General Partnerships

Distribution of Partenrship Assets after dissolution

1st to creditors, including partners who are creditors 2nd to partners for what is in their accounts (capital + share of profits - share of flosses)

Continuing Apparent Authority

A dissociating partner may continue to have apparent authority for one year after dissociation, but the partnership can protect itself by notifying creditors (effective immediately) or filing a statement of dissociation with department of state (effective after 90 days)

Limited Liaiblity of Partners in Limited Partnership

A limited partner is not personally laible for debts of L.P. even if participating in control

New Partner

A new partner may be added to an existing L.P. if the L.P. if the LP agreement allows or allp artners ocnsent in writing

Statement of Denial

A partner listed in a statement of authority may limit her authority by filing a statement of denial with the Department of State

Registration Statement

A partnership may file a registration statemnet with Dept. of Stite but it's a prerequisite to file other statements

Partners' Liability for Partnership Obligations (of course, partnership itself is liable; its a partnership obligation)

Joint and Several Liability: may join all the partners as defendants or sue any one (or more) individually for the full amount Exhaustion Requirement: a claimant must first exhaust partnership resources before recovering from a partner.

Bottom line

LLP and LLC offer same protection against vicarious liability in FL. But remember: A partner or member is always liable for his/her own malpractice; The firm itself is liable if the act was within the scope of its business; and Any type of business entity can be converted/merged into another if the owners consent and appropriate documents are filed with the Department of State

Limited Liability Partnerships

LLP just like general partnership except for liability. Liability: broad shield partner in llp not personally liable for any llp obligations except her own torts and those of someone under her direct supervision LLP liability: liable for torts committed within scope of its business and contracts executed by an agent acting with authority or a substitute for it

Limited Partnerships Definition

LP is partnership with one or more general partners (general liability) and one or more limited partners (limited liability).

Dissociation (of either general or limited partner)

Like general partnership: don't forget wrongful dissociation Apparent authority: general partner's apparent authority continues for two years after dissociation (not one year as in a general partnership)

Statement of Authority

May expand or limit partner's authority by filing with Department of State a statement of authority [good for five years]. Effect depends on whether a transfer of real property is involved. Real property: a grant of or limit on authority to transfer real property is good only if the statement is also recorded at the county recording office where property is situated. Other transactions: if a statement of authority grants a partner authority to enter transactions on the partnership's behalf other than the transfer of real property, the grant is conclusive in favor of a BFP.

LLC Liability

Members: members get limited liability except for their own torts (and in a PL the torts of someone under the member's direct control.) Managers too. LLC is liable for torts committed within the scope of its business and contracts executed by an agent acting with authority. Bottom Line: LLP and LLC offer same protectoin against vicarius liabilit yin FL.

Loyatly

Must account for profit from use of partnership property and cannot compete before dissolution without full disclosure of all material facts

Conversion/Merger of Limited Partnership

Must be approved by all general partners and limited partners who own a majority of the right to receive distributions when the consent is effective

Information

Must provide without demand information a partner needs to exercise her rights, and on reasonable demand any other information

Effect of dissolution

No big deal; usually partnership buys out dissociating partner (for the greater of liquidation or going concern value) and continues without him. Only certain specified events require dissolution and winding up.

Duty of Care

No grossly negligent or reckless conduct or intentional misconduct.

Right to Compensation

No right to compensation

Apparent Authority

P leads T to believe A has authority to bind P even though A has no actual authority. It protect T's reasonable reliance. Key fact: T's reasonable belief must be created at least in part by P and not A alone otherwise not fair to P Problem: Apparent authority can linger even after actual authority has been terminated if T is not aware of the termination

Actual Authority

P tells A to act on P's behalf

Knowledge/Notice

Partner's knowledge or receipt of notice is imputed to partnershi except wehre partenr commits fraud on partenrship

Duties

Partners owe the partnership certain duties. Partners cannot eliminate these duties but may determine the applicable standard, if reasonable.

Winding Up

Partners who have not wrongfully dissociated may wind up. The partnership will be liable for expenses incurred in winding up.

Writings

Partnership law does not require one but the Statute of Frauds may

Outgoing Partners Liability

Remain liable until released

Right to Inspect Books / to an Accounting

Right to inspect books always To an accounting if reasonable Transferee has no right o inspect and can get an accounting only on dissolution

Paternship Assets Insufficient to Cover Liabilities

Same drill- creditor first- split pro rata; rest of debts ____

Profits and Losses

Shared equally

Relations Among Partners

Statute supplies default rules but partners may contract around them, so their agreement usually controls. But partners CANNOT [1] waive access to books, [2] duties of loyalty and care, or [3] the power to dissociate or expel a partner.

Factors

To determine who is a partner, look to the following factors: Capital investment: a capital contribution is not required Control: the right to control may be enough even if control is never exercised Profit: a person who is entitled to receive a share of the firm's profits is presumed to be a partner ("prima facie evidence")

Liability of a Dissociating Partner

To existing creditors unless released by a creditor, either expressly or impliedly To subsequent creditors who reasonably believed he was then a partner and were unaware of his dissociation. Potential liability lasts for one year. To other creditors for wrongful dissociation (breach of ocntract)

Partnership's Rights in Property

Totally unrestricted [owns the prop]

LLC TAx

Treated like partnership. income passed through to owners unless elect to be taxed like corp (double taxation)

Partner's Rights

Very Limited: very limited; only for partnership purposes unless other partners consent. right can't be transferred.

Events Requiring Dissolution and Winding Up

[1] Event in partnership agreement requiring winding up unless partners unanimously agree to continue [2] event making it unlawful to continue [3] judicial decree [4] notice of express will in a partnership at will unless partners unanimously agree to continue (which they usually will) [5] if there's a definite term of specific task and [a] the term ends or the task is completed; [b] partners unanimously agree to wind up ; [c] at least half the partners agree to wind up within 90 days after death, incapacity, bankruptcy or wrongful dissociation.

Rules for Determining Partnership Property

[1] Partnership property if acquired in partnership's name or partner's name if instrument transferring title indicates he's acting for a partnership (e.g. mentions "a partnership" or representative capacity) [2] Presumed to be partnership property if partnership funds are used to pay for it [3] Presumed to be a partner's property if acquired in his name without partnership funds and there is no sign he's acting for a partnership.

Applying Agency Law to Partnerships [partnership = P; partner = A] [ actual, apparent]

Actual Authority: may be created by partnership agreement, by majority vote, or by the statute, which makes every partner an agent for carrying on business in the usual way [ but can be negated by partners]. Apparent authority: look at partner's title and past conduct

Relations Between Partners and Third Parties

Agency Principles: Usually, the issue is whether Principal B is bound to third party T on a contract entered into by principal agents A

Limited Partnership: Failure to File Certificate of LP

All partners are jointly and severally liable because it's a general partnership.

Conversion/Merger

Allowed: a partnership can convert or be merged into another business form if all partners (or less than all, if int he partnership agreement consent) Liability: a partner in a converted/merged partnership remains jointly and severally liable on obligations that arose before the conversion/merger.

Definition

An association of two or more persons to carry on as co-owners of a business for profit, whether they intend to form a partnership or not.

Summary

GP: joint & several liability of partner/member; worst aspsect of GP LLP: no tort liability of partner/member unless directly supervising agent; no contract liability; like a corporatoin L.P.: Joint and several liability for general partners (unless LLLP); no liability for limited partners. LLC: Tort: None (unless directly supervising in PL); contract: none; like a corporation

Liability of General Partners

General Rule: joint and several liability Exception Limited Liability Limited Partnership LLLP is just like limtied partenrship except liability. L.P. (limited partners safe) + LLP (general partners safe) = LLLP (all partners safe)

Transfer of Real Property

If a partner had no authority, the partnership can get its real property back from the initial transferee (who should have checked on authority) but not from a subsequent BFP (who had no reason to check)

Dissociation (when a partner ceases to be associated w/ partnership)

Causes: [1] Partner's express will to withdraw [2] Occurrence of agreed upon event [3] Partners expulsion bankruptcy death or incapacity [4] Termination of partner that is a Business entity [5] Appointment of receiver for a partner [6] Distribution of substantially all a partner's interest in the partnership

Rights and Obligations of Limited Partners

Contributions: May be cash, property, or services. A promise to contribute must be in writing; if so it's enforceable by the L.P. or by a creditor who relied on it. Profits/Losses: Unless otherwise provided in the partnership agreement, profits, losses and distributions are allocated on the value of capital contributions [different from general partnership] Transfer of interest: Does not cause dissociation or dissolution

Purported Partners

If no partnership was formed parties may still be liable as purported partners to protect reasonable reliance by third parties

Partner's Economic Interest in the Partnership

Definition: the right to receive a share of the profits Transferable (like any financial asset): a conveyance redirects the flow of profits; it does not confer any other rights or impose any obligations

Ratification (Retroactive and Intervening Rights)

Even if A had no authority P can still ratify the contract Retroactive: Ratification is retroactive to the time of the contract (i.e. it's as if P were a party to the contract from the start!) Intervening Rights: because ratification is retroactive, we must protect the intervening rights of a bonda fide purchaser (BFP)

Limited Partnerships

Filing: Must file a certificate of L.P, with Department of State -- Writing: Must have written agreement including value of each partner's contribution, when contributions will be made, and the events of dissolution. -- Name: Must contain "Limited Partnership," "Limited," "Ltd.," "LP" or "L.P." -- Annual Report: Must file an annual report -- Law: general partnership law applies unless L.P. statute is inconsistent

LLC Formation and MAnagment

Filing: must file articles of organization with the Department of State Name: Must end with the words "limited company" or limited liability company" or abbreviation "LC or "LLC" Professionals: May professional LLC abbreviated as "PL" Management: By managers or members, but members manage in proportion to profit shares unless otherwise provided in the AO or an operating agreement. If managers manage, each manager has equal rights, and a majority rules. Duties: Whoever manages owes duties of care, loyalty and good faith. Annual Report: Must file an annual report to maintian LLC status.

LLP Formation and Maintenace

Filing: statement of qualification with Deparemtn of State Name: must end with "registered limited liability partnership,' "limited liability partnership," "RLLP," "LLP," "RLLP" or "LLP" Annual Report: Required to maintain LLP status. If status revoked, may apply for reinstatement within two years. (Note: Liability shield is retroactive)

Apprent Authority

continues after an event requiring dissolution even if a partner is not winding up unless the partnership notifies creditor (effective immediately) or files statement of dissolution effective 9- days after filing.