Term
| What is the definition of a partnership? |
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Definition
Association of 2 or more persons who carry on as co-owners of a business for profit
Key factor in determining whether a partnership has been formed: whether the putative partners share profits |
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Term
| What are general partners liable for? |
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Definition
Agency principles apply: GP is p/s agent, and p/s is bound by GP's actions when committed in scope of p/s r/s or with actual/apparent authority
GPs are liable for p/s debts, contracts, and torts, including torts of co-partners
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Term
| To what extent are incoming general partners liable for the obligations of the p/s? |
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Definition
| Limited liability for old debts - liable for prior obligations of the p/s, but only to the extent of money/property contributed to the p/s |
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Term
| To what extent are dissociating or withdrawing GPs liable for p/s obligations? |
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Definition
Liable for all past p/s obligations as well as future ones until (1) she dies or (2) notice of withdrawal is given to all creditors.
Death: Dead partner is liable for actions of other GPs until those GPs receive notice of death |
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Term
| When does liability by estoppel arise? |
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Definition
When a person falsely represents to a 3rd party that there is a p/s, and 3rd party reasonably relies on it - person cannot later deny liability for the made-up p/s
She is liable only to the extent of liabilities arising as a result of her representation. |
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Term
General rule: GP cannot bind p/s to new business once p/s enters into dissolution/winding up
Exception? |
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Definition
1. GP has no notice of dissolution
2. Existing and potential creditors have no notice of dissolution
(?) |
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Term
| What fiduciary duties to GPs owe to the p/s? |
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Definition
1. Duty of reasonable care
2. Duty to obey reasonable instructions
3. Duty of loyalty
(Same as agency) |
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Term
| What remedies does a GP or p/s have against a breaching GP? |
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Definition
Generally, GPs can't sue the p/s or fellow GPs for p/s-related business in actions at law.
However, GP can obtain an equitable accounting in which p/s liabilities are converted in GP liabilities individually |
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Term
| What is the ownership/liquidity of specific p/s assets (e.g., land, equipment, etc.) held in p/s name? |
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Definition
Owned by p/s - can only be transferred by someone w/ authority
Individual GPs can't transfer these assets w/o authority - relatively illiquid |
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Term
| What is the ownership/liquidity of GP share of profits and surplus? |
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Definition
| Owned by GPs individually - freely transferable w/o p/s authority - liquid personal property |
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Term
| What is the liquidity/ownership of each GP's share in management of the p/s? |
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Definition
| Owned by p/s - can't be transferred or sold w/o p/s permission - illiquid |
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Term
| Default for management of p/s? |
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Definition
| Absent agreement, each GP is entitled to equal control - one GP, one vote |
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Term
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Definition
Absent agreement, GPs do not get paid salaries.
However, GPs can receive compensation for helping to wind up a p/s business. |
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Term
| Default for profits and losses? |
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Definition
Absent agreement, profits are shared equally among GPs and losses follow profits.
Conversely, profits do not follow losses (e.g., if p/s agreement provides for uneven apportionment of losses but is silent as to profits, profits are shared equally) |
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Term
| What are the stages of ending a p/s? |
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Definition
1. Dissolution
2. Winding up
3. Termination |
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Term
| What happens during the winding up of a partnership? |
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Definition
| Remaining GPs liquidate p/s assets to satisfy p/s creditors. |
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Term
| What events trigger the dissolution of a p/s? |
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Definition
| Material changes - includes withdrawal or death of any GP |
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Term
| What are the p/s's liabilities during winding up? |
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Definition
1. Retains liability for all transactions entered into to wind up old business w/ existing creditors
2. Retains liabilities for NEW transactions until notice is given to existing and potential creditors
CMR: what matters is whether the GP knew of the events giving rise to dissolution |
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Term
| What is the order of distribution of assets in winding up a p/s? |
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Definition
1. Outside (non-GP) creditors
2. Inside (GP) creditors
3. Capital contributions made by GPs
4. Remaining profits and surplus divided up among GPs as set out in p/s agreement (if silent, divide up equally)
If p/s assets are insufficient to pay any of the above (except #4) the deficit becomes the personal liability of the GPs |
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