Term
| What do you call a partnership that lasts indefinitely? |
|
Definition
| What is a "partnership at will"? |
|
|
Term
| If all partners agree to hold a retiring partner harmless for aall past, present & future debts of the partnership, is the retiring partner in fact free? |
|
Definition
| No, still liable for past debts to third parties. |
|
|
Term
| What does a retiring partner have to do to ensure they are not liable for new debts of a partnership? |
|
Definition
| 1. Give ACTUAL notification of their retirement to third parties with whom they've done business, and 2. Give CONSTRUCTIVE notification via ad in paper to all others. |
|
|
Term
| In what situations is unanimous consent of partners required in a partnership? |
|
Definition
In general: "extraordinary matters," e.g. (AGAST): Admitting new partner;
Guarantee debts of a third party;
Admit or submit a legal claim;
Sale of partnership fixed or intangible assets;
Third party is aware that authority is lacking (ie no apparent authority of a partner) |
|
|
Term
| When does a partnership agreement have to be in writing? |
|
Definition
Goods sold worth $500+;
Real estate sales;
Over one year required to perform;
Suretyship (guarantee debts of another);
Situation in consideration of marriage |
|
|
Term
| What are three key rights of partners? Which are transferrable & assignable? |
|
Definition
1. Profit receipt (profits after return of capital invested)--yes, can be transferred/assigned to another
2. Property rights--not transferrable/assignable
3. Managment rights (vote, contract, look at books)--no, not transferrable/assignable |
|
|
Term
| D,E,F, & G own a partnership with profits divided 40%, 30%, 20% & 10% respectively. Loss division not specified. If G leaves, how are profits & losses divided among the rest? What if F leaves too? |
|
Definition
| Solve fractionally: 40+30+20+10 = 100; if G leaves, then whole is 90 (40+30+20), so new division would be 4/9, 3/9, 2/9. If F leaves too, then 70 is left and the division is 4/7 and 3/7. |
|
|
Term
| What is a joint venture? What other business structure is it most like? |
|
Definition
| A joint venture is an association of two or more partners for a one-shot business deal (for profit). It is most like a general partnership. |
|
|
Term
| What is "Delectus Personae"? |
|
Definition
| Right of partners to choose associates. Any one single partner can overrule the majority and refuse admission to a new party. |
|
|
Term
| What are the fiduciary duties of partners? |
|
Definition
| Duty of Loyalty (no competition or conflict of interest, no disclosing confidential info); Duty of Care (refrain from GROSS negligence); Discharge of Duties |
|
|
Term
| How are profits divided in a partnership where one partner contributes money & another only services? What about losses? |
|
Definition
| UNLESS otherwise specified, PROFITS are divided equally (the partner contributing money would, however, be entitled first to return of his capital). UNLESS otherwise specified, losses are divided in the same way as profits. |
|
|
Term
| What is a main difference between UPA and RUPA in regards to the ending of partnerships? |
|
Definition
| Under UPA, the death, bankruptcy, or intent to leave the partnership meant that the whole partnership was dissolved and reformed; under RUPA, these same events mean that the partner "dissociates" but that the partnership as an entity still exists |
|
|
Term
| What are grounds for dissociation of a partner under RUPA? |
|
Definition
| Death, bankruptcy, express intent, expulsion, etc |
|
|
Term
| What are the only two (either/or) results of a partner dissociating from the partnership? |
|
Definition
| Either the partnership does a buyout of the partner's interest OR the partnership is dissolved. |
|
|
Term
| If a partner dissociates from a partnership and the partnership continues, what amount will the partner receive in the buyout? |
|
Definition
| the greater of the liquidation value of the partnership on the dissolution date OR the going concern value (Find out what these are), in each case LESS any damages if the dissociation was harmful. |
|
|
Term
| Under RUPA, what is the mandatory waiting time between disolution of a partnership and liquidation of partnership assets? |
|
Definition
| a 90-day "cooling off" period |
|
|
Term
| On dissolution, order of distributions under UPA & RUPA (gen lead to same result but stated diff)? |
|
Definition
| RUPA: 1. Outside creditors; 2. Partners in accordance with their rights to distibutions"/ UPA 2. partners as creditors; 3. return of capital contributions; 4. suplus |
|
|
Term
| ABC partnership is dissolving. Assets are 50K; debts to outside creditors are 40K. Original capital contributions are A-5K, B-4K, C-3K. In addition, C loaned the partnership 10K. What happens? |
|
Definition
| Outside creditors are repaid first (50-40-10). C's loan is repaid next (10K-10K = 0). 12K in capital still needs to be repaid; this is a LOSS. Since no other provision is specified, the loss is shared EQUALLY. C must give A 1K to make the losses 4K/4K/4K. |
|
|
Term
| On what date is a partnership dissolved: date of announcement one partner is leaving, date all debts to outsiders are paid, date final distributions of assets to partners is mde? |
|
Definition
| Date that one partner dissociates self from partnership (check; this is by inference f/ a study q) |
|
|
Term
| Of the basic partnership rights, what can be assigned to another? |
|
Definition
| right to receive profits but not partnership property or management rights |
|
|
Term
| What are the phases of ending a partnership under UPA? |
|
Definition
| Dissolution = announcement of intent; Winding up = gather assets & pay off debts; Termination = after winding up ends. Note that "dissolving" partnership does NOT yet mean it is terminated. Apparent authority continues during this phase. Watch which word used in problems! |
|
|
Term
| How can a limited partner forfeit limited liability? |
|
Definition
| knowing that no ltd ptr certificate is on file with the state or that it contains errors; permitting name to be used in name of ptrship; participating in management beyond limited acts allowed |
|
|
Term
| What are activities that a limited partner CAN do w/o forfeiting limited liability? |
|
Definition
| Can contract for or be an employee of the partnership, can consult/advise general ptrs, can guarantee ptrship loans, can sue on behalf of ptrship, can request or attend a meeting or partners, can wind up partnership affairs, can vote on certain partnership matters |
|
|
Term
| How does an LLC differ from an LLP? |
|
Definition
| LLPs require at least one general partner with unlimited liability; in LLCS, everyone can enjoy limited liability. Also can have 1 mem LLC not LLP |
|
|
Term
| In an LLP, whose torts are you personally liable for? |
|
Definition
| your own and those of people you supervise--so note that protection is not absolute! |
|
|
Term
| What are benefits of LLCs over S-corps? How are the two similar? |
|
Definition
| have fewer federal requirements (eg S-corps caps 3 ptrs at 100, can't have foreign ptrs). Both give the advantage of 1. limited liability, and 2. pass-through taxation. |
|
|
Term
| Which is preferable, having the entity (corp.) be taxed or having pass-through taxation? |
|
Definition
| Pass-through taxation means that income is only taxed once; with corporations, there is "double taxation" at both entity and individual level |
|
|
Term
|
Definition
| as a partnership UNLESS it elects to be taxed as a corp (but why would you do that?) |
|
|
Term
| What is a part-owner of an LLC called? |
|
Definition
|
|
Term
| When a new partner is admitted to a partnership, are they liable for old debts of the partnership? |
|
Definition
| Up to the amount of their capital contribution (ie limited liability for before they joined, unlimited for after) |
|
|
Term
| What happens if a partner has previously agreed to remain in a partnership but later decides to dissociate? |
|
Definition
| They have the "power but not the right" so may be liable for breach of contract--but they CAN dissociate themselves |
|
|
Term
| What rights does a limited partner in an LLP have? |
|
Definition
| They have an interest (right to profits) but NOT any property rights, and limited mgmt rights (they CAN look at the books & vote, but not make contracts) |
|
|
Term
| What issues can a limited partner in an LLP vote on? |
|
Definition
| admission of new LTD (but not gen) ptr, dissolution of p/s, loans made by p/s, change in nature of business, removal of gen ptrs |
|
|
Term
| Can one be both a general and a limited partner at the same time? |
|
Definition
|
|
Term
| Does a general partner owe fiduciary duty to the p/s? Does a limited ptr? |
|
Definition
| General ptr yes, limited ptr no |
|
|
Term
| How are profits & losses shared in an LLP if not otherwise specified? (cf w/gen p/s) |
|
Definition
| Shared based on capital contribution proportion. Ltd ptr only up to capital contribution, general ptr unlimited. (vs EQUAL sharing in gen p/s) |
|
|
Term
| When is an LLP dissolved? |
|
Definition
| Unanimous written consent of all ptrs, court decree, completion of event/time, w/d of a GEN ptr UNLESS all ptrs agree |
|
|
Term
| When does an LLC terminate? |
|
Definition
| On w/d of any member, passage of 30 years or state yr length limit. Limited duration in any case. |
|
|
Term
| Can an accounting firm be an LLC |
|
Definition
| most state laws require accting firms to be ptrship (gen or ltd) |
|
|
Term
| For what does a ptr have UNlimited liability in an LLP? LLC? |
|
Definition
| LLP: contracts & debts; LLC, malpractice or negligence |
|
|
Term
| A general ptr in an LLP is like a ___ while a limited ptr is like a ___ |
|
Definition
| gen ptr sim to gen ptrship; ltd ptr sim to shareholder in corp. |
|
|
Term
| What is a silent partner? |
|
Definition
| In a general p/s, a ptr w/no mgmt control but still UNlimited liability |
|
|
Term
| If a partnership is dissolving and after repaying creditors, one partner's account is in the red and that partner refuses to contribute any more money, what happens? |
|
Definition
| If the "broke" partner won't contribute, you have to distribute the losses among the other partners proportionally. The broke partner's account is then 0, and you distribute any remaining assets to the remaining partners. (but what if the books are still negative? can you force a partner to pay??? |
|
|
Term
| Can a limited partner act as an agent of the partnership? |
|
Definition
|
|
Term
| Can a limited partner vote on ADMISSION of a general partner? What about REMOVAL? |
|
Definition
| NO, only general partners vote to admit. However, Limited partners CAN vote on removal of a general partner. |
|
|
Term
| If a general partner leaves a LLP, is the partnership dissolved? what about if a limited partner leaves? |
|
Definition
|
|
Term
| Is a general partnership dissolved upon death of one of the partnerss? What about a joint venture? |
|
Definition
| No--not any more for GP, no for jt venture |
|
|
