Karteikarten
Chapter 36: Partnerships
Karten in diesem Stapel (35)
- 1Partnership Definition= two or more persons carrying on a business as co-owners for profit
- 2Missouri Law for PartnershipsUniform Partnership Act (UPA)
- 3Elements present in creation overview1. For profit
2. Co-owners
3. In business - 4For Profit - element in creation* sharing profit is prima facie evidence of partnership unless profits are shared to pay a debt, for services or for wages of an employee
- 5Non-profit associationsNot partnerships
profit motive is missing - 6What if it has no profit?Doesn't matter if they don't make a profit, because they are trying to make one
- 7Co-owner (joint-ownership) - element in creation* Joint ownership of business assets and sharing losses
* Exercise of management rights: purchasing, controlling costs, setting prices, hiring and firing people - 8Is mere joint ownership a partnership?No because there is an in-business requirement
- 9In Business - element in creation* Active endeavor for indefinite time
* Single transaction or series = join venture
* not passive ownership - Ex: tenants in common of real estate - 10Partnership by EstoppelCreated by:
1. A partner's representation of a partnership to a third party and
2. The third party's reliance on that representation in dealing with the purported partner
* similar to agency by estoppel and apparent authority
* only the partners with knowledge or the ones making representation are liable as partners by estoppel - 11Examples of partnership by estoppel* partners not notifying suppliers of departure of partner/purchasing agent
* a partner's inappropriate use of the word partner - 12Summary on partnership creationPartnership may be created by conduct or by oral or written contract
No subjective intent required - 13Aggregate theory= a partnership is simply the sum of individuals
all must sue or be sued to get binding judgment involving a partnership; all own property - 14Entity theory= a partnership is a separate entity like corporation
may sue and be sued and may hold property as an entity; applies in bankruptcy - 15Missouri Rule= entity theory as to holding property, aggregate theory as to suits - each partner must be joined to be bound
- 16Who may be partners?* must have capacity to contract (minor can't be a partner)
* business entities - in MO and most states, either corporations or individuals may be partners - 17Marshalling Assets1. partnership creditors have priority as to partnership property
2. Individual partner's creditors have priority as to that partner's property (jingle rule) - 18Partnership BankruptcyMarshaling of assets doesn't apply to a partnership in bankruptcy: after first step, business creditors and individual creditors have equal priority to the individual partner's property
Good motivation for business creditros to fild involunatry bankruptcy - 19Primary management rule (operation of partnership)1. Each partner one vote as to ordinary partnership business, majority rules
2. May be changed by agreement - 20Areas requiring unanimous consentFollowing required unless stated otherwise in partnership agreement
1. Admit a new partner (because each is bound by the actions of the others
2. Alter the capital structure of the film (partners' capital investment accounts)
3. Amending the partnership agreement
4. Any act which makes partnership business impossible
5. Altering essential nature of the firm's business - 21Profits and Losses (operation of partnerships)1. Both shared equally unless partnership agreement specifies otherwise
2. If profits division specified, but not losses, losses are split the same way as profits - 22Compensation - potential injustices1. A partner receives no compensation for the partnership's use of his property
2. A partner receives no compensation for his services (even extra services)
- presumption is partner is motivated by partnership profits. These rules don't apply during winding up after dissolution - 23Rights of Partners1. Managemetn of partnership (notice, hearing, vote)
2. Absolute right to inspect of partnership books and records
3. RIght to an accounting from other partners
4. Property rights - a partner's interest in partnership is called tenancy in co-partnership: undivided interest in all partnership property - 24*** Applying partnership rules example page 48see book
- 25(Treatment of partnership interests) Property classification* A partnership interest is not real estate; it is personal property even if the major assets of the partnership are made up of real estate
* Why? It's primarily the right to receive profits and return of investment - 26(Treatment of partnership interests) Possession and managementA partner has a right to join possession and management of all partnership property
- 27(Treatment of partnership interests) Assignment and Attachment* A partnership interest may be assigned to a non-partner
* A partnership interest is subject to charging orders of creditors (court-ordered attachment of profits and distributions)
* Neither assignment nor charging order is a dissolution of the firm, nor do they confer rights of a partner upon the recipient of the profits, but only the right to receive profits as distributed and return of capital on dissolution - 28Mutual Agency= Each partner is the agent of the other partners and the partnership
1. All duties of an agent
2. Fiduciary duty of performance, loyalty, accounting, notification and obedience - still held to this during winding up - 29Fiduciary duties continue* during winding up a partner is still held to the duties of an agent
*Widow of medical partner: was told 10% share was worth about $100K despite negotiating deal where 10% would be worth $250K
* Withdrawing law partner: profits down from 15% to 6% - 30Effects of agency relationship - tortsPartnership is liable for torts of partner in scope and course of partnership business
- 31Effects of agency relationship - contractsPartnership is liable for the contract of a partner with authority or if apparently carrying on business in the usual way
- a high degree of apparent and implied authority - 32****Application of power and Duties page 45see example
- 33Liability of incoming partnersLiable for preexisting firm debts only to extent of capital contribution
Ex: incoming partner liable for refinanced debt - 34Outgoing partner liabilitypersonal liabilit only for debts incurred while a partner (assuming proper notice of withdrawal)
Ex: retiring law partner for post-retirement malpractice - 35Duration of Partnership* No agreement as to duration -- partnership at will doctrine -- terminable by partner at any time without violating agreement: like agency at will
*Partnership for term - still power to dissolve, but termination without cause would be breach: like agency for term
* After a partnership term expires - if the partnership continues, then it goes back to at-will status
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- Karteikarten am Chapter 36: Partnerships, erstellt von Emily Gaunt am 07/11/2016.
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- Emily Gaunt
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