Partnerships

II. LLC LIABILITY

*** A. 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! *** B. LLC: The LLC is liable for torts committed within the scope of its business and contracts executed by an agent acting with authority.

V. DISSOCIATION (when a partner ceases to be associated with the partnership) A. CAUSES

1. A PARTNER'S EXPRESS WILL TO WITHDRAW; 2. OCCURRENCE OF AGREED-UPON EVENT (e.g., a partner turns 65); 3. A PARTNER'S EXPULSION, BANKRUPTCY, DEATH OR INCAPACITY; 4. TERMINATION OF A PARTNER THAT IS A BUSINESS ENTITY; 5. APPOINTMENT OF A RECEIVER FOR A PARTNER; or 6. DISTRIBUTION OF SUBSTANTIALLY ALL A PARTNER'S INTEREST IN THE PARTNERSHIP.

B. APPLYING AGENCY LAW TO PARTNERSHIPS [partnership= P; partner= A]

1. 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]. 2. APPARENT AUTHORITY: Look at the partner's title and past conduct.

IV. RELATIONS BETWEEN PARTNERS AND THIRD PARTIES A. AGENCY PRINCIPLES: Usually, the issue is whether the principal (P) is bound to a third-party (T) on a contract entered into by the principal's agent (A).

1. ACTUAL AUTHORITY: P tells A to act on P's behalf. Fall Back Position 2. APPARENT AUTHORITY: P leads T to believe A has authority to bind P even though A has no actual authority. It protects T's reasonable reliance. a. KEY FACT: T's reasonable belief must be created at least in part by P, and not by A alone. Otherwise, it wouldn't be fair to P.

F. CONVERSION/MERGER

1. ALLOWED: A partnership can convert or be merged into another business form if all partners (or less than all, if in the partnership agreement) consent. 2. LIABILITY: A partner remains jointly and severally liable on obligations that arose before the conversion/merger.

B. FACTORS: To determine who is a partner, look to the following factors:

1. CAPITAL INVESTMENT. A capital contribution is not required. 2. CONTROL. The right to control may be enough, even if control is never exercised. [Owners usually have the right to control operations.] *** 3. PROFIT. A person who is entitled to receive a share of the firm's profits is presumed to be a partner ("prima facie evidence").

E. DUTIES: Partners owe the partnership certain duties. Partners cannot eliminate these duties but may determine the applicable standard, if reasonable [huh?].

1. CARE: No grossly negligent or reckless conduct or intentional misconduct. 2. LOYALTY: Must account for profit from use of partnership property and cannot compete before dissolution without full disclosure of all material facts. (same as corporate officer) 3. GOOD FAITH AND FAIR DEALING 4. INFORMATION: Must provide without demand information a partner needs to exercise her rights, and on reasonable demand any other information.

C. A PARTNER'S ECONOMIC INTEREST IN THE PARTNERSHIP

1. DEFINITION: The right to receive a share of the profits (e.g., a 25% stake). 2. TRANSFERABLE (like any financial asset): A conveyance redirects the flow of profits; it does not confer any other rights or impose any obligations.

VI. DISSOLUTION AND WINDING UP *** A. 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!); or 5. IF THERE'S A DEFINITE TERM OR SPECIFIC TASK AND a. THE TERM ENDS OR THE TASK IS COMPLETED; b. PARTNERS UNANIMOUSLY AGREE TO WIND UP; or c. AT LEAST HALF THE PARTNERS AGREE TO WIND UP within 90 days after death, incapacity, bankruptcy or wrongful dissociation.

II. PROPERTY INTERESTS A. RULES FOR DETERMINING PARTNERSHIP PROPERTY

1. IS PARTNERSHIP PROPERTY if acquired in the partnership's name or in a partner's name if the instrument transferring title indicates he is acting for a partnership (e.g, mentions "a partnership" or representative capacity). Rebuttable Presumptions 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. * It looks like property belongs to that partner so it's presumed to be his

E. PARTNERS' LIABILITY FOR PARTNERSHIP OBLIGATIONS (of course, the partnership itself is liable—it's a partnership obligation!)

1. JOINT AND SEVERAL LIABILITY: May join all the partners as defendants or sue any one (or more) individually for the full amount. 2. EXHAUSTION REQUIREMENT: A claimant must first exhaust partnership resources before recovering from a partner.

C. STATEMENT OF AUTHORITY: A partnership may expand or limit a partner's authority by filing with the Department of State a statement of authority [good for five years]. Effect depends on whether a transfer of real property is involved.

1. 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 the property is situated. Statement of Authority Not Likely to do Partnership much good. 2. 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.

E. LIABILITY OF A DISSOCIATING PARTNER

1. TO EXISTING CREDITORS unless released by a creditor expressly or impliedly (so release is assessed on a creditor-by-creditor basis). 2. TO SUBSEQUENT CREDITORS who reasonably believed he was then a partner and were unaware of his dissociation [but he can file a statement of dissociation to protect himself]. Potential liability lasts for one year. 3. TO THE OTHER PARTNERS for wrongful dissociation (breach of contract)

D. DISTRIBUTION OF PARTNERSHIP ASSETS AFTER DISSOLUTION RPM has $100,000 in assets and owes $30,000 to Adele, a 3d-party creditor. Rachel and Monica each contributed $5,000. Rachel also loaned RPM $15,000. Who gets what, when?

1st: to creditors, including partners who are creditors: Adele 30k and Rachel 15k 2nd: to partners for what is in their accounts (capital + share of profits - share of losses): Rachel and Monica get 5k + 1/3 of profits unless otherwise agreed

II. LIABILITY OF LIMITED PARTNERS *** A. LIMITED LIABILITY:

A limited partner is not personally liable for debts of the L.P. even if she participates in control [note: extremely unusual!].

V. NEW PARTNER:

A new partner may be added to an existing L.P. if the L.P. agreement allows it or all the partners consent in writing.

D. 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.

H. KNOWLEDGE/NOTICE:

A partner's knowledge or receipt of notice is imputed to the partnership except where that partner commits a fraud on the partnership.

D. REGISTRATION STATEMENT:

A partnership may file a registration statement with the Department of State, but it's a prerequisite to filing other statements.

II. LIABILITY

A. BROAD SHIELD: A partner in an LLP is not personally liable for any LLP obligations except her own torts and those of someone under her direct supervision. B. LLP: The LLP is liable for torts committed within the scope of its business and contracts executed by an agent acting with authority or a substitute for it.

III. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

A. 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. B. PROFITS/LOSSES/DISTRIBUTIONS: Unless otherwise provided in the partnership agreement, allocated on the value of capital contributions. C. TRANSFER OF INTEREST: Does not cause dissociation or dissolution.

LIMITED PARTNERSHIPS (L.P.) I. FORMATION

A. DEFINITION: An L.P. is a partnership with one or more general partners [general liability] and one or more limited partners [limited liability]. B. FILING: Must file a certificate of L.P. with the Department of State [see long outline for contents]. C. WRITING: Must have a written agreement including value of each partner's contribution; when contributions will be made; and the events of dissolution. D. NAME: Must contain "Limited Partnership," "Limited," "Ltd.," "LP" or "L.P." E. ANNUAL REPORT: Must file an annual report. F. LAW: General partnership law applies unless the L.P. statute is inconsistent.

III. FORMATION AND MAINTENANCE

A. FILING: Must file a statement of qualification with the Department of State. B. NAME: Must end with "Registered Limited Liability Partnership," "Limited Liability Partnership," "RLLP," "LLP," "R.L.L.P." or "L.L.P." [puts third parties on notice]. C. ANNUAL REPORT: Required to maintain LLP status. If status is revoked, may apply for reinstatement within two years (Note: The liability shield is retroactive!).

LIMITED LIABILITY COMPANIES (LLC) I. FORMATION AND MANAGEMENT

A. FILING: Must file articles of organization (AO) with the Department of State. B. NAME: Must end with the words "limited liability company" or the abbreviation "LLC." C. PROFESSIONALS: May form a professional LLC (abbreviated as "PL" or "PLLC"). D. MANAGEMENT: By managers or members, but members manage in proportion to current profit shares unless otherwise provided in the AO or an operating agreement. If managers manage, each manager has equal rights, and a majority rules. E. DUTIES: Whoever manages owes duties of care, loyalty and good faith. F. ANNUAL REPORT: Must file an annual report to maintain LLC status. G. TAX: Taxed like a partnership (income is passed through to the owners) unless it elects to be taxed like a corporation (firm income is subject to "double taxation").

VI. DISSOCIATION (of either a general or a limited partner)

A. LIKE A GENERAL PARTNERSHIP (p. 11)[don't forget a wrongful dissociation] B. APPARENT AUTHORITY: A general partner's apparent authority continues for two years after dissociation (not one year as in a general partnership).

V. DISSOCIATION (when a partner ceases to be associated with the partnership) Cont:

B. EFFECT: No big deal! Usually, the partnership buys out the dissociating partner (for the greater of liquidation or going concern value) and continues without her. Only certain specified events require dissolution and winding up (p. 13). C. MANAGEMENT RIGHTS AND FIDUCIARY DUTIES TERMINATE D. APPARENT AUTHORITY MAY CONTINUE for one year after dissociation, but the partnership can protect itself by notifying creditors (effective immediately) or filing a statement of dissociation (becomes effective 90 days after filing).

VII. CONVERSION/MERGER:

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.

C. WRITING: Partnership law does not require one, but the Statute of Frauds may. Ice-T and Ice Cube form a partnership to record two rap albums. Is a writing required? What if they agreed that their partnership was to last for two years?

No Yes because SOF, 1 year provision, so writing is required for this

Chef Tom forms an L.P. to run a club. Padma invests $50,000 as a limited partner. The club flops; all its money, including her $50,000, is gone. Is Padma personally liable for its debts? Padma signs a bank loan for the L.P. Bank mistakenly believes she is a general partner (since general partners often sign loan documents for an L.P.). Is Padma personally liable on the loan?

No because she is a limited partner and liability is limited to contribution No because she is a limited partner and not liable.

Phoebe sold land owned by RPM to Olivia Pope without authority. Olivia in turn sold it to Huck. Can the partnership get the land back from Huck?

No if a BFP and had no notice of the lack of authority.

b. PROBLEM: Apparent authority can linger even after actual authority has been terminated if T is not aware of the termination. Beavis, Butthead's office manager, bought goods from KMart without permission. Butthead paid, but told Beavis not to do it again. Beavis does it anyway. Did he have actual authority to buy more?

No, but he had apparent authority

2. PARTNER'S RIGHTS: Very limited! He can use it only for partnership purposes unless the other partners consent. That right can't be transferred. May a partner use a truck the partnership owns on her vacation?

No, not unless the other partners consent. Truck belongs to partnership and not A.

Lebron knows that Monica is RPM's managing partner and has signed contracts for RPM before. Rachel and Phoebe forbid Monica to sign new contracts, but she signs one with Lebron anyway. Did Monica have actual authority to bind RPM to Lebron? Did Monica have apparent authority to bind RPM to Lebron?

No, other partners agreed against it by 2 to 1 vote Yes from 3rd parties perspective.

RPM has a two-year term. Phoebe dies before the term is up. Must RPM be dissolved?

Only if w/in 90 days after death half partners agree to wind it up.

This time, you use a PL for your firm. Who's liable to Justin if a member commits malpractice? A member, acting with authority, contracts for the PL with Justin. Who is liable on the contract?

Only the tortgeasor and the firm are liable unless the tortfeasor was under someone else's control Only the LLC as the principle on the K. BOTTOM LINE: LLP and LLC offer the same protection against vicarious liability in Florida.

B. WINDING UP:

Partners who have not wrongfully dissociated may wind up. The partnership will liable for expenses incurred in winding up (common sense).

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

Partnership I. FORMATION A. DEFINITION:

F. CREDITORS' RIGHTS Phoebe and RPM are both insolvent. If Phoebe's separate creditors and RPM's creditors assert claims against RPM's assets, who has priority—RPM's creditors or Phoebe's separate creditors? Who has priority if both sets of creditors assert claims against Phoebe's separate assets?

Partnership creditors have priority on partnership property Both sets of creditors have equal claims on a partner's separate assets after partnership has been dissolved.

B. EXCEPTION: LIMITED LIABILTY LIMITED PARTNERSHIP (LLLP) KEY POINT: An LLLP is just like a limited partnership [LLLP = LP], except for liability. Chef Tom wants to insulate his personal assets, but remain a general partner. How can he do that?

Register limited partnership as a limited liability limited partnership. FORMULA: L.P. (limited partners safe) + LLP (general partners safe) = LLLP (all partners safe)

D. RIGHT TO INDEMNIFICATION Phoebe pays out $10,000 on a debt owed by RPM What are her rights against RPM?

Right to be paid back or indemnified with interest.

E. PARTNERSHIP ASSETS INSUFFICIENT TO COVER LIABILITIES What if RPM had only $33,000 in assets on dissolution?

Same drill: There's not enough to pay the creditors in full, so they split the $33,000 pro rata [RPM owes Adele twice as much as Rachel, so Adele gets twice as much as Rachel: $22,000 vs. $11,000]. The rest of the debts ($12,000) and the partners' capital contributions ($10,000) are partnership losses and are split in the same proportion as profits.

III. RELATIONS AMONG PARTNERS:

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

AB Partnership acquired a truck in A's name. A paid with her own money. The partnership uses the truck for deliveries. Is the truck partnership property or A's separate property?

Truck is presumed to belong to A under rule 3 above if the instrument transfering title didn't indicate that A was acting for a partnership

G. ADMITTING A NEW PARTNER Rachel and Monica want to admit Chris Pratt as a partner. Phoebe objects. Result? If Phoebe changes her mind and Chris is admitted, will he be liable for debts the partnership had incurred before his admission?

Unless otherwise agreed a new partner requires unanimous consent Yes, but he is cut slack because he wasn't around when debts were incurred. All Chris can lose is interest in partnership, but no liability beyond that amount. However, for future debts Chris is liable like everyone else.

B. NO RIGHT TO COMPENSATION Monica runs RPM. Is she entitled to compensation?

Unless otherwise agreed, NO! (except in winding up partnership affairs at end of partnership lifecycle)

C. MANAGEMENT RIGHTS Rachel gets 60% of the profits; Phoebe and Monica get 20% each. [They've "otherwise agreed."] Rachel votes against selling goods to James Spader. Phoebe and Monica vote in favor. What result?

Unless otherwise agreed, majority rules. Sale approved 2 to 1 majority. However, unanymity is required for acts outside ordinary course of business and to amend partnership agreement (unless otherwise agreed)

RPM owns land in Dade County. RPM files a statement of authority with the Department of State and the Dade County Recording Office barring Phoebe from selling the land. Phoebe sells the land to Miley Cyrus. Is the restriction effective against Miley? Even if Miley did not know of the restriction?

Yes becasue statement was properly filed in both places. Yes. The filings give her constructive notice.

On May 5, Phoebe dissociates from RPM. On June 10, she contracts for RPM with Olivia. Is RPM liable to Olivia on the contract? Would RPM be liable to Olivia if it had filed a statement of dissociation on May 6? [TRICK Q!]

Yes if Phoebe had apparent authority to bind RPM, and Olivia had not been notified of the dissociation Yes, statement of dissociation doesn't become effective until 90 days after it is filed.

Rachel contracts for RPM with Olivia six months after an event requiring dissolution. The contract is not for winding up partnership affairs. Is RPM liable to Olivia on the contract? If RPM is liable to Olivia, will she have any rights against the partners individually? How could RPM or the partners have protected against this liability? If RPM is liable to Olivia, will RPM have any rights against Rachel?

Yes if Rachel had apparent authroity to bind RPM to Olivia. Yes. Partners are Jointly and Severably liable no matter when they arise. Notified Olivia or filed notice of dissolution with Sec of State Yes, right to be reimbursed by Rachel that she caused.

H. OUTGOING PARTNERS REMAIN LIABLE UNLESS RELEASED If Phoebe retires from RPM, will she still be liable for RPM's outstanding debts?

Yes unless a creditor releases her (creditor by creditor basis)

Did Beavis have apparent authority to buy more? How can Butthead destroy this apparent authority?

Yes! Look at it from KMart's perspective: Beavis had bought supplies from them before and Butthead had paid for them, so it's reasonable for KMart to think Beavis is authorized to do it again (as long as Kmart did not know about the prohibition). He can tell KMart Beavis has no authority to bind him. Note: It's harder to destroy apparent authority since it can exist in the minds of many third parties.

Frodo tells Amanda Bynes, "If you want to buy the ring, see Gandalf." Frodo has never given Gandalf authority to sell it. If Amanda contracts with Gandalf to buy the ring, is Frodo bound? Gandalf, in Frodo's presence, tells Amanda he's Frodo's agent, although he has no actual authority. Frodo says nothing to contradict him. If she contracts with Gandalf for the ring, is Frodo bound?

Yes, Frodo let Amanda to believe Gandalf had authority and that is why Frodo is bound. Yes because Frodo's silence in face of Gandal's statement created apparent authority.

If RPM has a two- year term, can Phoebe dissociate after one week? If RPM is formed to complete a specific task, like buying a plot of land, subdividing it, and selling off the lots, can Phoebe dissociate before the last lot is sold? What if RPM was formed to run a bar (no term or specific task—it's "open-ended")?

Yes, but she'll be liable to the other partners for breach of K. (wrongful dissociation) Yes, but she'll be liable for breach of K (wrongful dissociation) Partnership at will - partner may dissociate at any time w/out liability to the other partners for breach of K. Vast majority of partnerships are at will except those w/ term or specific task to complete.

IV. LIABILITY OF GENERAL PARTNERS A. GENERAL RULE: JOINT AND SEVERAL LIABILITY Chef Tom is a general partner of the L.P. Is he personally liable for the L.P.'s obligations?

Yes, joint and several liability exists just like a GP.

B. RIGHTS IN PARTNERSHIP PROPERTY 1. PARTNERSHIP'S RIGHTS: Totally unrestricted [it owns the property!] May a partnership pledge a truck the partnership owns as collateral for a loan? May a partnership creditor attach a truck the partnership owns?

Yes, partnership can do whatever it wants to with its own property Yes, partnership creditor can get to partnership property.

Rob Camiletti's bakery owes Pillsbury money, but Rob & the firm are broke. Pillsbury claims Rob's main squeeze, Cher, is a partner because she gets 20% of the profits. Is this true? What if Cher gets profits as wages, rent, repayment of a debt, or interest on a loan? What if Cher got 20% of the gross receipts, as opposed to 20% of the profits?

Yes, presumed a partner because she shares in profits. However, she can rebut this presumption by other evidence such as she has no right to control. No presumption in any of these cases. However, P can still try to show from other evidence that Cher is still a partner. Sharing in gross receipts does not give rise to a presumption either, but P can still rebut. Remember: We are only talking about whether there's a presumption.

After passing the bar, you all form a law firm as a general partnership. A lawyer at the firm commits malpractice representing a client. Are you personally liable to the client? Your firm breaches a contract with a supplier. Are you personally liable to the supplier? If you pay the client, what are your rights against the partnership and the other partners?

Yes. Client can sue any partner for all of her damages as long as properly served. Yes. Same rule applies to K as tort. Partnership resources must first be exhausted though. Right to be indemnified by partnership and right to contribution from other partners for their share of the loss. However, if partnership and other partners have no money, you will be left with the judgment liability.

Grace applies to a bank for a loan. Will lets Grace say he's her partner, even though he's not. Is Will liable to the bank if it loans money to Grace based on her statement? Can the bank recover from Grace as well? Can Grace's other creditors recover from Will based on the statement?

Yes. He is liable to bank as if he was a partner (purported partner) Both liable as if they were partners Only if Will let grace make the statement publicly

This time, you form your law firm as an LLP (PLLP). Your partner commits malpractice defending Justin Bieber in a paternity suit. From whom can Justin recover? Your partner, acting with authority, contracts for the PLLP with Justin. Who's liable on the contract?

Your Partner - absolutely, liable for own malpractice The PLLP - Yes since tort was committed in ordinary course of business You and other Partners - No, not unless directly supervising the tort feasor Only PLLP as principle on the K

A, B and C are partners. B assigns his interest in the partnership to D. The partnership loses $50,000 in an ill-fated venture. Which of the following is correct? a. B must share in the loss. b. D must share in the loss. c. Neither B nor D must share in the loss. d. Both B and D must share in the loss.

a. B must share in the loss. All assignment does is redirect profits. It does not transfer any of B's other obligations.

3. RATIFICATION: Even if A had no authority, P can still ratify the contract.

a. 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!) b. INTERVENING RIGHTS: Because ratification is retroactive, we must protect the intervening rights of a bona fide purchaser (BFP).

Hannah and Jess are partners. Hannah hires a lawyer for the partnership over Jess's objection. Jess consistently objects to using partnership funds to pay the lawyer. Which of the following is true? a. Hannah can bind the partnership, and thus hire the lawyer only if she is managing partner. b. Hannah can bind the partnership on partnership affairs, and thus hire the lawyer. c. Hannah cannot hire the lawyer without Jess's consent. d. Hannah and Jess should dissolve their partnership if they cannot agree on the lawyer.

b. Hannah can bind the partnership on partnership affairs, and thus hire the lawyer.

F. RIGHT TO INSPECT BOOKS / TO AN ACCOUNTING

Always right to inspect books If reasonable for accounting. Note: Transferee has no right to inspect and can get an accounting only on dissolution.

LIMITED LIABILITY PARTNERSHIPS (LLP) I. KEY POINT:

An LLP is just like a general partnership [LLP = GP], except for liability.

RPM owns a boat and has filed a statement of authority permitting Phoebe to sell it. Phoebe sells the boat to Miley. RPM claims that it had terminated Phoebe's authority before the sale. Result? What if the statement of authority had prohibited Phoebe from selling the boat? The restriction would be effective against Miley only if she actually knew about it!

As long as Miley was a BFP RPM is bound by the sale. Miley is cut slack because sale wasn't for real property. No constructive notice and no expectation Miley would check recordings.

Lucy, acting without authority, sold Desi's car for $6,000. Later, Desi agreed to sell the car to John Wayne Bobbitt for $5,000. Can Desi ratify Lucy's sale?

He'd like to, but he can't cut off Bobbitt's intervening rights if Bobbitt is a BFP. That just wouldn't be fair to Bobbitt.

G. 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).

C. APPARENT AUTHORITY:

Continues after an event requiring dissolution even if a partner is not winding up unless the partnership notifies a creditor (effective immediately) or files a statement of dissolution (becomes effective 90 days after filing).

E. PURPORTED PARTNERS:

If no partnership was formed, parties may still be liable as purported partners to protect reasonable reliance by third parties ["as if"].

A. PROFITS AND LOSSES SHARED EQUALLY Rachel, Phoebe and Monica form the RPM Partnership. Rachel contributes 60% of the capital; the others contribute 20% each. Unless otherwise agreed ("UOA"), how will profits be split? How will they share the losses? If they agree Rachel won't bear any loss, is she free from liability to a third party? [TRICK Q!]

Equally, and not in proportion to capital contributions. Unless otherwise agreed the same as profits. No! Partners cannot limit 3rd parties rights without 3rd parties consent. Agreement not effective against the 3rd party. Agreement will be effective among themselves.

B. FAILURE TO FILE CERTIFICATE OF L.P.: All partners are jointly and severally liable. Why? Because it's a general partnership by default! Chef Tom forgot to file a certificate of L.P. Is there any way Padma can shield herself against future liability? [She can't avoid liability that's already arisen.]

File certificate of limited partnership herself or withdraw from limited partnership within reasonable time after learing of failing to file and notify Sec of State of the withdrawl.

A and B form a partnership. The partnership owns a truck. Bank obtains a judgment against A for defaulting on a personal loan. Which of these statements is correct? a. Bank may attach the truck. b. Bank may attach A's interest in the truck. c. Bank may attach A's interest in the partnership. d. None of the above.

c. Bank may attach A's interest in the partnership. Partners judgment creditor can attach a partners econmic interest in a partnership like any other economic assets.

X and Y form a partnership. X contributes $3,000 cash; Y contributes services worth $2,000. X also loans the partnership $1,000. On dissolution, there is $6,000. There are no third-party creditors. Unless otherwise agreed [the question is asking about the default rule], how is the $6,000 distributed? a. $3,000 each. b. $3,500 to X and $2,500 to Y. c. $4,000 to X and $2,000 to Y. d. $5,000 to X and $1,000 to Y.

d. $5,000 to X and $1,000 to Y. Y is not entitled to service contribution unless otherwise agreed.

Heidi Klum and Tim Gunn are the general partners of Gates, Ltd. Bill Gates is a limited partner who owns 55% of the partnership. Bill has veto power over the firm's investments. On these facts, is Bill personally liable to the partnership's creditors? a. Yes, because Bill owns more than 50% of the partnership. b. Yes, because Bill's name is in the name of the partnership. c. Yes, because Bill is involved in the control of the partnership. d. No, because a limited partner is not personally liable for the partnership's debts.

d. No, because a limited partner is not personally liable for the partnership's debts. It doesn't matter what the stake is or name in partnership. Limited partner is not liable.

A and B form a partnership. They acquire a truck in the partnership's name [partnership property] and use it for deliveries in the regular course of business. Which of the following is true? a. A has the right to use the truck for both business and personal purposes. b. A has the right to sell his one-half interest in the truck. c. Personal judgment creditors of A may attach A's one-half interest in the truck. d. None of the above.

d. None of the above. A cannot use truck for personal purposes, and A has no interest in the truck to sell/attach. Truck is partnership property