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partnerships
| Term | Definition |
|---|---|
| applicable law | Revised Uniform Partnership Act (RUPA) |
| formation of general partnership | does not require formalities; must have: (1) association, (2) of two or more "persons" (3) to carry on a for-profit business |
| formation of general partnership --- association | can be express or implied, no writing required |
| formation of general partnership --- of two or more "persons" | can be an individual with capacity to contract or a legal entity |
| formation of general partnership --- to carry on a for-profit business | must have intent to carry on a business; intent to form a partnership not required; sharing of profits presumes a partnership |
| formation of general partnership --- exceptions to sharing of profits presumption | payments for a debt; interest on a loan; rent; wages; good will payments from sale of business; retirement or health benefits paid to a deceased or retired partner's beneficiary |
| consequences of a valid partnership | creates separate legal entity (can hold property, sue, be sued); no limited liability (partners are personally liable for P's obligations) |
| partnership agreement | not required but if made is subject to SoF; an agreement will control over RUPA to the extent allowed by law (e.g., cannot rid of fiduciary duty) |
| partnership by estoppel | third party (3P) can recover as if a valid P were formed if one is held out as a partner with consent, and a 3P relies and suffers damages (agency principles) |
| partner duties to the partnership | agency principles apply |
| partner duties to each other | fiduciary duties owed to the partnership and current partners; duty of loyalty; duty of care |
| partner duties to each other---duty of loyalty | not compete, advance adverse interest, or self-deal unless approved w. full disclosure; P agreement cannot eliminate duty of loyalty |
| partner duties to each other---duty of care | a partner must not knowingly violate the law or engage in reckless or grossly negligent conduct or intentional misconduct |
| partner duties to third parties | agency principles apply; joint and several liability |
| partner duties to third parties---joint an several liability | an incoming partner’s liability for pre-existing P obligations is limited to his capital contribution; a dissociated partner is liable for obligations incurred before dissociation, and after dissociation if the 3P was without notice of the dissociation |
| partner rights in management & control | unless provided in agreement, each partner has an equal right to manage and control |
| partner rights in ordinary business | requires approval by a majority of the partners |
| partner rights in special business | requires approval by all partners |
| partner rights to inspect and copy | access to the records must be provided to a partner or his agent |
| partner rights re: indemnification | required if a partner incurs liability while preserving P property or business |
| profits and losses | absent an agreement, profits and losses are shared equally (regardless of unequal status or contribution); losses follow (shared like) profits if agreement is silent |
| distributions | no right to demand a distribution unless provided in the P agreement |
| transfer of partnership interest | a partner has a partnership interest (right to share profits, losses, distributions); a transfer of PI does not cause a dissolution or dissociation |
| transfer of partnership property | a partner may have apparent authority to transfer P property on behalf of P; property transferred without authority can be recovered unless the P's interest was not indicated and transferee was without notice |
| ownership | whether property belongs to a partner or the P is determined by title, the type of funds used, and in whose name it is held; untitled property ownership is determined by intent of the partners and presumed P property if acquired with P funds/credit |
| use | a partner does not have a right to use or possess P property for personal use and must compensate the P for any resulting personal gain |
| addition of a partner | a partner can be added only through unanimous consent of the other partners |
| dissociation | can be the voluntary or involuntary withdrawal of a partner; may withdraw by providing notice; if in breach, liable for damages; the P can expel per agreement, by unanimous vote if becomes unlawful, death, bankruptcy, incapacity, court decree |
| consequences of dissociation | P must purchase the p’s interest and indemnify; won't necessarily trigger dissolution and winding up, except in at-will P; if wrongful, the remaining ps may vote to dissolve the bix; The p has the power to bind unless notice filed w. state + 90 days |
| partnership changes | a general P can covert to or merge with a limited P and vice versa; approval of partners is required unless otherwise provided in the P agreement or state law |
| termination | 2 steps: dissolution and winding up |
| dissolution---partnership at-will | if no fixed term or undertaking, the P dissolves when any partner dissociates |
| dissolution---partnership for a specific term or undertaking | may dissolve by its terms, with unanimous consent, or after a partner is dissociated if at least half of remaining partners consent |
| dissolution---triggering events | any P may dissolve per the P agreement, due to an event that causes unresolved illegality, or by judicial determination |
| winding up | liquidate assets, pay creditors, and distribute remainder to the partners |
| winding up---status until complete | a P continues after dissolution until the winding up is complete |
| winding up---who | a partner who has not wrongfully dissociated may wind up the P business |
| winding up---power | to wind up one may dispose of and transfer P property and discharge P liabilities |
| winding up---binding | the appropriate acts of a partner while winding up will bind the P |
| winding up---statement of dissolution | filed with the state; after 90 days serves as notice to creditors |
| winding up---priority | creditors (including partners who are creditors) are paid before partners |
| limited liability partnerships (LLP) | no personal liability for partnership obligations |
| LLP---formation | created by filing statement of qualification w. state, effective on date filed, name must end with LLP or RLLP or others describing status; transforming a P into a LLP requires approval of all ps or per P agreement |
| LLP---liabilities | a partner is only liable for her own personal misconduct not for LLP obligations |
| LLP---termination | cancelling statement will transform LLP into a general P |
| limited partnership (LP) | reduces a limited partner's liability to his capital contribution; an LP consists of at least 1 general and 1 limited partner |
| LP---formation | created by filing a certificate of LP w. state, effective on date filed, certificate must be signed by all gps and include LP name, address, local agent, name and address of each gp, and duration |
| LP---limited partners---admission | after formation requires unanimous written consent or per the agreement |
| LP---limited partners---voting | a limited partner may vote only to extent allowed under the P agreement |
| LP---limited partners---inspect and copy | a limited partner has the right to inspect/copy records and demand information from the gps about the financial condition and affairs of the P |
| LP---limited partners---liabilities | a limited partner is liable only if she participates in the control of the business and the 3P reasonably believes she is a general partner based on conduct, or if she also serves as a general partner |
| LP---limited partners---withdrawal | requires six months' advance written notice on each general partner or per agreement |
| LP---general partners---admission | after formation requires unanimous written consent or per the P agreement |
| LP---general partners---rights | a general partner in an LP has the same rights/limitations as in a general P |
| LP---general partners---liabilities | a general partner is personally liable for the LP obligations; a general partner is often a corporation to provide a shield from liability. |
| LP---general partners---withdrawal | requires written notice and if in breach, the partner will be liable for damages; the partner may withdraw per agreement, by transferring interest, or in event of death, bankruptcy, incapacity, court decree or upon term. of an entity partner |
| LP---profits and losses | absent a written agreement, profits, losses, and distributions are allocated based upon each partner's contributions |
| LP---assignment | upon assignment, the assignee is entitled to receive any distribution and will not become a limited partner unless the P agreement provides or all partners consent |
| LP---derivative suit | a limited partner may sue on behalf of the P against the general partners |
| LP---termination (requires dissolution & winding up) | Dissolution may occur per the P agreement, unanimous written consent, after withdrawal of the only general partner, or by judicial decree; General partners who have not wrongfully dissolved the P may perform the wind up |
| LP---priority of distribution | creditors (including partners who are creditors) are paid before partners with accrued distributions before other partners |
Created by:
mrynna