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25 terms

Business Law Chapter 33

STUDY
PLAY
advantages of partnerships
1) they do not pay taxes
2) they are easy to form
default rules
rules that govern a partnership unless the partners agree otherwise
partnership under the UPA
the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership
association
means a voluntary relationship
factors in determining whether a partnership exists
1) the partners must share profits
2) partners share in the management of the business
3) an agreement to share in losses is strong evidence of a partnership
4) referring to yourselves as partners is not enough to create a partnership, but in a close case, it may help sway a court
5) charitable businesses are not partnerships
partnership by estoppel
a person does not want to be considered a partner because he wishes to avoid liability of the partnership
applies if:
1) participants tell other people that they are partners (even though they are not), or they allow other people to say, without contradiction, that they are partners
2) a third party relies on this assertion
3) the third party suffers harm
under the UPA...
the rules governing the liability of partners to outsiders are mandatory; most of the rules governing the relationship among partners are default provisions, meaning that the partners can change these rules if they desire. every partner is an agent of the partnership for the purpose of its business
actual authority
a partnership is liable for any act of a partner that it authorized
implied authority
a partnership is liable for any act of a partner that is reasonably necessary to carry out an authorized transaction
apparent authority
a partnership is liable for an unauthorized act of a partner if the partner appears to be carrying on the business of the partnership or even business of the same type
ratification
if the partnership accepts the benefit of the unauthorized transaction or fails to repudiate it, the partnership has ratified it
information
as agent, a partner has a duty to pass on all relevant information to the partnership; under the UPA, whatever one partner knows, the partnership is deemed to know
tort liability
a partnership is responsible for the intentional and negiligent torts of a partner that occur in the ordinary course of the partnership's business or with the actual authority of the partners
basic rule of partnership liability
all partners are personally liable for all debts of the partnership
joint and several liability
means that a creditor can sue the partnership and the partners together or in separate lawsuits or in any combination
charging order
is simply a court order granting a third party the right to receive a share of partnership profits
duties of care
partners are liable to the partnership for gross negligence, reckless conduct, intentional misconduct, or a knowing violation of the law; partners are not liable for ordinary negligence
partnership at will
a partnership with no fixed duration; any of the partners may leave at any time, for any reason
term partnership
a partnership in which the partners agree in advance how long it will last
dissociation
when a partner leaves the partnership
rightful dissociation occurs if...
1) a partner in a partnership at will serves notice that he intends to withdraw
2) the partners agree in advance on an event that causes dissociation
3) a partner dies or becomes incompetent
4) a partner is expelled by the other partners
the UPA permits the expulsion of a partner only if:
1) it is illegal to carry on the business with her
2) she has transferred her partnership interest
wrongful dissociation occurs if...
1) a partner violates the partnership agreement
2) a partner in a term partnership withdraws before the end of the term
3) a court expels a partner in a term partnership because her behavior is harmful
4) a partner in a term partnership becomes bankrupt
winding up process
all debts of the partnership are paid, and the remaining proceeds are distributed to the partners
how are partnerships distributed
1) to creditors of the partnership, icluding creditors who are partners
2) any leftover funds (or obligations) are distibuted to the partners