Partnerships, Agency, Corporations

CA Bar - July 2025

Partnership

An association with two or more legal persons who carry on a for profit business as co-owners

• person

• no specific intent needed

• co-ownership

• sharing control

Person

• anyone or anything that has a legal capacity to contract

• corporations, LLCs, humans

• incapacitated - minors, inebriated people

Co-ownership

• Element of Partnership

• when two or more persons share profit, there is a presumption of a partnership relationship

• no presumption in payment of a debt, interest payments, rent, wages, goodwill —> because there is a payment, but NOT a division of profits

Partnership Liability

• partners are personally liable for the partnership’s obligations; no limited liability

• can be limited for their torts + contracts

Partnership Agreement

• need not be a written agreement

• if there’s no partnership agreement

• state law will govern the partnership with default rules

• however, if there is written, it will govern

• Exception - when state laws are mandatory, (1) liability to 3P, can’t deny partners access to books & records, fiduciary duties can’t be eliminated

Duty of Loyalty - partnership

partners must not:

• compete w/ partnership biz

• advance an adverse interest to partnership

• usurp a partnership opportunity

• limitation - can’t eliminate this, but can limit it by describing it differently

• Safe Harbor - if a partner makes a full disclosure of all material facts, then a certain % of other partners may authorize or ratify the transaction

Duty of Care - Partnership

• can’t unreasonably lower this duty

• MUST NOT:

  • engage in grossly negligent or reckless conduct

  • engage in intentional misconduct

  • engage in a knowing violation of the law

Timing of Duties

duties of loyalty and care only apply to partners, not to prospective partners or future partners

Profits and Losses - partnership

• need not to be the same

• financial contributions/capital contributions need not have an effect on this division

• when there’s no partnership agreement, P divided evenly, L follow

Distributions - partnership

• Default - partners don’t have the right to demand this

• partners can agree in advance to allow this to be made accordance to the partnership agreement

Transfer of Partnership Interests

• Default - partner doesn’t have the right to do this

• partners may agree to change the default rule to require a majority vote of the partners

• in the past (no longer), doing this would have dissolved the partnerhip

New Partner

Default - when a he/she is introduced, all existing partners must consent to this

Managing Governing Relationships

• Default - every partner has equal rights in management and control of the partnership —> can be changed by agreements

• common division is to reflect the parties’ capital contribution(s) rather than an even share

Quroums - Partnerships

no default rule regarding quorums for voting

Ordinary Buisness Matters

• requires a vote of the majority of the partners

• (eg: declaring a distribution)

Extraordinary Business Matters

• require a vote of all the partners

• (eg: amending partnership agreement)

Access to Records - partnership

• must be provided to partners and their agents

• MANDATORY - can’t be abridged by agreement

Dissociation - partnership

• when a partner ceases to be associated with the partnership

• Voluntary —> partner may give notice that they want to withdrawn

• Involuntary —>

  • event triggers it, expelled due to partnership agreement, unlawful to carry on biz, court order, partner is bankrupt, partner dies, partner is incapacitated, one of the entities of the partnership dissolves

Contract Liability - partnership

• partners can enter contracts for which they have authority

• express, implied, apparent

Tort Liability - partnership

a partnership is liable for torts that are committed by partners within the scope of their partnership

Terminating a Partnership

• Requires Dissolution and Winding Up

Dissolution - partnership

• can be triggered by an event, beginning of the end

• can be brought by a partner or operation of law

• partnership at will - no fixed term, generally dissolves when this partnership chooses to

• partnership for a term or undertaking - when term expires, orundertaking compelte

• Dissolved —→ (1) any dissolving event, event makes it unlawful to continue and not cured within 90 days, judicial determination

Winding Up - Partnership

• who —> (a) any partner not wrongfully dissociated, (b) legal rep of last surviving partner, (cd) any partner, legal representative, or transferee may seek judicial supervision of winding up

• Power —> may dispose, transfer property, discharge liabilities, person can preserve partnership biz to max value

• Statement ——> filing that gives notice 3 that the partnership has been dissolved after 90 days

• Priority —> creditors, then distributors

Limited Liability Partnership

• partnership in which a partner’s liability is eliminated

• must file with state

• Formation - to transfer a gen partnership to this, vote for it

• Liabilities - not personally liable for obligation of this entity, but liable for their own personal misconduct or negligence

• terminating - can voluntarily transform & cancel this status, state can also revoke it

Limited Partnership

• a partnership formed by 2+ persons that has at least one general partner and one limited partner

• liability - limited partners have limited liability, the general partners have personal liability

• formation - file certificate, name, in-state addy, name of agent in state, name and addy of gen partners, statement of duration, signed by gen partner

• Come into existence - when filed, or effective date if include, substantial compliance is effective

Limited Partners

• type of partner

• admission - may join at creation, or w/ agreement

• voting - only under partnership agreement, limited partner doesn’t vote

• right to access records

• liability to 3P- limited partner isn’t personally liable, unless she serves as gen partner or starts to participate

  • can do these without running biz: be officer, director of gen partner, consult gen partner, act as surety, request to attend meetings, wind up, propose or prove partnership matters

• Withdrawing - limited partner must give 6 months notice

General Partners

• type of partner

• becoming - joining at beginning or admitted w/ consent

• rights & powers - same as those in gen partnership

• liability to 3P - personally liable, can form a Corp to limit liability

• termination - voluntarily withdraw, try to assign and then get removed, bankruptcy, insolvent, death, incapacitation, biz entity partner is terminated

Agency Relationship

• need agent and principal

• creation - extend the principal’s economic reach, to acquire the agent’s expertise, make money

• consideration NOT required

• 3 components

  • assent - both parties manifest assent

  • benefit - agent agrees to work for principal’s benefit

  • control - the agent agrees to work subject to control of principal

Principal

• almost any person or entity has the legal capacity to be this

• excludes minors, and anyone incapacitated by illness or intoxication

• types of entities that can be this - employer, corp, LLC, partnership, LLP

• Unincorporated associations can’t cuz they don’t have legal capacity