Partnerships

Flashcards based on partnership law lecture notes.

What is the main body of law for MEE partnerships?

RUPA - Revised Uniform Partnership Act

Is intent to form a partnership required to create a General Partnership?

No, a general partnership can be formed by the actions and conduct of the parties, even without a specific intent.

Define a general partnership

A general partnership is formed when two or more persons associate to carry on as co-owners of a business for profit, whether or not they intend to form a partnership.

Does sharing in gross profits automatically create a partnership?

No, sharing in gross profits alone does not necessarily indicate a co-ownership of the business.

Can a Limited Partnership be formed without filing a Certificate of Limited Partnership with the Secretary of State?

No, a Certificate of Limited Partnership must be filed to formally establish a Limited Partnership.

Do all partners in a Limited Liability Partnership (LLP) have limited personal liability?

Yes, the primary purpose of an LLP is to provide limited personal liability for all partners.

Does filing a Statement of Qualification to become an LLP create a new partnership if a General Partnership or Limited Partnership existed prior to filing?

No, filing a Statement of Qualification merely changes the form of an existing partnership into an LLP; it doesn't create a new legal entity.

Does a partner generally have authority to bind the Partnership for its business?

Yes, partners are typically considered agents of the partnership and can bind it in the ordinary course of business.

Must differences among partners for acts within the ordinary course of business be approved unanimously?

No, differences in the ordinary course of business are typically decided by a majority vote among the partners.

Must acts outside the ordinary course of business be approved unanimously?

Yes, acts outside the ordinary course of business fundamentally alter the nature of the partnership and require the agreement of all partners.

Will a partner's act bind the Partnership if the partner lacked authority and the third-party knew of this lack of authority?

No, if a third party is aware that a partner lacks authority, they cannot claim to have reasonably relied on that partner's actions to bind the partnership.

Are General Partners personally liable for all obligations of the Partnership unless otherwise agreed by the claimant or provided by law?

Yes, General Partners are personally liable for all obligations of the partnership unless:

1. The claimant has agreed otherwise,
   or

2. A statute provides otherwise (e.g., liability protections under specific laws).

Are partners admitted into an existing partnership liable for obligations incurred prior to their admission?

No, new partners are generally not liable for existing debts unless they expressly agree to assume them.

Is a judgment against the Partnership automatically a judgment against the individual partner(s)?

No, a partnership is a separate legal entity, and a judgment against it does not automatically extend to the individual partners' personal assets.

Can a judgment creditor levy execution of a judgment for a Partnership debt against a partner's personal assets before Partnership assets are exhausted or insufficient?

No, generally, partnership assets must be exhausted or shown to be insufficient before a creditor can pursue a partner's individual assets.

Are Limited Partners personally liable for obligations of the Limited Partnership?

No, the defining characteristic of a limited partner is their limited liability, usually up to the amount of their investment.

Under ULPA (2001), is personal liability created for a limited partner who participates in the management or control of the business?

No, ULPA (2001) significantly reduced the risk of limited partners losing their limited liability by participating in management.

Under RUPA, is a partner in an LLP liable for partnership obligations?

No, under RUPA, partners in an LLP generally have limited personal liability for partnership obligations.

Unless agreed otherwise, are profits shared equally among partners?

Yes, without a specific agreement, partnership law generally presumes equal sharing of profits.

Unless agreed otherwise, does each partner have equal rights in the management and control of the business?

Yes, because in the absence of a partnership agreement stating otherwise, all partners have an equal say in management.

Can a partner transfer any rights other than their interest in profits/losses and the right to receive distributions, unless the partnership agreement provides otherwise?

No, a partner's full rights, including management and property rights, are generally not transferable without the consent of the other partners.

Is all property acquired by a Partnership (or with Partnership assets) owned by the partners individually?

No, property acquired by a partnership is considered partnership property, not individual property of the partners.

Can a judgment solely against a partner be satisfied with Partnership property?

No, partnership property is distinct from individual partner property and generally cannot be used to satisfy a personal judgment against a partner.

Is a partner entitled to remuneration for services performed for the Partnership if there is no agreement to the contrary and it's not for winding up the business?

No, partners are generally not compensated for their services to the partnership unless there's an express agreement or they are involved in winding up the business.

Does a partner owe a fiduciary duty of care to the Partnership?

Yes, partners are expected to act in the best interests of the partnership and exercise reasonable care in their duties.

Under RUPA, does a partner breach the duty of care by engaging in simple negligence?

No, RUPA generally holds partners liable for gross negligence, reckless conduct, intentional misconduct, or a knowing violation of law, not simple negligence.

Does a partner owe a fiduciary duty of loyalty to the Partnership?

Yes, partners are in a position of trust and must act in good faith and for the benefit of the partnership.

If reasonable, may the Partnership agreement eliminate or alter a duty of loyalty?

Yes, provided the alteration is not manifestly unreasonable and does not eliminate the duty entirely.

Can a partner maintain a derivative action against another partner for misconduct?

No, generally, a partner's remedy for another partner's misconduct is a direct action against that partner or the partnership, not a derivative action which is typically for corporate settings.

Can a partner dissociate (withdraw) from the Partnership at any time upon notice?

Yes, a partner generally has the power to withdraw from a partnership at any time, even if it's a wrongful dissociation.

Can a wrongfully dissociated partner participate in management?

No, a wrongfully dissociated partner loses their right to participate in the management of the partnership.

Under RUPA (2013), can dissolution be rescinded by the affirmative vote or consent of all remaining partners?

Yes, because RUPA (2013) allows for the continuation of the partnership after a dissolution event if all remaining partners agree.

Under UPA (1914), must a Partnership always be wound up and terminated regardless of whether dissociation was rightful or wrongful?

Yes, because under UPA (1914), dissociation generally triggered dissolution, requiring winding up and termination.

Is termination the same as dissolution? Which one comes first?

No, dissolution is the act of ending the partnership, while termination is the final stage where all affairs are wound up and the partnership ceases to exist. Dissolution precedes termination.

During the winding up process, are inside creditors (partners who loaned money) paid before outside creditors?

No, outside creditors generally have priority over inside creditors during the winding up process.

What are the elements required to form a general partnership?

A general partnership is formed when two or more persons carry on as co-owners of a business for profit, regardless of intent or formal agreement. Sharing profits creates a presumption of partnership.

Are partners personally liable for partnership debts?

Yes. In a general partnership, each partner is jointly and severally liable for the partnership’s obligations, even if incurred by another partner in the ordinary course of business.

What authority does a partner have to bind the partnership?

A partner has actual authority (express/implied) and apparent authority to bind the partnership to contracts made in the ordinary course of the partnership’s business.

When can a partner be held liable for the wrongful acts of another partner?

A partnership is liable for a partner’s wrongful acts or omissions if committed in the ordinary course of business or with actual authority.

How are profits and losses shared in a general partnership?

Profits are shared equally unless otherwise agreed. Losses follow profits unless otherwise agreed.

Can a partner transfer their interest in the partnership?

Yes, a partner may transfer their financial interest (right to profits), but not their management rights or status as a partner without unanimous consent.

What fiduciary duties do partners owe to the partnership and to each other?

Partners owe duties of loyalty and care, and an obligation of good faith and fair dealing. They must account for any benefit from partnership business and avoid conflicts of interest.

What events trigger dissolution of a general partnership?

Dissolution can occur by partner agreement, withdrawal, death, illegality, or court order. After dissolution, the partnership must wind up its affairs.

How are partnership assets distributed upon dissolution?

Assets are used first to pay partnership creditors (including partner loans), then to repay capital contributions, and finally, any remainder is distributed as profits.

What is the liability of an incoming or outgoing partner?

An incoming partner is not personally liable for pre-existing debts. A dissociating partner remains liable for debts incurred before dissociation unless released by the creditor.