Business Law 2 - Chapter 25 The Business Person: An introduction List of Exam Terms
What does the RULPA define a limited partnership as?
"A partnership formed by two or more persons...having one or more general partners and one or more limited partners."
What does the RUPA say a partnership is?
"An association of two or more persons to carry on as co-owners of a business for profit."
What can a general partner accumulate?
Additional capital without admitting another general partner who would be entitled to management rights. Thus, the general partner maintains control while strengthening the firm's treasury.
What is the purpose of the certificate of limited partnership?
To warn third parties of the limited liability of some partners.
For a limited partnership, what must usually be filed?
Usually, a certificate of a limited partnership must be filed with he secretary of state's office.
Sole Proprietorship
A business operation owned and operated by one person.
Continuity of Existence
A concept promoted by the Revised Uniform Partnership Act that permits a partnership to continue to operate as an entity even after individual partners are no longer associated with it.
As is often the case with legal terms, person can have multiple meanings. In this case, what can the term refer to?
A flesh-and-blood individual, a corporation, other partnerships, joint ventures, trusts, estates, and other commercial or legal institutions.
What is one disadvantage of a sole proprietorship?
A major disadvantage to this type of business is that the owner of a sole proprietorship is subject to unlimited liability.
Limited Partner
A partner who does not take part in the management of a firm and whose liability does not extend beyond his or her investment.
What is a second essential point that the RUPA emphasizes.
A partnership must involve a sharing of profits.
What is the easiest business organization to form?
A sole proprietorship.
Entity Theory
A theory in partnership law that holds that a partnership is actually a separate legal person with its own legal identity.
What is a third advantage of a sole proprietorship?
A third advantage is that a sole proprietorship is relatively simple to begin and to end.
In contrast, under the aggregate theory, what is the partnership simply seen as?
An assembly or collection of the partners who do business together.
Partnership
An association of two or more persons to carry on a business for profit.
According to the entity theory, what does a partnership exists as?
An individual person with its own separate identity. This unique, individual entity is separate from the identities of the partners.
What is a second disadvantage of a sole proprietorship?
Another disadvantage is that the sole proprietorship's existence depends entirely upon the sole proprietor.
What is a second advantage of a sole proprietorship?
Another major advantage is that the owner may keep all of the profits made by the sole proprietorship.
The RUPA states that partnership property is what?
Any and all property that has been obtained by the partnership itself.
·In most cases, how can business people initiate a sole proprietorship?
By simply opening their doors for business.
Limited partners must also guard against what?
Becoming too involved in the business.
A limited partnership is advantageous for who?
Both the limited partner and the general partner.
Under the RUPA, what do partnerships also have?
Continuity of existence.
Limited Partnership
One or more general partners joined with one or more limited partners to operate a business entity for profit.
What is one thing that a sole proprietorship might have to do?
Depending on the nature, location, and extent of the business, the sole proprietorship may have to check zoning restrictions, licensing laws, and filing requirements.
What is a third instance of partnership property.
Ff the instrument of transfer indicates that the property was obtained by a partner in his or her role as a partner or if the partnership is referred to in the instrument, the property belongs to the partnership.
What is a third disadvantage of a sole proprietorship?
Finally, owners of sole proprietorships often find it difficult to raise a lot of cash quickly for expansion purposes.
When it is difficult to determine whether a piece of property belongs to the partnership or to a partner, what is a second question the court may ask?
Has the partnership expanded its own funds to improve or repair the property?
When it is difficult to determine whether a piece of property belongs to the partnership or to a partner, what is one question the court may ask?
Has the partnership included the property in its account books?
When it is difficult to determine whether a piece of property belongs to the partnership or to a partner, what is a third question the court may ask?
Has the partnership paid other expenses, such as maintenance costs, for the property?
Moreover, if in the certificate of limited partnership, a limited partner is incorrectly identified as a general partner, then what?
He or she would not have limited partner status.
What is the only state that has not adopted the UPA?
Only Louisiana, which is devoted to the Napoleonic Code, did not adopt the UPA.
What is a second instance of partnership property?
If the property was obtained by a partner in his or her role as a partner, it is partnership property.
What is one instance of partnership property?
If the property was obtained in the partnership's name, it is partnership property.
The fact that the RUPA has established the existence of a partnership as an entity has done what?
It has alleviated some of the difficulties once associated with identifying partnership property.
What does Continuity of Existence Permit?
It permits a partnership to continue to operate as an entity even after the individual partners are no longer associated with it. In addition, the partners are considered agents of the partnership.
The UPA was so successful that what happened?
It was put into practice by every state in the union but one.
What will failure to file a certificate of limited partnership do?
It will deprive a limited partner of liability if third parties attempting to hold the limited partner liable did not know that they were dealing with a limited partnership.
The UPA does, however, have what?
Limitations and shortcomings.
The limited partner also benefits because a limited partnership means what?
Limited liability.
· Nevertheless, the UPA has been the may stay of partnership law, in relation to general partnerships, for how long?
More than 90 years.
Limited Partners are what?
Nonparticipating investors. They contribute cash, property, or services to the partnership but do not take part in the management of the firm.
What is one essential point that the RUPA emphasizes.
Partnerships must involve at least two persons.
What is one advantage of a sole proprietorship?
Perhaps the greatest advantage to a sole proprietorship is that the owner has complete control over the business.
This last point is so crucial that the sharing of profits is considered what?
Prima facie evidence of the existence of a partnership.
Moreover, if in the certificate of limited partnership, a limited partner is incorrectly identified as a general partner, he or she would not have limited partner status. To correct such an error, what would the limited partner have to do?
Refile an amended certificate of limited partnership or leave the limited partnership altogether.
What must limited partnerships follow?
Strict filing requirements.
Limited Liability in turn means what?
That limited partner's nonpartnership property cannot be used to satisfy any debts owed by the partnership. Thus, limited partners receive a return on their investment while risking only that original investment.
The purpose of the certificate is to warn third parties of the limited liability of some partners. However, some state statutes indicate what?
That neither the names of the limited partners nor the amounts of their capital contributions must be included in the certificate. This provision simplifies the formation of a limited partnership because it allows limited partners to remain anonymous.
The more of these questions asked by the court that can be answered in the affirmative, the more likely it is of what being so?
That the property is partnership property.
What governs limited Partnerships?
The Revised Uniform Limited Partnership Act (RULPA).
What has been one of the most dependable sources of law affecting partnerships?
The Uniform Law Commission (ULC) which, when it was still known as the National Conference of Commissioners on Uniform State Laws, developed the Uniform Partnership Act (UPA) in 1914.
RUPA Entity Theory
The latest partnership statute written by the National Conference of Commissioners on Uniform State Laws.
Prima fice evidence in the context of profit sharing in partnerships means what?
The law presumes, in the absence of evidence to the contrary, that an individual receiving profits is a partner.
Uniform Partnership Act (UPA)
The original partnership statute written by the National Conference of Commissioners on Uniform State Laws.
What is an example of an unlimited liability that a sole proprietor is subject to.
The sole proprietor is responsible for all of the debts incurred in running the business. This liability may even extend to the owner's personal assets.
The drastic actions of refiling an amended certificate of limited partnership or leaving the limited partnership altogether would be necessary unless what?
The state statute under which the limited partnership was formed allows a limited partner who has been incorrectly named as a general partner to file with the appropriate state office a unilateral disclaimer of general partner status.
Capital Contributions
The sum contributed by a business partner as a permanent investment in the business. It is then considered to be the property of the partnership that the partners are entitled to have returned when the partnership is dissolved.
What does the RUPA definition emphasize?
The two essential elements of a partnership.
Recently, however, what have many state legislatures done?
They have greatly expanded the types of activities that a limited partner can perform without losing the shelter provided by limited partnership status.
What might happen to a limited partner who exercises to much control over partnership affairs?
They may lose the protective mantle of limited liability.
In a limited partnership, general partners do what?
They take an active part in the management of the firm and have unlimited liability for the firm's debts.
Under the Uniform Partnership Act, what was there room to dispute?
Whether a partnership should be considered an aggregate or an entity.