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29 Cards in this Set
- Front
- Back
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Partnership - Generally
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Governed by UPA in PA
Association of two or more people to carry on as co-owners a business for profit. |
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Forming a Partnership
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Partnership Agreement
- Express or Implied (determine on E of intent, agreement to share P/L, mutual right of control) Partners = receipt of a share of business profits =prima facie E of partner u/l received in payment for wages, rent, consideration from sale of asset, repayment of principal or interest on debt - no need for written agreement - K rules apply - written or verbal! |
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Partnership Property
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Property Held in Partnership's Name
- P'ship c/hold title to property in its name and is considered such property if purchased in the P'ship's name Not Held in Partnership's Name - Look at parties' intent! - Presumed P'ship Property - bought in /acquired by partners for the P'ship business - acquired by P'ship w/ P'ship funds u/l contrary intent appears - acquired in one+ individual partners' names IF carried on the books - improved by P'ship or on which it covers expenses (i.e. taxes, repairs, insurance) |
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Partnership Property - Partners' Rights
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Tenants in Partnership!
- equity interest Cannot possess for personal use w/o consent of all Cannot attach except on claim against P'ship Cannot assign interest except in connection w/ assignment of rights of ALL partners Dower = not subject to dower, curtesy, or allowances to widows, heirs or next of kin Rights vest in surviving partners upon a partner's death |
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Partnership Interest
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Share of profits or surplus = personal property
Can be transferred, sold or assigned, but assignee takes limited rights: - entitled only to receive profits assignor w/g under PA - NOT entitled to interfere in control or management, require any information or account, or to inspect the books Creditors cannot receive direct assignment of P'ship interest - M/seek court order (Charging Order) to appoint a receiver to collect Partner's share of profits for purposes of satisfying debt |
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Partners' General Rights and Obligations
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Controlled by PA = very flexible in making K terms!
- presumed to share P/L equally u/l E to the contrary Unwaivable Rights/Obligations - FD of loyalty and care - liability to 3P for P'ship obligations - right to accounting and inspect books Management & Control Rights = equal right u/l otherwise agreed; majority vote for day-to-day business u/l otherwise agreed, and unanimity for all other matters |
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Internal Legal Actions
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Partner c/n sue or be sued by P'ship or another At Law for br/PA or P'ship matters
Actions in Equity - Accounting - to determine and resolve ALL txns and financial matters in connection w/ P'ship - Partner c/h legal claim under this Formal accounting generally a final settlement on dissolution and winding up - but Partner can demand: - wrongfully excluded from P'ship business or possession of property - PA provides for it - other circumstances make it just and reasonable Note: Formal accounting m/b used to settle disputes over FD violations |
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Duties Between/Among Partners
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Fiduciary Duties
- every partner has FD to P'ship and to other partners in connection to P'ship business (loyalty, GF, fair dealing, trust and confidence, indemnify for losses as result of misconduct) - Partner c/seek accounting proceedures |
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Partnerships - Indemnification and Contribution
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P'ship M/indemnify every partner for payments made and personal liability reasonably incurred in connection w/ the business
Individual partners M/contribute amounts necessary to meet P'ship obligations u/l otherwise agreed |
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Right to Information
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All Partners have right to access and inspect books and receive full and true information on things affecting P'ship
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Distribution of Partnership Profits
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NOT automatically entitled to distribution of profits - they get Draw as determined by majority vote u/l otherwise agreed.
No right to demand money or distribution |
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Remuneration
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Partners generally not entitled to compensation for services u/l otherwise agreed - except exceptional situations
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Partnership - Agency Principles
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Every partner is an agent and P'ship is bound by the act of any partner for apparently carrying on business of the P'ship in the usual way
Actual Authority - implied or express Apparent Authority = if 3P w/ whom partner is dealing reasonably believed the actor is authorized AND belief is traceable to manifestation of the principal Ratification - express or implied by conduct that w/make sense only if Partners had ratified By Estoppel |
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Partnership - Actual Authority
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Implied
- for all things necessary, usual and proper to accomplish express responsibilities OR - reasonably incident to express authority Express - conferred by express or implied consent of Partners - M/h unanimous consent for assignment of P'ship property for C benefit, disposing of goodwill, confessing judgment, submitting claims to arbitration OR other act making impossible the ordinary business |
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Partnership by Estoppel
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Non-partner represents herself as Partner or consents to another so representing = liable to anyone who in GF extends credit to P'ship based on that representation
C/hold other partners liable if: - carelessly or intentionally caused 3P to believe she is a partner OR - knowing of her belief did not take reasonable action to notify 3P |
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Partner Liability - Tort and Wrongful Act
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Jointly and Severally liable to 3Ps for loss or injury from wrongful acts or omissions of any partner acting in ordinary course of business or w/ co-partners' authority.
- liable even if innocent and d/n/k of the wrong! |
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Partner Liability - Breach of Trust
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Jointly and severally liable for one partner's improper receipt of misapplication of any money or property if:
- she was acting in scope of apparent authority OR - for misappropriation of money or property in custody of P'ship that was received in ordinary course of business |
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Partner Liability - Contract
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Jointly liable for debts and obligations of P'ship
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Liability of Incoming and Outgoing Partners
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Incoming = for all obligations arising before her admission as if she h/b partner when obligations occurred
- liability c/b satisfied only to extent of her contribution Outgoing = remains liable to 3P who extended credit while member of P'ship |
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Partnerships - Real Property Transfers
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Titles and conveyances M/match - names
Bona Fide Purchaser = conveyance of P'ship property is valid even if conveying partner had no actual authority - BFP = takes for value w/o knowledge of partner exceeding her authority |
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Dissolution - Generally
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Change in rel'p of partners caused by any partner ceasing to be associated w/ the P'ship
Rightful or Proper - end of definite term/venture - at will if no definite term - bona fide expulsion of a partner - death of a partner - w/drawal of a partner - bankruptcy of any partner Wrongful - violation of PA - willful or persistent breach of PA - wrongful expulsion - NOTE: wrongfully dissolving results in liability to other partners for br/K Dissolution by Court Decree - P'ship m/b dissolved by decree upon partner's application AND - Court finds incapacity or misconduct OR not reasonably practicable to carry on P'ship business |
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Dissolution - Effect
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Termination of Partner Authority to act as agent except for winding up (post-dissolution before termination)
Continuation of business if PA provides after wrongful dissolution = partner who wrongfully dissolved m/b entitled to cash "buy out" but remaining partners can subtract recoverable damages Upon Rightful/Proper - demand liquidation u/l otherwise agreed in PA (i.e. force sale) - Proceeds first satisfy P'ship liabilities and then surplus to each partner according to her Interest Deceased Partner's estate can demand cash payment of value of decedent's P'ship interest (became TIP and vested in P'ship) |
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Dissolution - Payment of Creditors and Partners
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Contribution = insufficient assets to pay off creditors, then each partner M/contribute equally to satisfy u/l otherwise agreed in PA
Distribution - if assets available - payments to non-partner Cs - debts owed to partners - amounts owed to partners based on their capital contributions AND - amounts owed to partners based on their profit share (surplus) |
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Limited Partnerships
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Formed by one+ persons and having at least one+ GP AND one+ LP
- GP can be corp, trust or other entity - Formed by filing certificate of LP w/ Secretary of State - d/n/h to be written, but name M/include "limited partnership" |
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Limited Partnerships - Limited Liability
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LP not liable for debts and obligations
- EXCEPT if she participates in control of business and then is liable ONLY to persons who transact w/ P'ship reasonably believing that the LP is a GP GP = liable for wrongful acts, br/trust and other debts and obligations under the same rules as partners of general partnerships |
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Limited Partnerships - Partner Rights
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P/L based on proportion of her contribution as stated in P'ship records u/l PA says otherwise
LP can assign her P'ship interest w/o dissolving the limited partnership - Assignee does NOT become LP u/l assignor gives that right in accordance w/ the PA and is only entitled to the distribution she w/h/b entitled to |
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Limited Partnerships - Dissolution
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End of definite term
Per PA of limited partnership Written consent of all partners W/drawal of a GP - unless: - at least one GP remains and the PA permits continuation of P'ship business - all partners agree in writing w/in 90d to continue business and to appointment of one+ GP |
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Partnership Tax Considerations
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Not a taxable entity - does not file tax return, but M/file information return
Pass-Through Entity - corps are double-tax entitty - P'ships pay only single tax on profit (SHs!) - Distributive share of P/L = each partner M/pay tax on her share, whether rec'd or not; account for losses on individual return Sale of P'ship Property - uses same method to compute gain or loss as a taxable entity - no tax to P'ship - individual partners report appropriate share of gain/loss on individual return |
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LLPs and LLCs
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Best of both worlds - limited liability to all members and pass-through tax entity
LLCs d/n need partner - single-member entity, no personal liability LLPs not personally liable on debts and obligations of p'ship arising from co-partners' torts - most states require them to register and adopt name w/ "LLP" - most states not personally liable for p'ship debts or obligations - most states partner remains personally liable for her own wrongful acts or those of someone she directly supervised |
