Business Law: Chapters 16,17,18

Property Rights Each partner can:

-Use or possess property on behalf of the partnership. Can't sell it to pay individual debts but you have the right to use that property. -Assign her right to her share of the profits to another to satisfy individual debt.you can assign your rights. Partners cannot use the property to satisfy an individual debt.

Three type of franchises

1. Distributorship. 2. Chain Style Business Operation. 3. Manufacturing or Processing Arrangement.

Entity vs Aggregate Today, a majority of states recognize the partnership as a separate legal entity from people running the partnership for the following purposes: [3 Things] Example: eggers brothers construction. One brother is separate legal entity, another brother is a separate legal entity, and then the partnership is another separate legal entity.

(1) To sue and be sued. You can sue the partner and then sue the partnership •Today, a majority of states .... (2) To have judgments collected against it's assets, and individual partners' assets. If someone does not pay the partnership, you can sue the person from the partnership. (3) To own and convey partnership property. Partnerships own and convey property. Example: construction equipment in the name of their partnership.

Liability in an LLP**

***An LLP allows professionals to avoid personal liability for the malpractice of other partners. A partner in an LLP is still liable for her or his own wrongful acts. The partner who supervised the individual who committed a wrongful act is also liable. The supervisor can also be liable. If you are supervising one of the partners, you will also be liable. Can't sue the LLP altogether.

Quality Control

Quality Control is a legitimate issue for Franchisor because of good will, reputation and trademark value. (how the food tastes) want to protect their reputation and trademark. -The contract often states that the franchisor will establish certain quality standards for the product and facility.

compensation

•Compensation: Time, Skill and Energy usually not compensable. Usually paid for in a partnership unless the partnership agreement says otherwise. Doesn't matter if you are working 80 hrs vs the other one is working 5 hrs. you will not be paid for the difference since profits and losses are split equally unless in partnership agreement.

Wrongful Termination

•Most courts will not consider the termination "wrongful" if: so they can be shut down if -Franchisor's decision to terminate was made in the normal course of business operations. -Reasonable notice of termination was given to the franchisee.

Termination. What if you want Out of the franchise agreement.

•Usually a franchise contract sets out conditions of termination. •Notice Requirements. -Reasonable time to 'wind up' business. Give franchisee to wind up the business usually 6 months.

Formation of an LLP:

-An LLP must file an annual report with the state to remain qualified as an LLP in that state. -In most states, it is easy to convert a traditional partnership into an LLP. -All statutory and common law rules governing partnerships apply, apart from those modified by the LLP statute.

As in a general partner:

-Assumes management responsibility for the partnership. They will be the one running the business. Has full responsibility for the partnership and for all its debts. Because they make the decisions and bad decisions so they are responsible for the debts.

Formation of an LP:

-Certificate of limited partnership must include certain information such as the name, mailing address, and capital contribution (have to put how much you put into the business, what assets are there if you go to court) of each general and limited partner. Certificate must be filed with the designated state official (under the RULPA, the secretary of state).

Limited partner

-Contributes cash or other property and owns an interest in the firm. -Is not involved in management responsibilities. -Is not personally liable for partnership debts beyond the amount of his or her investment, unless they engage in management of the business. If a limited partner starts to manage the business, they lose their limited liability protection. They can be held liable too.

Dissolution

-Dissociated member has no right to force the LLC to dissolve. The remaining members can choose to continue or dissolve. If someone just leaves, the LLC can choose to continue or dissolve. -Operating agreement "trigger" events will cause dissolution.

An LLC member has the power—but not necessarily the right—to dissociate from the LLC at any time. If you leave in and its breach of contract then you are liable. Just like a partnership.

-Dissociation of an LLC is triggered by events similar to dissociation of a partnership including voluntary notice, triggering event, unanimous vote, bankruptcy, incapacity, or death.

Formation of an LLP

-LLPs must be formed and operated in compliance with state statutes. File the form with the state. The appropriate form must be filed with a central state agency and the business's name must include either "Limited Liability Partnership" or "LLP".

LLC Operating Agreement Addresses: What it includes

-Management and how future managers will be chosen. -How profits will be divided. How membership interests may be transferred. -Dissociation procedures. What happens if you want to leave. -Whether formal meetings will be held. -How voting rights will be apportioned. -Outline who has the right to borrow money for the company. Who has the right to buy equipment for the company.

Winding Up:

-Members must collect and liquidate LLC assets and honor prior contracts. Collect your debts and pay your debts and assets. -After all assets are sold, proceeds are distributed to pay creditors, then capital contributions, and then remaining money is distributed pro-rata (equally) to the members. Creditors always get paid first, then get your money you put in back, then if you get money back, it goes back to the LLC members. If your in debt, those follow the members too.

Liability of partners

-Partners are personally liable for the debts of the partnership. In most states, the liability is essentially unlimited, because the acts of one partner subject the other partners to personal liability. Partners are personally liable for the debts of the partnerships. Partnership opens you are to liability and you partner can do it and you can still be liability

Property Rights

-Property acquired by the partnership remains partnership property and not of the partners individually. Eggers construction property. A partner cannot sell that construction trucks to pay off their gambling debts. An individual partner has no right to sell, mortgage, or transfer partnership property.

Laws Governing Franchising. •State Protection for Franchisees. Not a lot of protection at the state level so make an informed decision

-Protection from unfair trade practices and bad faith terminations. -Requires disclosure documentation, including costs of operation, recurring expenses, profits earned, and substantiating of these figures.

LLC Operating Agreement: if you don't want one

-State Statute Fills in the Gaps: LLC statute governs where operating agreement is silent. splits everything equally. -Partnership Law May Apply: If LLC statute is silent, courts may apply partnership principles.

•Payment for the Franchise:

-The franchisor may rely heavily on the initial sale of the franchise for realizing a profit OR depend on continued dealings with its franchisees for profit. -Generally, the franchisor receives a stated percentage of sales or volume of business done by the franchisee.

Disadvantages of the LLC: LLC are state law entities. They are governed by the state

-The main disadvantage is the lack of uniformity with state laws. Example: under NC says u don't need the insurance for the workers. But in Tennessee the law was different. They counted members of a LLC as workers so they have to have workers. If you do business in another state make sure you check the law. -Businesses that operate in multiple states may not receive consistent treatment.

Events that cause dissociation

-Voluntary Notice. Its in writing, you send a letter saying you want out. Triggers that dissociation. -Triggering Event. If the Carolina wins the super bowl then we will stop our business. -Unanimous Vote. People get together and everyone is in favor that they are done. -Court or Arbitrator Order. Can end a partnership. Court is ordering you to leave the partnership Partner's bankruptcy, assignment of interest, incapacity, or death. Serve to dissociate them from the partnership.

Dissociation of a Partner. •Effects of Dissociation.

-lose your Management Rights and Duties of the out-going partner cease. -Remaining partners could have the right to "Buyout" the exiting partner's interest in the business. Might be able to buyout the partner that is leaving and be able to have the partnership going.

Advantages of the LLC

1. Limited Liability: Members are liable to amount of investment. 2. Flexibility in Taxation: Two or more members can choose to be taxed as partnership (pass-through) or corporation (double-tax). They are taxed individually. A one-member LLC is taxed as sole proprietorship unless owner wishes to be taxed as corporation.

Partnership Termination •obligation to pay your Creditors' Claims Paid First (general rule):

1. Payment of debts, including those owed to partner and nonpartner creditors. 2. Return of capital contributions and distribution of profits to partners. Whatever you put in the beginning of starting the business if there is money left over. 3. then anything you get back is divided evenly between partners: If liabilities are greater than assets partners bear losses in proportion in which they shared profits, unless agreed otherwise. 50-50 unless it says otherwise.

Familiy Limited Liability Partnerships:

A limited liability partnership in which the partners are related to each other. Not North Carolina. -A person acting in a fiduciary capacity for persons so related can also be a partner. -All partners must be natural persons or be acting in a fiduciary capacity for the benefit of natural persons. LLP will limit your liable for your partner's malpractice but if you are supervisor you are still liable.

Distributorship

A manufacturer (the franchisor) licenses a dealer (the franchisee) to sell its product. Often, a distributorship covers an exclusive territory. (I.E. Automobile dealerships). Nissan lets you to sell their vehicles. Also sell you a location.

Partner Definition

A partnership arises from an agreement (express- written down or implied- based on your conduct (if your successful but never talked about it) between two or more persons to carry on a business for a profit. -Partners are co-owners of the business who have joint control over its operation and the right to share in its profits.

Liability of partners Joint Liability

A third party must sue ALL partners as a group, but each partner can be held liable for the full amount. Old law- you had to sue everybody. Each partner was held liability for the full amount. Sue everyone even the partnership. It was a problem because if you couldn't sue everyone then it wouldn't go through.

Partnership Termination •Winding Up and Distribution of Assets.

After dissolution, partnership continues to wind up the partnership affairs. Once the partnership has dissolved after the winding up phase, no new business. Partnership is over. Only thing you can do is: Partners have no authority except to: -Complete transactions already begun. Continue the contract but can't renew it. Complete what needs to be done. -Collect and preserve partnership assets, discharge liabilities, and provide an accounting. Pay your debts You can't take the money from the partnerships and spend it on vacation. Partnerships usually are dissolved because not making money, does not mean that the debts are clear and gone. You are also personally liable. You have to pay those debts and have to file an accounting.

The Partnership Agreement

Also known as "Articles of Partnership." Can be written or verbal, unless the Statute of Frauds requires a written agreement. Have a written document that govern the partnership. Going to outline who makes the decisions, who buys the materials, and stuff like that. Any terms you want. Get one of these. -Can include any terms if not illegal or against public policy.

Management of an LLC: 2 ways

An LLC can be member-managed or manager-managed. Most LLCs are run by members. In member management, all members participate in management and decisions. They run it.

Liability in an LLP Liability outside the State of Formation

An LLP formed in one state may do business in another state, but the LLP statutes in the two states may provide different liability protection. Most states apply the law of the state in which the LLP was formed, even when the firm does business in another state. If you form ur LLP in NC and the malpractice is in florida, it will go back to your state law that will govern. So it will be governed by NC

Franchise Definition

An agreement in which Franchisor (owner of trademark, trade name or copyright) mcdonalds that licenses a Franchisee the ability to use the trade mark, trade name or copyright in the sale of goods or services. Franchise: Where the franchise owner (franchisor) gives you a license to sell their product.

Advantages of Sole Proprietorship: -owner is in complete control and receives all profits -flexibility -ease of creation; maintenance

Disadvantages: -owner is personally liable for all torts/contracts -lacks continuity after death -difficult to raise financing

Effects of Dissociation: what happens if you leave

Dissociating member loses the right to participate in the management and the right to act as an agent. Lose your ability to vote or take out loans. Member also has the right to have her interest bought out by other members.

authority of partners

Each partner has apparent authority to act upon the partnership. You are bound by that action. You are liable for it. Partner has apparent authority when carrying out partnership business. -Can limit authority of partners by filing a "statement of partnership" in the designated state office. Put in the statement who can buy stuff in the partner agreement. Who can act on the partnership. This is what you outline in the agreement.

Agency Concepts and Partnership Law:

Each partner is deemed to be the agent of the other partners and of the partnership, similar to an agency relationship. They can act on your behalf in a partnership. If one person acts, the other person is bound to it even if you didn't talk about it.

Partnership Termination.

End of partnerships in two phases. •The termination of a partnership occurs in two stages: 1. Dissolution (is the legal "death" of the partnership) partnership is done and cannot engage in any new business at that part. Dissolution moment., and have to begin 2. Winding up and Distribution of Assets (collecting and distributing partnership assets). Have to address prior debts and contracts and business deals with third parties. Pay any debts that you have.

Breach and Waiver of Fiduciary Duties

Fiduciary Duties cannot be waived in a partnership. •Must disclose any potential conflicts of interest to other partners. Duty to disclose any conflicts of interest to your partner. You have to tell your partner that you have an interest in this other party. You can't hide your conflict of interest. You have to share that you are interested in that real estate offer.

Formation of an LP

Formation of a limited partnership is a public and formal proceeding in which partners must strictly follow statutory requirements. It's a form in North Carolina. The partners must also sign: a certificate of limited partnership.

Chain Style Business Operation

Franchise operates under franchisor's trade name and must maintain a certain appearance, standards of performance, etc. (I.E. McDonalds) hold you to specific standards. Mcdonalds corporate that you have to operate it in certain standards.

The Franchise Contract: •Pricing Arrangements

Franchisor may require franchisee to purchase certain supplies from the franchisor at an established price. Mcdonalds is going to require the franchisee to have certain cups, and certain products. But the -A franchisor cannot set the prices at which the franchisee will resell the goods. A franchisor can suggest retail prices but cannot mandate them. This is called price fixing and it is illegal. Franchisor cannot force to sell at a certain price. They can suggest but cant force the price and don't have to have them engage in those deals.

Manufacturing or Processing Arrangement

Franchisor transmits essential ingredients to Franchisee. (I.E. Pepsi-Cola bottling company) pepsi corporate sell the ingredients to the bottling plant (in west Jefferson) and it that person's job to put it together and sell them in that area.

Effects of Dissociation

If the dissociation violates the operating agreement, it is wrongful and the member can be held liable for damages

Termination Law to protect you

Importance of Good Faith and Fair Dealing. Can't shut you down for no reason. Good faith is subjective so it depends. State and Federal law usually tries to balance rights of both parties. If franchisor arbitrarily or unfairly terminates a franchise, franchisee may be able to sue for wrongful termination.

authority of partners

In an ordinary partnership, partners can exercise all implied powers reasonably necessary and customary to carry on that particular business. You can also use their implied authority. Example: to have a construction business- you have all that equipment, money is required to buy that equipment. Implied authority to get a loan from the bank even though not stated in the agreement to start a construction company. Do what is necessary to run your business. You are still bound by this.

Liability of Partners in an LP

In most states, the General partners are personally liable to the partnership's creditors.

Formation and Operation

In the absence of a partnership agreement (verbal or written) state statutes (laws) govern the partnership. -UPA will govern partnerships in North Carolina if no partnership agreement exists. They will provide an agreement for you.

Laws Governing Franchising. •Federal Regulation of Franchises.

Industry-Specific Standards: protect franchisee from unreasonable demands and bad faith termination by franchisor. Laws that protect from unreasonable demands, and to protect you if you buy the franchise.

inspection of the books

Inspection of the Books: Each partner has the right to receive full and complete information concerning the conduct of all aspects of partnership business. Books must also be kept at the firm's principal business office (unless agreed otherwise). Right of access also extends to any personal representative of a deceased partner's estate. If you die, your survival spouse has the right to inspect your books or your attorney. It is their right to see what interest their spouse had with that business, so that they can figure out what half is so they get it.

Limited Liability of Members

LLC members are shielded from personal liability in most situations and any liability of members is normally limited to the amount of their investments. In LLC members are shielded from personal liability. Only liable to the amount you have invested to the business or the amount of insurance policy you buy for the business- general rule

Rights of Partners

Management unanimous consent interest in the partnership compensation accounting inspection of the books

Winding Up

Members who did not wrongfully dissociate may participate in the winding up process.

Formation of the LLC Articles of Organization

Must be filed with a central state agency—usually the secretary of state's office. You file articles of organization. You can do it online. It's a fill in the blank form. -Articles must usually include the business name, its principal address, the name and address of a registered agent (it's who receives the mail, lawsuits, person you designate to receive the lawsuit because the LLC has a lot of members), the members' names, and how the LLC will be managed. You can't have an LLC if you don't have a registered agent.

Nature of the LLC if you form one

Owners are called "members" (not shareholders) and their ownership is called an "interest" (not shares). You are a member of a LLC. Have an interest in the business.

Right to Indemnification

Partner who committed the action can be forced to reimburse the other partners. What if you can't find the other partner so you sue the other person. That partner will find that partner that committed the act and be reimbursed.

Partnership Termination •Dissolution: by operation of law or judicial decree -->

Partners can Agree to Dissolve (partner say this is not working, has to be an unanimous vote), or be Ordered by the Court.

Formation duration of the partnership (2 types)

Partnership for a Term (example: we will be in business for 2 years): If duration is stated in Partnership Agreement. Partnership at Will: If no duration is listed in the Partnership Agreement. Don't state a time. Run the business until one of us gets tired or don't want to run it anymore.

Tax Treatment of a partnership

Partnership is a pass-through entity. So whatever money partnership brings in, it goes though the partnership, it goes to the partners. Partnership isn't taxed, but the owners are. Pass-Through Entity: Business with no tax liability. Income is passed through to owners who pay income taxes on it. •Under federal (and most state) tax laws, a partnership is treated as a "pass through" entity, with profits, losses, and taxes attributed on a pro-rata basis to the partners.

Essential Elements of a Partnership. Example: Food truck with partners but not in a real partnership and something goes wrong.

Partnership is presumed under UPA if: (3 Elements) court will look at your agreement and we assume you have an agreement. 3 elements that you did have a partnership whether you talked about it or not. 1. Sharing of profits or losses. 2. Joint ownership of the business. Making decisions of buying the equipment 3. Equal right to be involved in the management of the business. Management decisions under law you may have a partnership even if you haven't talked about it.

Rights of Partners:

Relate to the following areas: management, interest in the partnership, compensation, inspection of books, accounting, and property.

The Franchise Contract

Specifies the terms and conditions of the franchise and spells out the rights and duties of the franchisor and the franchisee. Spells out what is expected of you and required for you to do. -If either party fails to perform its contractual duties, that party may be subject to a lawsuit for breach of contract. Sue for breach of contract.

The Franchise Rule

The Franchise Rule: disclosure of material facts for informed decision The franchisor has a legal obligation to provide you with all material facts surrounding that franchise. So if you wanna buy kresby crème, obligation their stock market and if their store near that area, why did it fail. so that you can make an informed decision.

The Franchise Contract: •Payment for the Franchise:

The franchisee usually pays an initial fee or lump-sum price for the franchise license. The sum just to have their name. How are you going to pay for this franchise? But also may also require you to The franchisee may also have to pay a percentage of the franchisor's advertising costs and certain administrative expenses each month So you pay upfront, the lump sum, but also a percentage back to the franchisor. Some of them they will continue taking money from you each month. So know exactly what you are paying for.

Articles of Organization

The name of the business must include the words Limited Liability Company or the initials LLC. Because if someone searches your company, they need to know what kind of business they are going to run with your LLC. -A majority of the states permit one-member LLCs, but some states require at least two members. Well now north Carolina has changed it to be at least one person in a LLC.

doing business without creating a separate legal entity is a sole proprietorship.

The owner is the business. don't file paperwork, you just start.

Liability of Partners Joint and Several Liability:

Third party has the option to sue all of the partners together (jointly) or one or more of the partners separately. (Severally). Law that exists here. No longer have to sue everyone. You can if you want but you can sue one person or just the partnership. You sue severally. You can pick what partner you want to sue or the partnership.

Termination •Opportunity to Cure a Breach.

This is minor breach of contract and the franchisor has to give the franchisee an opportunity to change it before they can shut you down. -Agreement may grant franchisee the opportunity to "cure" an ordinary breach within a period of time to prevent termination. Contracts are usually more favorable to the franchisor than to the franchisee. Bulk of the power is will the franchisor. -The franchisee may receive little or nothing on termination since the franchisor owns the trademark and the business.

Authority of Partners

UPA affirms general principles of agency law. -Partner may be able to subject partnership to tort liability. One partner can subject you to tort liability. Intentional interference of the business, violation of law. If your partner is doing it, you can be sued for it as well.

Problem with the dissociation of a partner

Under the first amendment- you have free association. •Wrongful Dissociation: A partner has the power to dissociate from a partnership at any time but may not have the right to do so. Example: violated partnership agreement. Stay for 3 years but least at 6 months. If the partner lacks the right to dissociate, the dissociation is considered wrongful under the law and that party could be sued for a breach of the partnership agreement. Court won't force you to hang out with someone but if you sign the binding contract to be in the partnership for 3 years. You have the ability to leave but don't have the right. You can be sued for that.

Uniform Partnership Act

When you don't have a partnership agreement. •In the absence of a partnership agreement the UPA, as adopted by most states, governs the partnership. Known as the default statute. No partnership agreement, something goes wrong, and get taken to court, there is a law that governs this partnership. The law will provide an agreement for you. Don't want that.

Operation of Law

death of a partner, bankruptcy of a partner/partnership, or Illegality. Then the partnership is terminated at that point.

Limited Liability Company (LLC)

is a hybrid entity that combines the limited liability of a corporation and the tax advantages of a partnership. Limited to what you put into your company. If something goes wrong, the business is held liable, but got the tax advantages like a partnership- pass through. They are taxed individual. Only pay income tax. -LLCs are increasingly the entity of choice for businesses. File one of these if you can. -LLCs are governed by state law.

Limited Liability Partnership (LLP) for professionals

is a hybrid form of business designed mostly for professionals who normally do business as partners in a partnership. Example: law firms, dentist office, accounting firm, doctor's office Biggest advantage: An LLP allows a partnership to continue as a pass-through entity for tax purposes but limits the personal liability of the partners. Not held liable for your partner's action. Under an LLP it doesn't work that way like a partnership. Big advantage

Fiduciary Duties (2 types)

owe both of these to the partner and partnership •1. Duty of Care: Refraining from "grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law." Example: You won't be dealing drugs out of your construction site. Not subject them to tort law or get the partnership property seized. •2. Duty of Loyalty: Must act for the benefit of the partnership. Act in the partnership's best interest. Partnership dealing real estate. If something comes on and says leave your partnership and I'll sell it to you straight to you and you will make double. Can't do this.

LLC operating Agreement

separate document. Contract between you and the other members. -Analogous to corporation's bylaws. Bylaws of your LLC. Not required but good to have. Not required for LLC to exist, but strongly recommended the agreement be in writing. It's like a partnership agreement. Put it in writing.

Fiduciary Duties

when they are so big, they will hire a manager to run it for them. Managers in a manager-managed LLC owe fiduciary duties (the duty of loyalty and the duty of care) to the LLC and its members. Fiduciary Duties: putting your interest aside so that the business can succeed. Manager will have an obligation to Put the LLC first and to the members.

Major Disadvantage

• Owner is personally liable for all losses or liabilities incurred by the business enterprise. Example: Start mowing and you hit granny. Granny gets to sue you personally for everything you have.

accounting

•Accounting: Can be done voluntarily or required by the Court. Determines Value, etc. Rights of Partners. You can look at the books and demand an accounting. If you think the other person is ripping you off, you can look at the books. Court can order an accounting on the partnership, to hand over the books.

Jurisdictional Requirements: being sued and suing as an LLC

•An LLC is a legal entity separate from its owners. You sue like a partnership. That LLC is separate from the members. You can sue LLC individually. For federal diversity jurisdiction (2 people are from different states), the LLC may be treated differently than a corporation.

Jurisdictional Requirement: to get into federal court work with an LLC

•Citizenship of an LLC is the citizenship of its members, which may live in multiple jurisdictions. Each LLC member is a citizen in which they live. It's determined where the members live. 1 lives in NC, SC, TE, and GA. An LLC lives in each of those even though its formed in California. you have to be a resident of another state. If one of the members live in the same state as you, you cannot take them to federal court because you are from the same state. •The state citizenship of an LLC may come into play when a party sues the LLC based on diversity of citizenship. Has to be over $75,000

The Franchise Contract. Here's the problem

•Courts will not question Franchisor's strict supervision of a franchise, but Franchisor may be liable for torts of agents. If someone spills hot coffee on them and sues or if anyone gets hurt at that mcdonalds. They can sue mcdonald corporate. The franchisor is still liable of actions of the franchisee. Mcdonalds is making money off of that franchisee. So even tho they weren't there, that franchisee is the agent so mcdonalds corporate is still liable.

Unanimous Consent

•Each partner has one vote, majority wins; however, unanimous consent is generally needed to significantly change the nature of the partnership. *** however is you are changing the fundamental nature of your partnership, it has to be unanimous. (change construction to a vape shop) it is not a majority wins. Everyone must be okay with it.

Consider these if starting your own business

•Ease of creation. -created your business. Not filing any paper work. •Owners' liability. -personal libility when you start your business •Tax considerations. -double tax? •Need for Capital. -need for start up capital

When Liability May be Imposed

•In extraordinary circumstances, in cases of abuse and to achieve justice, the courts may hold the members of an LLC personally liable for its debts. •Known as "piercing the corporate veil." Example: you have an LLC to sell cars. You know you are selling junk cars but don't tell people. And people buy them and come back say this is a junk go. But you say you are protected by LLC but that LLC doesn't mean anything. You sell out that LLC to fraud people. The court will not let that happen.

The Franchise Contract. Who is going to own the building?

•Includes franchisee's type of business entity including capital structure, sales quotas (you have to sell x amount of product otherwise you will be shut down) and record keeping. •Whether business Premises are to be leased or purchased. -Location of the Franchise and "territorial rights" to a certain area. Don't wanna have two mcdonalds in same area.

interest in the partnership

•Interest in the Partnership: fundamental nature of a partnership. Unless otherwise indicated in a Partnership Agreement, profits and losses are shared equally between the partners.

Management

•Management: Is equally shared between partners unless the Partnership Agreement says otherwise. If you are in management, Make partnership decisions. Usually its shared equally unless partnership agreement says otherwise.

Essential Elements When it is not presumed if one of these 5 things exist.

•No partnership formed if profits were received as payment for: 1. A debt by installments or interest. Paying debt to capital one, you are not partnership with capital one. 2. Wages of an employee (or services of independent contractor). You don't have a partnership if you pay someone to be a employee. 3. Rent to a landlord. Paying rent to the standard, you are not in a partnership in the standard. 4. Annuity to a surviving spouse or representative of a deceased partner. Order from the court, not originally part of the partnership if one partner died and their spouse tries to get in but they are not partner in that. 5. Sale of a business or property's goodwill. If you sell your business, you can't be partners with the new owners.

Dissociation of a Partnership. What if you want to leave?

•Occurs when one partner ceases to be associated in the partnership business. One partner wants to leave the partnership. Things that happen when you dissociate: -Allows partner to have her interest purchased by the partnership. Interest bought out by the other. Your third share of the interest bought out by the other partners. -Terminates her voting interest in the partnership. You can't make decisions in the partnership if you aren't apart of it.

Preformation Contracts: try to avoid these

•Prior to charter, owners of the firm are called "promoters." At that point. You are not a member not of an LLC. You are trying to get people to invest in your business. •If a promoter forms a "preincorporation contract" prior to formation (LLC), they may be personally liable. You will be personally liable because you don't have a LLC at that point. So if you make a contract before their LLC is formed and then they signed a bunch of contracts and they are personally liable. Get your LLC first so that you avoid this.

Other Similarities to Corporations

•Separate legal entity from owners. They can be sued and sue others. •Can hold property separately. Buy property in the name of a LLC •"Foreign" designation if doing business in state other than the one where the LLC was formed. Not limited in another state. If you have LLC in NC and do business in Georgia. You can do that but the LLC will be named as foreign.

Duties and Liabilities of Partners

•you owe them a Fiduciary Duties. Partners are fiduciaries and general agents of one another and the partnership. Act in your partner's best interest •See Classic Case 16.2 Meinhard v. Salmon (1928). Went out to buy buildings on his own without talking to his partner. Did it for himself basically. •Must act in the best interests of the partnership.

•Effects of Dissociation. You have to be careful. Liability to Third Parties

Based on the doctrine of "Apparent Authority," the Partnership can be bound for two years by acts of outgoing partner, unless proper notice given. Avoid: call up the bank or creditors and give them notice that the one partner is not in the partnership so that the bank cannot give that person money or sells them equipment. Because you can be held liable for their action bound to it for 2 years even though the partner is not in the partnership.