forfeiting their limited liability status, but under the newly-revised Uniform Limited Partnership Act, limited partners may now manage without forfeiting limited liabilty status |
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Alternatives to Partnership
Registered Limited Liability Partnership |
Must file STATEMENT OF QUALIFICATION plus ANNUAL REPORTS
Liability: -NO PARTNERSHIP liable for debts of partnership itself (but can always sue individual partners for their personal assets) |
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Alternatives to Partnership
Limited Liability Company |
Hybrid between a corporation and a partnership in which the owners (members have the same limited liability of shareholders in a corporation
AND Benefits of partnership tax status Must: 1) file ARTICLES OF ORGANIZATION and 2) adopt OPERATING AGREEMENT (Control) Owners (members) may control and delegate control to a team of managers |
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Alternatives to Partnership
Limited Liability Company similarities to Partnerships |
(Liquidity fr. partnerships)
Full membership interest cannot be transferred without unanimous consent of all members (Life fr. partnerships) Articles of Organization or Operating Agreement must indicate some event that will dissolve LLC (Tax-status fr. partnerships) Limited tax |
