Business Law 2 Chapter 36

What are the key issues in deciding what organizational form to choose?

-Ability of owners to protect personal assets from liabilities of the business -Profits taxed as income to owners and losses qualify for deductions to owners vs. double taxation -Flexibility with respect to management -Transferability of ownership -Ability to raise capital -Manageable formalities

What are the fiduciary duties that partners owe to each other?

-Duty of loyalty -Duty of performance/care -Duty of obedience -Duty to notify/disclose -Duty of accounting

What are the partners liabilities to third parties?

-Each partner has agency authority to bind the partnership -Each partner has unlimited personal liability for debts and liabilities of partnership, so creditor can choose to sue partners separately or all partners jointly in one action for partnership debts/liabilities (liability continues after dissociation unless the debt/obligation is satisfied, released, or replaced. Limited to partners capital contribution if partner was not a partner at time debt/liability was created)

List 4 situations where there is no partnership even though profits are shared.

-Employer shares profits with employee as payment for work -Landlord accepts share of profits for payment of rent -Party receives share of profits for payment of debt -Party receives share of profits for payment from sale of goodwill of business/other property

What is the lifecycle of a partnership?

-Formation -Performance -Dissolution -Winding up -Termination

Define formation.

-Partnership formed either by written agreement, articles of partnership, or by estoppel

What are the rights of the partners?

-Right to share in management -Right to share in profits -Rights to partnership property -Right to inspect books -Right to an accounting (which, in this instance, means a right to review of all partnership assets and/or profits)

What are the major forms of business organizations?

-Sole Proprietorship -General Partnership -Limited Partnership -Limited Liability Partnership -Limited Liability Company -Corporation

What are the characteristics of a partnership?

-Voluntary and consensual relationship -Between two or more individuals, partnerships, corporations, or other forms of business organization -Engaged in numerous business transactions over period of time -Partners share profits and management of business (*Key Characteristic) -Taxed as a "flow/pass through entity"

Define partnership according to the UPA.

Association of two or more persons to carry on as co-owners a business for profit *No written partnership agreement, articles of partnership, or approval by the state is necessary

Define performance.

Business conducted as partners work for benefit of partnership, in accordance with partnership agreement

Define winding up.

Partners complete unfinished partnership business, collect and pay debts, collect partnership assets, and take inventory.

Define dissolution.

Partnership dissolves either by act of court, act of partners, or operation of law (doesn't necessarily lead to winding up, as remaining partners can agree to continue the business)

Define termination.

Partnership terminates.

What is the Revised Uniform Partnership Act (RUPA)

Revised version of Uniform Partnership Act (UPA); use of RUPA varies from state to state, but most have now adopted all or part of this uniform law