Corporate Law
What is a general partnership?
- A creature of agency law! = Partners: Agents = Partnership: Principal
What are the disadvantages of a proprietorship form?
- Liability. The personal liability of the owner is unlimited. - Access to capital/financing
What are the advantages of a proprietorship form?
- No special documents or paperwork required. - The owner has the absolute right to make all management and governance decisions. - The owner receives all of the gains and losses from the business. - Assets can be transferred or sold simply. - Taxation is at the individual level through Form 1040
What are the four common cooperate forms?
- Sole proprietorship - Partnership - Corporation - Limited Liability Company
What is a proprietorship?
- The simplest business form which is comprised of a single owner. - The entity is not separate from the individual.
In a limited partnership, what is the liability of the partners?
A general partner bears unlimited personal liability for the partnership's debts, while a limited partner's liability is limited to the extent of their capital contribution. Limited partners are not personally liable for the partnership's debts beyond what they have invested.
What is the formation of a general partnership?
A general partnership is established based on agency law principles, where partners act as agents for the partnership, which is considered the principal. It forms when two or more individuals or entities voluntarily come together to conduct a business as co-owners for profit. This voluntary association requires agreement from all partners involved. Partners can be individuals or other entities like corporations or LLCs. Each partner must contribute to the management of the business, and the primary motive for the partnership is profit.
What is the dissolution of a general partnership?
A general partnership typically dissolves either by mutual agreement or when a partner withdraws, such as by reaching the end of a specified time period or leaving the partnership for other reasons like death. However, partners can agree to continue the partnership even if one partner leaves. After dissolution, the partnership settles its affairs by collecting and selling assets, paying off creditors, and distributing any remaining funds to the former partners. If there's not enough money to cover all debts, general partners remain personally responsible. When a partner dies, their share of the partnership doesn't automatically transfer to their heirs; instead, the remaining partners receive the deceased partner's share of the partnership assets while the heirs receive the value of that share.
What are the key points of a general partnership?
All partners have the right to manage the organization and can bind the partnership-- and have personal liability for the debts of the organization.
What is the tort liability in a general partnership?
In a general partnership, each partner is personally liable for any wrongful acts (torts) committed by themselves or by other partners during partnership activities. This means that partners can be held accountable for any damages caused, and they are collectively responsible for the full amount owed to the injured party. If one partner pays more than their share of the liability, they can ask the other partners to compensate them for their extra contribution.
What is the governance of a limited partnership?
In a limited partnership, a general partner has complete authority to manage the partnership. On the other hand, a limited partner lacks any management rights within the partnership. It's worth noting that if a limited partner assumes too much management responsibility, they risk losing their limited liability status and may be treated as a general partner instead.
How does the general partnership agreement started implemented?
The agreement may be written, oral, or implied. NO formalities are necessary.
What is the contract liability in a general partnership?
When a partner in a general partnership makes a contract with a third party, it legally binds the entire partnership. This means that all general partners are personally liable for any debts or obligations arising from that contract. If someone sues the partnership over a contract issue, they must sue all the partners to be able to collect any damages. However, if successful, the plaintiff can usually recover damages from one, all, or some of the partners involved in the contract.
What is the formation of a limited partnership?
When forming a limited partnership, the process is formal and involves agreement, similar to a general partnership. However, if there's an error in the formation process, the limited partnership isn't valid, and it's treated as a general partnership instead. In this case, limited partners are considered as general partners, meaning they have the same responsibilities and liabilities as general partners.
