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Corporate Law- General Partnerships
Corporate Law- General Partnerships
37
Law
Post-Graduate
06/28/2014

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Term

What is a general partnership?

 

Who can be a partner and who cannot?

Definition

A voluntary association of 2 or more people who agree to carry on business together for profit.

 

The partners can cinlude a person, other businesses, or partnerships (but it can never be a sole proprietorship.)

Term
What must general partnerships be?
Definition
The MUST be a voluntary association because you cannot be forced to work with someone.
Term

What is a joint venture?

 

Are the members of joint ventures agents of each other?

Definition
A joint venture is a voluntary assocation is fo a particular enterprise. Once it has accomplished its purpose, it ends. Typically, the members are not agents of each other and they are not liable for each other's actions. This is all dealt with the in the contract to form the joint venture.
Term
What will the IRS do with paritcular entities in determining taxation status?
Definition
The IRS will take a look at eneties and look at common law to determine the kind of entity something is.
Term
How do you create a partnership?
Definition

You do not need to do file anything with the state. You just need to agree to be in partnership with each other.

 

Basically persons and entities must come together to create a business for profit.

Term

How must a partnership be named?

 

What must be done if certain criteria are not met?

Definition
The name must include the last names of all partners or the partnership must file a d/b/a petition
Term
How is the profit sharing determined in a general partnershp?
Definition
This should be addressed by the partnershp in agreement, but the default is that profitls are split evenly.
Term

Does the partnership agreement need to be in writing?

 

Definition

No, the partnerhsip does not need to be in writing?

 

 

Term
What happens if the partnership agreement is silent on a particular issue?
Definition
Then the state law will prevail
Term
What hsould be addressed in the partnership agreement?
Definition

The partnership agreement should say what the purpose of the partnership is and who longit will last.

 

This should be genearl enough to allow the business to grow with some leeway

Term
What happens if a person leaves the partnership or dies while a member
Definition
In the original unified code, the parntership terminated. This was then revised in where the remaining partners can decide within a certain period of time to decide if they wnat to continue
Term

How are partnerships managed?

 

How does this affect liablity?

Definition

All partners are each other's agent and agents for the partnership.

 

All partys are jointly liable but if anyone goes outside the scope of the agency, the partnership can sue for breaching the partnership agreement.

Term
How does a partner bind the entire partnership (example)
Definition

A partner binds a partnership. So if the partner signs a contract for kitchen supplies, then he has bound the partnership to the contract. So if the partner fails to pay and then ther partnership and the o ther partners would also be held liable. If the partner buys clothes for themselves not in the normal course of business and uses the partnership and holds themselves out as doing business for the partnership and the vendor belives the partner is acting in the scop of their partnership, then the partnership will still be liable for the $$$. Then the partners will have to work it out among themselves (indemnify) If the vendor DID know that this was not in the normal course of business then the parnterhsip will not be liable.

Term
Joint and several liablity- what is it?
Definition

If parties have joint liability, then they are each liable up to the full amount of the relevant obligation

 

The converse is several or proportionate liability, where the parties are liable for only their respective obligations. 



Under joint and several liability or all sums, a claimant may pursue an obligation against any one party as if they were jointly liable and it becomes the responsibility of the defendants to sort out their respective proportions of liability and payment. This means that if the claimant pursues one defendant and receives payment, that defendant must then pursue the other obligors for a contribution to their share of the liability.

Term
Do partnerships have joint and several liablity?
Definition
Yes, partners have joint and several liablity
Term
Where should paralegals look when they receive new assignments for corporate law?
Definition

When receive a new assignment, always look at the jurisidictional language for assignments. ALWAYS look at the directions

Term
Why do so many business form themselves in Delaware?
Definition

They form in Delaware b/c they have a court system that only looks at business law so it’s got great case law so it’s easy to know if you can or cannot do something. Then qualify to do business elsewhere.

Term

How do you form a general partnership?

 

Does the agreement have to be in writing?

Definition

Creation of partnership, like with a sole proprietor- all you have to do is get some peeps together and agree to carry out business. There has to be an agreement. Typically it is written, it can be oral but not awesome idea.

 

You do not have toseek jurisidiction permission to form.

Term
What is the rule about naming your general partnership?
Definition

Name must include all the last names of tall the general partners. If not, then you have to find a d/b/a and then you would have to go to state.

Term
How does the partnership decide certain things?
Definition

n the partnership agreement, we contract for certain things, how we reseolve things, etc. If we don’t plan for something, then we use the general partnership law in the state.

 

 

Governing law- either unform partnership or the revised uniform partnership act. But you should always go to the language of the state, because that’s what controls.

Term
What does agency in a partnership  mean for the kind of authority partners have to conduct business?
Definition

Agency- partners have implied authority to conduct ordinary partnership business.

Term
Joint and severa liability (in torts)?
Definition

when one partner can be responsible to pay the entire amount (in torts).

Term
What does joint liablity mean in contracts?
Definition
A joint liability allows parties to share the risks associated with taking on additional debt, and to protect themselves in the event of legal litigation and lawsuits. 
Term

Are partners still liable once they leave a general partnership?

 

What can a partner do to change this?

Definition

If partner leaves, they can still be liable for things done by the partnership in some jurisdictions for two years. So to make this last less time, you can file something to limit liability (called a statement of dissociation) that limits this liabilite for 90 days after it is filed. It is filed at the state level.  By doing this, file with state, then it puts it on the lender, vendor to check and see if such a thing was filed. So if I’m a lender, I want to check to see if someone has filed this because I have to do my due diligience to see if I want to lend them money.

Term
What can a partner leaveing a partnership file to limit his liability?
Definition

For a partner to shorten their liablity, you can file something to limit liability (called a statement of dissociation) that limits this liabilite for 90 days after it is filed. It is filed at the state level.  By doing this, file with state, then it puts it on the lender, vendor to check and see if such a thing was filed. So if I’m a lender, I want to check to see if someone has filed this because I have to do my due diligience to see if I want to lend them money.

Term
How do you put people on constructive notice?
Definition

When you file stuff with state, you put people on “constructive notice”

Term
What are a partner's rights with regards to management?
Definition

Partners have the equal right to management (1 vote per partner), same to right to interst (equal), compensation =, right to inspection of books, and accouting- UNLESS YOU SAY OUTEHRWISE IN THE AGREEMENT!!!!

 

Term
How do you dissolve your liability once you leave your place?
Definition

When a partner leaves, there has tobe a way to file the statmenet of dissocation otherwise you are liability

Term
How do partnerships dissolve?
Definition

How can a gen partnership dissolve?

 

Can agree that the partnership will dissolve  after certain amounts of time.

 

 

Dissolution by acts!!

 

Under RUPA, ther partnerhips will  not die automatically if the partner does, you get a specific period of time to decide if you want to continue with partnership.

 

 

 

You can transfer your interst to get paid, but you can’t bring the creditor in a a new partner.

 

If a lean is put on the entity, then you can dissolve the partnerhip.

 

 

Dissolution by law-

 

Death or incompetnancy of a partner.

 

 

 Dissolution  by dcree- if partners argues then goes to court and can decide to dissolve.

 

If partner is adjudicated insance.

 

Term
How are new partners added?
Definition

If a there is a new partner, then all new partners have to agree (unless the partnership agreement provides otherwise).

Term
Can you transfer your stake in a partnership?
Definition

You can transfer your right to receive profits, but you can't transfer your managment stake, etc. 

 

You cannot bring the creditor/person who now receives the profits in as a partner.

Term
Notice of Dissolution
Definition
Give actual notice to our creditors so we can get you paid so we can pay ourselves out because we can’t get paid back until the creditors are paid first.  (constructive notice). Always fulfill obligations before you terminate business. You windup your business and then 
Term
Advantages of General Partnerships
Definition

1) pass through taxation

 

2) easy to create 

 

3) Partners can act as additional sources of capital

 

4) Partners share in losses

 

5) Flexiablity in appointing certain partners as managers and can be delegated the authority to make certain decisions by themselves

Term
Disadvantages of General Partnerships?
Definition

1) Unlimited personal liablity

 

2) Lack of Continuity

 

3) Difficult in transferring partnership interest

Term
What should partnership agreements contain?
Definition

1) Name of partnership

 

2) Name and address of the partners

 

3) Recitals (simple statements that it is the intent of the parties to form a partnership).

 

4) Purpose- define the purpose of the partnerhsip- don't make too specific otherwise you can limit the growth ofbusiness

 

5) Address- the place of business of the partnership

 

6) Term- How long ther partnership will last

 

7) Financial provisions- what the initial conrtibutions will be; what will happen if additional capital is needed

 

8) Profitis and losses- if profits or losses will be shared or if they will be proportionate to contributions

 

9) management and control- what will the parnters voting power be (equal or protionate to contributions); if there will be a managing partner

 

10) Admission and withdrawal of new partners- how will new partners be admited and how withdrawal will occur.

 

11) Dissolution- What events can cause a dissolution of the partnerhips

Term
Winding-up a partnerhsip
Definition
Wrapping up business affairs, terminating business, satisfying obligations, selling assets, and collecting debts
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