Partnerships, Limited Liability Companies, and Special Business Forms

Flashcards covering partnerships, limited liability partnerships, and limited liability companies.

General Partnership

An association of two or more persons to carry on as co-owners a business for profit.

Relationship among partners

Each partner is an agent of the other partners and the partnership, and the relationship is fiduciary.

Essential elements of a partnership

Sharing of profits and losses, joint ownership of the business, and an equal right to participate in the management of the business.

Agreements to form a partnership

Can be oral, written, or implied by conduct and can include virtually any terms the parties wish, provided they are not illegal or contrary to public policy.

Basic Structure (Partnership Agreement)

Name of partnership and partners, location of business, purpose and duration of business, and state law applicable to the partnership.

Capital Contributions (Partnership Agreement)

Amount of capital each partner is contributing, agreed-on value of real or personal property contributed instead of cash, how losses and gains on contributed capital will be allocated, and whether contributions will earn interest.

Sharing of Profits and Losses (Partnership Agreement)

Percentage of profits and losses that each partner will receive, when distributions of profit will be made, and how net profit will be calculated.

Management and Control (Partnership Agreement)

How management responsibilities will be divided among partners, name of managing partner or partners, and whether other partners have voting rights.

Dissociation and Dissolution (Partnership Agreement)

Events that will cause the dissociation of a partner or dissolve the partnership, how partnership property will be valued and apportioned on distribution, and whether an arbitrator will determine the value of partnership property on dissolution and whether that determination will be binding.

Management Rights of Partners

All partners have equal rights in the management and conduct of partnership business, regardless of each partner’s proportional interest in the firm.

Interest in the Partnership

Each partner is entitled to the proportion of business profits and losses that is designated in the partnership agreement. If the agreement does not apportion profits, the UPA provides that profits will be shared equally.

Inspection of Books (Partnership)

Partnership books and records must be accessible to all partners, and every partner has a right to inspect records.

Two basic property rights of a partner

A partner's interest in the firm and partnership property.

Duty of Loyalty (Partnership)

Partners must account to the partnership for any property, profit, or benefit derived by the partner in the conduct of partnership business or from a use of its property.

Duty of Care (Partnership)

Partners must refrain from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.

Liability of Partners

Partners are jointly and severally liable for partnership obligations, including contracts and torts.

Dissociation

Occurs when a partner ceases to be associated in the carrying on of the partnership business.

Two stages of partnership termination

Dissolution and winding up.

Winding up

The actual process of collecting and distributing the partnership’s assets.

Limited Liability Partnership (LLP)

A hybrid form of business designed mostly for professionals, allowing them to avoid personal liability for the malpractice of other partners.

Limited Partnership

A partnership consisting of at least one general partner and one or more limited partners, governed by the Revised Uniform Limited Partnership Act (RULPA).

Limited Liability Company (LLC)

A hybrid form that combines the limited liability aspects of the corporation and the tax advantages of a partnership.

Joint Venture

An undertaking by two or more persons or business entities engaged in a single defined project or a series of related transactions.