Partnership

Question 1

what is the effect of dissolution on partnership authority?

Answer 1

terminated all authority of any partner to act for the partnership

*except authority necessary to wind-up partnership affairs/ unfinished business

Question 2

what are the 3 levels of priority that must be satisfied during “winding-up” phase?

Answer 2

1. 1st: creditors (including paying off internal loans fr partners)
2. 2nd: full re-payment to its own partners for capital contributions
3. 3rd: profits & surplus, if any, shared equally among partners (unless partners agree otherwise)

Question 3

How long does a partnership retain liability on new business during dissolution/ winding-up phase?

Answer 3

until notice of dissolution is given to all known & potential creditors

Question 4

what is the winding up period of partnership dissolution?

Answer 4

period b/w dissolution & termination where remaining partners liquidate partnership assets to satisfy creditors

Question 5

what are examples of material changes a court will use to justify dissolution of a partnership?

Answer 5

1. partners withdrawal/ death
2. partners incompetency
3. partners bankruptcy
4. violation of partnership agreement

Question 6

When will a GENERAL PARTNERSHIP be automatically dissolved?

Answer 6

any MATERIAL change in the partnership caused by DEATH or WITHDRAWAL of any single GENERAL PARTNER

Question 7

When may an assignee become a LIMITED partner?

Answer 7

if assignor gives assignee that right according to agreement OR ALL partners consent in WRITING

Question 8

If a SUCCESSOR decides not to join partnership, what are her rights?

Answer 8

right to receive a share of compensation deceased/ withdrawn partner would have received upon departure fr partnership

Question 9

When will a SUCCESSOR have a right to JOIN a partnership? (2)

Answer 9

1. prescribed by partnership agreement
2. all partners CONSENT in WRITING

*usually occurs upon death or withdrawal of existing partner

Question 10

What are the 3 general rules for the ASSIGNMENT of partnership INTERESTS to 3 rd parties?

Answer 10

1. specific P assets (land, equip.) may not transfer w/o partnership authority
2. Profits & surplus (may transfer to 3rd parties)
3. Share in Management (cant transfer to 3rd party)

Question 11

What are a partner’s fiduciary responsibilities?

Answer 11

1. fiduciaries of each other
2. Owe a duty of loyalty
   - no self-dealing
   - no usurping partnership opps
   - no secret profits

*an action for accounting is the only form of action that 1 partner can bring against other for breach of duty

Question 12

How long do OUTGOING partners retain liability of future debts?

Answer 12

until notice of withdrawal is given to all known & potential creditors

• death of outgoing P terminates all liability

Question 13

Are incoming partners liable fr prior debts?

Answer 13

NO, but $ incoming partners pay into partnership maybe be used to pay prior debts

Question 14

What are the 3 general rules for partners liability?

Answer 14

Every General Partner is liable for

1. own actions
2. actions of other partners when w/in scope of partnership
3. actions of employees w/in scope

Question 15

How are partnership profits handled?

Answer 15

Shared equally

Question 16

How are partnership losses handled?

Answer 16

Shared like profits (equally)

Question 17

How are partnership salaries handled?

Answer 17

Partners get NO salary. They receive compensation for winding-up partnership business (dissolution)

Question 18

What 3 types of K’s are partnerships bound by?

Answer 18

1. K’s entered by partners w/ authority
2. K’s for usual business of partnership (w/in scope)
3. K’s for business outside partnership scope that ALL partners ratify

Question 19

What torts are partnerships bound by?

Answer 19

Torts committed by partners in the scope of the partnerships business

Question 20

In a LIMITED PARTNERSHIP, what are GENERAL partners personally liable for?

Answer 20

Personally liable for ALL partnership obligations

• also has right to manage
• *limited P’s NOT liable for partnership obligations & NO right to manage

Question 21

What are the 3 types of partnerships?

Answer 21

1. General P- 2 or more ppl as co-owners for profit
2. Limited P- at least 1 general P & 1 limited P
3. Limited liability P- no partner liable for debts/ obligations of partnership; partners liable for PERSONAL wrongdoing