Partnership Property/Profits
X, Y, and Z form the XYZ Partnership. At the time of the partnership’s formation, X contributes $50,000 cash, Y contributes equipment valued at $25,000, and Z contributes land with a value of $25,000. After a year of operations, the partnership is thriving and the partners are looking forward to several years of profitable operations. The partners agree that the partnership should make an interim (i.e., non-liquidating) distribution of $60,000 of profits to the partners. How should the money be distributed?
$20,000 to X; $20,000 to Y; and $20,000 to Z
X and Y are partners in the XY partnership, a limited liability partnership. X commits a tort in the ordinary course of the partnership’s business. Subsequent to the commission of the tort, Z joins the partnership. Who is liable for the tort?
X and the partnership
X, Y, and Z are partners in the XYZ Partnership. X transfers his transferable interest in the partnership to T. T does not become a partner. T believes that he is entitled to more money from the partnership than he has received. Therefore, T requests to inspect the books and records of the partnership to confirm that he has received the proper amount of distributions. The partnership has not been dissolved. Must the partnership provide T access to its books and records?
No, as a transferee T does not have the right to inspect the partnership’s books and records.
W, X, Y, and Z are partners in the WXYZ Partnership. The partnership has a ten-year term starting in 2021 and ending in 2031. W withdraws from the partnership on January 1, 2023, in breach of the partnership agreement. On February 1, 2023, X, Y, and Z meet to decide whether to continue the partnership business. X votes to continue the business, arguing that “we committed to operate this business until 2031.” Y and Z vote to wind up the partnership business, arguing that without W (the partnership’s rainmaker), the business is sure to fail. Is the partnership dissolved?
The partnership is dissolved and its business must be wound up.
X, Y, and Z are partners in Law Firm, LLP, a limited liability partnership. X commits legal malpractice in handling a case for one of the firm’s clients. Who is liable to the client?
X and Law Firm, LLP
X, Y, and Z form the XYZ Partnership. Under the terms of their partnership agreement, X is the managing partner of the partnership and is authorized to make purchases on behalf of the partnership. X uses partnership funds to purchase a new Tesla automobile. The title to the automobile is put in X’s name. Based on these facts, who owns the automobile?
The XYZ Partnership
X and Y are partners in the XY Partnership. The XY Partnership breaches a lease agreement with Landlord. Landlord sues the partnership and obtains a judgment against the partnership based on the breach. With the judgment against the partnership, Landlord may levy execution against whose assets?
The partnership’s assets
X, Y, and Z are partners in the XYZ Partnership. At the time of the partnership’s formation, X contributed $50,000 cash, Y contributed equipment valued at $25,000, and Z contributed land with a value of $25,000. No additional contributions to the partnership have been made since these initial contributions. After one year of operations, X transfers one-half of his transferable interest in the partnership to T. Shortly after this transfer, the partners must decide whether to enter into a supply agreement with one of the partnership’s regular suppliers. How much voting power does each individual have in making this decision for the partnership?
X has 1/3 of the voting power; Y has 1/3; and Z has 1/3
X, Y, and Z are partners in the XYZ Partnership. While acting in the ordinary course of partnership business, X negligently injures V. After learning about what happened, Y announces that he is withdrawing from the partnership. V subsequently brings a lawsuit relating to the tort committed by X. Who is liable to V?
X, Y, Z, and the partnership
X, Y, and Z were the only partners of Partnership, a general partnership. X, acting with actual authority, entered into a contract on behalf of Partnership. Subsequently, X, Y, and Z unanimously approved the filing of a statement of qualification with the Secretary of State’s office to convert Partnership from a general partnership into a limited liability partnership. After this approval and the filing of the statement of qualification with the Secretary of State’s office, Partnership breached the contract. Who is liable for the breach?
X, Y, Z and Partnership
X, Y, and Z are partners in the XYZ Partnership. The partnership owns several vehicles, including a pickup truck. On weekends, when the pickup truck is not being used for partnership business, X uses the truck to haul his yard waste to the local dump. X pays for the gas used in hauling the waste and always returns the truck in clean condition before the partnership business reopens on Monday morning. Is X permitted to use the truck?
No, because a partner may use partnership property only on behalf of the partnership.
X, Y, and Z are partners in the XYZ Partnership. After one year of operations, X transfers all of his transferable interest in the partnership to T. Subsequent to this transfer, the partnership defaults on a supply contract with C that the partnership had entered into before the transfer from X to T. Who is liable to C?
The partnership, X, Y and Z
X, Y, and Z are partners in the XYZ Partnership. X transfers all of his transferrable interest in the partnership to T. Y and Z subsequently vote to expel X from the partnership. Is X expelled and does T have any interest in the partnership?
X is expelled from the partnership and T now owns an economic interest in the partnership.
W, X, Y, and Z are partners in the WXYZ Partnership. The partnership has a ten-year term, running from 2020 through 2030. In 2021, W informs the other partners that he is withdrawing from the partnership. One month later, X tells Y and Z that he is also withdrawing. Is X permitted to withdraw and is it rightful or wrongful?
X is permitted to withdraw from the partnership, and this is not a wrongful withdrawal.
X, Y, and Z are partners in the XYZ Partnership. The partnership owns an expensive piece of equipment. Unrelated to partnership business, X is involved in a car accident and is ultimately found liable for negligence with respect to the accident. X’s judgment creditor seeks to collect on the judgment against X by levying execution against the partnership’s equipment. May the judgment creditor do so?
No, a partner is not a co-owner of partnership property and has no interest in partnership property subject to execution.
X, Y, and Z are partners in the XYZ Partnership. X dissociates from the partnership on January 1, 2021. Y and Z continue to operate the partnership business. On February 1, 2021, X renews a contract with one of the partnership’s suppliers. X had previously negotiated and signed the original contract with the supplier on behalf of the partnership while X was still a partner. The supplier did not know that X had dissociated from the partnership when X renewed the contract. Y and Z are upset with X because they had found a new supplier who could provide the partnership with the same goods for a substantially lower price. Who is liable to the supplier if a breach occurs?
X, Y and Z, and the partnership.
X, Y, and Z are partners in the XYZ Partnership. X dies. Y and Z continue the partnership business. Under the terms of the partnership agreement, a deceased partner may transfer all of his transferrable interest in the decedent’s will. X’s will provides that all of X’s interest in the partnership passes to X’s daughter, D. What interest does D have in the partnership and is she a partner?
D is a transferee, holding X’s economic interest but is not a partner in the partnership.
W, X, Y, and Z are partners in the WXYZ Partnership. The partnership has a ten-year term starting in 2021 and ending in 2031. The partners meet to decide whether to continue the partnership business. W and X vote to dissolve and wind up the partnership. Y and Z vote to continue the partnership. Is the partnership dissolved or does it continue?
The partnership continues because the partners did not unanimously agree to wind up the partnership.
General, Inc. is the sole general partner of Limited Partnership. As the names indicate, General, Inc. is a corporation and Limited Partnership is a limited partnership. Owner, an individual, is the sole shareholder, sole director, and the president of General, Inc. Owner also owns a limited partnership interest in Limited Partnership in his individual capacity. General, Inc. signs a lease agreement on behalf of Limited Partnership. Subsequently, Limited Partnership breaches the lease. Who is liable for the breach?
Limited Partnership and General, Inc.