Partnership
Partnerships are vicariously liable for torts committed by partners when...
1,. Acting in ordinary course of business, OR 2. Acting with the actual or apparently authority of co-partners. NOTE: Partners added at a later date are not liable for torts arising before they became a partner. Partners also not liable for criminal acts of other partners unless you helped commit them.
When does dissolution happen to a Partnership for a Definite Term?
1. After the time has run or the event specified in the pship agreement has occurred, OR 2. All partners vote to dissolve 3. After another partner's death / bankruptcy / wrongful dissolution, partnership dissolves IF a majority of the other partners elect to dissolve. Otherwise, it remains.
What order do distribution of partnership assets happen in?
1. Debts to outside creditors 2. Debts owed to partners 3. Return of partner's capital (cash or value or property put into partnership by a partner) 4. Profits
Limited Partnerships - Disassociation of GP
1. Disassociation of GP causes dissolution of the LP. If there is another GP AND the partnership agreement calls for continuation upon this event, then LP continues. LP can also continue after a GP disassociates if all GPs and LPs waive the dissolution and vote to continue business.
What are the 3 fiduciary duties of partners?
1. Duty of Loyalty - Dont compete w/ Pship, disclose business opportunities in same line of work as pship, avoid secret profits, promote best interests of pship. 2. Duty of Care - Avoid intentional misconduct & gross negligence / recklessness. 3. Duty of Good Faith & Fair Dealing
Limited Partnership Formation
1. Filing - Must file a "certificate of limited partnership" with the Secy of State 2. Naming - Name must include "Limited Partnership" or "LP." Traditional Rule says a limited partner's name can't be in the partnership's actual name since it gives the appearance that they are a general partner. Modern rule says limited partners can have their name in the LP's name without sacrificing limited liability.
Limited Partnerships - Default Rules for Disassociation & Dissolution
1. General & Limited Partners may disassociate from the LP. 2. On dissolution they get fair value of their interest in the LP. 3. If LP was for a definite term, then the dissociating partner is in breach and may be liable for damages caused by wrongful exit. Disassociation of an LP does not end the partnership.
What two classes of partners exist in LP? (Limited Partnerships)
1. General Partner - LPs must have at least one, manage & are personally liable for partnership debts. They have actual & apparent authority to bind LP to 3rd parties in contracts & torts. 2. Limited Partners - Akin to a shareholder. They are NOT personally liable and (under traditional rule) cannot participate in management. If they participate in management they become GPs and assume unlimited liability. Under the modern rule, limited partners can participate in management but retain limited liability.
What are the 5 rights and powers of partners?
1. Management rights (ordinary = majority vote of partners, unusual decision = unanimous) 2. Right to Share in Profits 3. Right to Distribution in Liquidation 4. Right to Access Info & Books 5. Right to Share in Losses (breaks down same as profits)
When is the partnership entity liable for torts committed by partners?
1. Partners committing torts acting in the ordinary course of business 2. Partners acting with actual or apparent authority of other partners Partners are not liable for criminal acts of other partners unless they helped commit the crime.
What are the liabilities of LLP partners?
1. Partners in an LLP liable for their own torts and torts committed by those under their direct supervision & control 2. Partners in an LLP not personally liable for partnership debts. 3. Courts can "pierce the veil" of the LLP in the same manner as with corporations Otherwise, general partnership rules apply.
What are disassociated partners entitled to?
1. Payment of their partnership interest 2. Indemnification against all known partnership liabilities and all future liabilities, except those caused by the disassociating partner.
3 Key Differences of a Limited Liability Partnership
1. Requires a filing of "statement of qualification" with the secretary of state - can't exist out of thin air like a regular partnership. Attempt to do so results in a regular partnership. 2. Name must identify the partnership as an LLP 3. Liability of partners different
What effect does a disassociation have on an At Will partnership?
Disassociation of one partner in an At Will partnership causes dissolution UNLESS the other partners waive dissolution and decide to continue business.
What is each partner's liability in a partnership?
Each partner is personally - BUT SECONDARILY - liable for partnership debts. i.e. The partnership entity's assets are sold off, then partners are personally liable for remaining debts under joint & several liability. Any partner who pays more than their capital share entitled to contribution from other partners.
Limited Partnership - Fiduciary Duties
General Partners - Same as regular partnership: Duty of Loyalty, Duty of Care, Duty of Good Faith & Fair Dealing Limited Partners, Non-Managing: Duty of Good Faith & Fair Dealing in Partnership affairs Limited Partners, Managing - Same as regular partnership.
Limited Partnerships - Derivative Actions
LPs may sue GP in the name of the partnership for breach of that GP's duty to the partnership IF harm was caused to the partnership. Any recovery from the suit must benefit the partnership as a whole.
Limited Partnership - Economic Rights
Profits, losses & distributions are divided in proportion to the relative value of each member's contribution to the LP. Contributions include cash, property, services, or promises to provide any of those in the future.
