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What is a partnership?
An association of two or more competent persons to carry on as co-owners a business for profit.
What is partnership law based on?
Partnership law is based on the law of contract and agency.
Is a partnership a legal entity?
Treated as an entity for some purposes, but not for others. * *eg, the debts of the partnership are the debts of the individual partners, but title to land may be in the partner ship name and a partnership may be sued in the partnership name.
Why do contract rule apply to partnership?
Contract rules are applied to partnerships because partnerships are the result of agreements.
Who has capacity to be a partner?
Anyone who is capable of entering into a binding contract may be a partner.
To what extent is a partner who lacks capacity liable?
only to the extent of his capital contribution.
What formalities are needed to form a contract?
No formalities are required to form a partnership. The partnership agreement can be express or implied (i.e., established solely through the conduct of the parties).
When is a writing necessary to form a partnership?
Only if the partnership agreement cannot be performed within a year. * *Violation of this gives rise to a partnership at will.)
Can a person become a partner without the express or implied consent of all partners?
How do you determine the existence of the partnership?
In determining the existence of a partnership, the express intent of the parties governs.
How is intent inferred when not express?
Look to: 1) Title to property (in partnership’s name or individual’s name); 2) Designation of the entity by the parties; 3) Amount of activity involved in the enterprise undertaken by the parties (the more activity, the more likely it is a partnership); 4) Sharing gross returns 5) Sharing profits 6)) Sharing losses.
What is partnership by estoppel?
1) When a person represents himself or permits another to represent him as a partner, he will be liable to third parties who extend credit to the partnership in reliance on the representation. 2) When a person holds another out as a partner, he thereby makes that person his agent to bind him to third parties.
Does partnership by estoppel affect liability between would be partners?
No, only affects 3rd party dealings.
What is partnership capital?
The property or money contributed by each partner for the purpose of carrying on the partnership’s business.
What is partnership property?
In its broadest sense, it is everything the partnership owns, including both capital and property subsequently acquired in partnership transactions.
What is includable in partnership property?
There is no restriction as to what may be included as partnership property. In determining what comprises partnership property, the controlling factor is the partners’ intent to devote the property to partnership purposes.
What factors should be considered to determined intent to devote property to partnership purposes?
1. The source of the funds for the acquisition;2. The use of the property;3. Improvement, if any, of the property by the partnership;4. The relation of the property to the business;5. Title to the property; 6). Treatment of the property in the partnership books; and7. Payment of maintenance costs and expenses by the partnership.
What are a partner\'s rights in partnership property?
A partner’s ownership interest in any specific item of partnership property is that of a tenant in partnership. The incidents of this tenancy are:
What are incidents of a tenancy in partnership?
1. Right of possession for partnership purposes;2. Not assignable, mortgageable, subject to dower rights or homestead laws, attachable, or subject to any individual claims on a partner; and3. Right of ownership vests in surviving partners after death of partner. * * no right to use partnership property other than for the benefit of the partnership
What is the partner\'s interest in the partnership?
His share of profits and surplus, which is:(i) Treated as personal property;(ii) Assignable without dissolving the partnership; and(iii) Attachable.
When can a partner sell his partnership status?
Only with unanimous consent of other partners
What is the fiduciary duty between partners?
Profits made in the course of the partner ship belong to the partnership, and one partner will not be permitted to gain for himself at the expense of the partnership.
What are a partners rights to management participation?
All partners have equal rights in the management of the partnership business absent an agreement to the contrary.
How are profits and surplus distributed among partners?
Equal shares absent contrary agreement.
How are losses divided?
Each partner must contribute to the partnership losses according to her share of the profits.
Is there a general right of remuneration?
No such right for service to the partnership absent express or implied agreement.
When will a partner be liable for breach of agreement to work?
When a partner has impliedly or expressly promised to devote time to the partnership business and fails to do so, he may be charged in an accounting for damages caused to the partnership.
What are indemnification rights among partners?
A partnership must indemnify every partner with regard to payments made and personal liability ties reasonably incurred in the ordinary and proper conduct of business, or for the preservation of business or property.
What are contribution rights among partners?
Where one partner has been required to pay or satisfy more than her share of a partnership debt, she may require the other partners to contribute their pro rata shares.
When can there be a general legal action between partners or by/against the partnership?
1) A partner cannot sue or be sued by his partnership in an action at law; 2) nor may one partner sue another partner on matters related to the partnership business.
What is the no legal action exception?
Actions for accounting. An action lies to recover the balance due any partner.
What is an action for accounting?
An equitable proceeding whereby the liabilities between each partner and the partnership are converted into liabilities between the partners individually.
How does agency law apply to partnerships?
1) Every partner is an agent of the partnership for the purpose of its business. 2) The act of every partner “for apparently carrying on in the usual way the business of the partnership” will bind the partnership and thereby bind the other partners. 3) The partnership’s liability for the act of a partner may be in contract, in tort, or for breach of trust.
What sources will give a partnership actual authority to bind partnership?
Sources of actual authority include the partnership agreement, a majority vote of the partners, or a unanimous vote of the partners.
When is unanimous vote of the partners required?
Unless the agreement provides otherwise: 1)authorize a submission to arbitration, 2) assignment of partnership property for the benefit of creditors, 3) confession of judgment, and 4) disposition of the partnership’s goodwill.
What is the apparent authority of a partner?
See Notes
When is notice to a partnership effective?
“Notice” is an oral or written communication by a third person transmitted to one or more partners (or other proper person) with the intent that the partnership be informed of the message communicated.
What is \"knowlegde\"?
“Knowledge” is information that is or reasonably should be known by an individual partner.
When is knowledge imputed to the firm?
Depends whether the partner with knowledge participated in the action: 1) Participation: Usually imputed. 2) No-participation: Imputed only if the partner with knowledge could and should have communicated to the participating partner
What is the effect of dissolution?
Where dissolution is caused by the act, death, or bankruptcy of a partner, the acts of other partners will bind the partnership as if it were not dissolved until the other partners have notice or knowledge of the act, death, or bankruptcy.
When will a partnership beheld liable for a partner defrauding a 3rd party?
Generally, only when it is inside the scope of the partnership business.
What is the effect if a partner seeks to defraud the partnership as part of a transaction with a 3rd party and that party is aware of the fraud?
Partnership is not liable to the 3rd party.
What kinds of civil liability may be had against the partners?
(i) contract liability, if the contract is within the scope of the partnership business or expressly authorized, and(ii) tort liability for partners’ and employees’ torts committed within the ordinary course of partnership business.
What is the nature of a partner\'s liability?
Liability is joint and several for torts and breaches of trust and joint for all other partnership obligations.
What is the extent of a partners liability?
Each partner is personally and individually liable for the entire amount of partnership obligations.
Is a partner entitled to indemnification?
1) If he pays the whole of a partnership obligation, he is entitled to indemnification from the partnership; 2) if the partnership is unable to indemnify, he may require the other partners to contribute their pro rata shares.
What is the liability of an incoming partner?
Liable for prior partnership obligations only to the extent of her capital contribution.
What is the liability of a retiring partner?
A retiring partner remains liable for partnership obligations arising while he was a partner, unless there has been payment, release, or novation. * *also is liable for acts done after retirement until he has given notice of his withdrawal.
What is a frequently test partnership distinction?
The liability between incoming and outgoing partner.
What is the criminal liability of a partner?
Will not be liable for the crimes of other partners committed within the scope of the partnership business, unless the he participated in the commission of the crime either as principal or accessory.
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