Partnerships & Hybrid Business Forms

Partnership by estoppel has 2 elements:

1) a representation to a third party that there is in fact a partnership 2) Reliance by the third party on the representation

Two aspects with regard to profits

1) whether the business is for-profit 2) Whether there is a sharing of the profit

Two categories of partners in a LP

1)Limited partner: capitalizes the business 2) General partners: run it

Disaffirm

A partner who is a minor may _____ the agreement

Corporations

Afford the inestimable benefit of limited liability

Unincorporated nonprofit organizations (UNAs)

Cannot be partnerships

Implied partnership

Exists when in fact there are two+ persons carrying on a business as co-owners for profit ex. splitting the profit painting houses

Lawful

Family members can be partners, and partnerships between parents and minor children are _________

Fiduciary duties

General partners owe _________ to other general partners, the firm and the limited partners; Limited partners who do not exercise control do not owe ____________

UPA or RUPA

If parties have an express partnership with no partnership agreement, __________________ applies the governing rules

one year

If the business cannot be performed within __________ from the time that the agreement is entered into, the partnership agreement should be in writing to avoid invalidation under the Statue of Frauds.

Express partnership

In words, orally, or in writing

Limited partnerships and limited liability companies

Most common hybrid types

Control

NOT generally shared by both classes of partners (in LP)

Partnership law and tax law

Permit and investor to put capital into a limited partnership and realize tax benefits without liability for the acts of the general partners

limited liability on its limited partners

The limited partnership is attractive because of its treatment of taxation and its imposition of ...............

Limited partners

The money to capitalize the business typically comes mostly from the .......

expressly

The most common way of forming a partnership is ________

Sharing of profits

The most important test used by courts to determine co-ownership

Joint Tenancy

The owners hold the property under a single instrument such as a deed, and if one dies the others automatically becomes owners of the deceased's share, which does not descend to his heirs

Tenancy in common

The survivor tenants do not take the deceased's share. Each tenant in common has a distinct estate in the property

Tests for partnership

Two or more persons AND Co-ownership AND Business for profit

Share profits

Various forms of ownership by themselves do not establish partnership, whether or not the co-owners ________________ made by the use of the property.

Partnerships

afford the inestimable benefit of limited taxation

Partnerships

are NOT taxable entities

Tenancy by the entirety and community property

forms of ownership are limited to spouses, and their effects are similar to that of joint tenancy

Partnership

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

Joint venture

-No formality necessary, but associates will usually sign an agreement - Need have no group name, but they may -Property may be owned jointly -Profits and losses will be shared -Each associate has the right to participate in management -Liability is unlimited

Certificate of limited partnership

-Required to be filed with the secretary of state. -Must be signed by all general partners -Include the name of the limited partnership -Words "limited partnership" must be in the name

Under federal bankruptcy law

...... a partnership is an entity that may voluntarily seek the haven of a bankruptcy court or that may involuntarily be trust into a bankruptcy proceeding by its creditors

4 types of co-ownership

1) Joint tenancy 2) tenancy in common 3)tenancy by the entireties 4) community property

Rationale for the invention of hybrid business forms

1) Risk reduction 2) Tax reduction

Limited partnership (LP)

A partnership formed by two or more persons under the law of a state and having one or more limited partners. This tends to be attractive in business situations that focus on a single or limited term project like a movie

Legal entity

A person or group that the law recognizes as having legal rights, such as the right to own and dispose of property, to sue and be sued, and to enter into contracts

Revised Uniform Partnership Act (RUPA) 1997

A series of 'default rules' that govern the relations among partners in situations they have not addressed in a partnership agreement. Th primary focus of RUPA is the small, often informal, partnership. Larger partnerships generally have a partnership agreement addressing and often modifying many of the provisions of the partnership act

Joint venture (joint adventure, coadventure, joint enterprise, joint undertaking, group, pool)

An association of persons to carry on a particular task until completed. A "temporary partnership"

True

Co-ownership does not establish a partnership unless there is a business, and a business by itself is not a partnership unless co-ownership is present

Co-owners of a business

If what two or more people own is clearly a business-- including capital assets, contracts with employees or agents, an income stream, and debts incurred on behalf of the operation -- at partnership exists

partnership and not the partners

Property acquired by the partnership is property of the ______________

Is partnership property

Property originally brought into the partnership stock or subsequently acquired by purchase... on account of the partnership..... ______

Association of Persons

So the persons involved need to have capacity to contract. Unless state law precludes it, a corporation can be a partner in a partnership

True

T/F A partner may bring onto the partnership premises her own property, not acquired in the name of the partnership or with its credit, and it remains separate property

True

T/F Under neither law can a parter unilaterally dispose of partnership property, however labeled, for the obvious reason that one cannot dispose of another's property or property rights without permission

property, real or personal

UPA stated that partnership ___________________, could be held in the name of the partners as "tenants in the partnership" --- a type of co ownership--- or it could be held in the name of the partnership

Hybrid forms

associations that share some aspects of partnerships and some of corporations

Entity theory

the concept of a business firm as a legal person, with existence and accountability separate from its owners

Factors courts look at in establishing partnership

the right to participate in decision making, the duty to share liabilities, and the manner in which the business is operated

all the partners

under UPA, lawsuits to enforce a partnership contract or some other right must be filled in the name of _______. To sue a partnership, the plaintiff must name and sue ________