Intro to Partnerships & LLPs (Outline 5)

LLPS and Partnerships are treated the same except in 2 respects, what is the first one?

The way in which they are formed

LLPS and Partnerships are treated the same except in 2 respects, what is the second one?

Liability of the partners(2)

In order of importance, partnership rules come in this order

1. The ARTICLES OF PARTNERSHIP

2. The UPA & ULLPA

3. The common law of partnership and of agency

What are the Articles of partnership?

It is a partnership agreement

What is the UPA & ULLPA?

Mostly uniform state statues, revised from time to time

What is sharing management authority

refers to the distribution of the right and responsibility among the partners to manage and make decisions on behalf of the business.

Is sharing management authority a default or mandatory rule?

Default rule

Is the rule of distribution at liquidation a default or mandatory rule?

Mandatory rule

What is the order of distrubution at liquidation?

1. Creditors

2. Any cash leftover goes to partners

How does the UPA define a partnership?

Two or more persons carrying on as co-owners a business for profit

Are there formalities in partnerships and can partnerships form automatically

There are no formalities in partnerships, and yes partnerships can form automatically.

What is the default form of businesses?

Partnerships and sole proprietorships

Writing isn’t required to create a partnership but it is recommended for 3 reasons. What is the first?

Prove its existence & that there is a mutual agreement.

Writing isn’t required to create a partnership but it is recommended for 3 reasons. What is the second?

Proof of terms of agreement

Writing isn’t required to create a partnership but it is recommended for 3 reasons. What is the third?

The act of writing it down for you to remember the details in the partnership

True or false is creating a partnership easier and cheaper than a corporation?

False as long as you do it right, forming a corporation is simple + partnerships have a huge amount of flexibility

Why are written agreeements useful for partnerships?

Without a written agreement, it may be hard to know whether a partnership exists.

Doing what creates a presumption of a partnership?

Sharing profits

Presumption relation with BURDEN OF PROOF?

The other party must present some evidence that it is not a partnership, despite the profit sharing.

How could you prove that you are not partners?

Sharing profits in an employment relationship + franchise

What type of relationship is a partnership?

voluntary relationship

What is non-transferable in a partnership

The actions of a partner

Bringing in a new partner requires what?

Unanimous consent

What type of rule is unanimous consent?

Unanimous consent is a default rule

Partnership in relation to property and assets?

A partnership is an entity and can own property in its own name. Partners have no ownership interest in partnership assets.

What can a partner’s personal creditors not do?

They cannot reach a partnership assets

What is Partnership interest?

All the partner’s rights in the partnership, including the partner’s rights to money and all management and other rights.

In what way is a partnership interest like most property?

interest is freely transferable

Does all partnership interest transfer?

No, only some of the partner’s partnership interests transfer.

What do transferee get from transferors

They only get the rights to recieve money from the partnership.

What other rights do transferee get from transferors

1. Share of profits

2. Distributions made by the partnership to partners

3. Return of capitol at liquidation

What is the capitol formula?

What they Invested + Profits - losses - distributions = capitol

Does a transferee become a partner after receiving their interest?

No, they do not become a partner and are not liable for partnership debts

Can the transferor continue to manage as a partner?

Yes, unless the partnership agreement states otherwise + they are still liable for partnership debts

Can a partner’s personal creditors seize their right of receiving money?

Yes, because a partner’s right to receive money is freely transferable.

What is a changing order?

It is when the court orders the partnership to pay the partner’s share to the personal creditors of the partner.