General Partnerships
General Requirements
No formal agreement or writing is required unless the SOF applies.
May file a registration statement with the Department of State.
Causes of Disassociation
1. Express will to withdraw
2. Occurrence of agreed upon event
3. Expulsion pursuant to P'ship agreement, bankruptcy, death, or incapacity
4. Termination of a partner that is a business entity
5. Appointment of a receiver
6. Transfer of substantially all of a partner's interest
7. Unanimous vote of the partners if unlawful to carry on with that partner, or judicial decree upon partner misconduct.
Profits & Losses
There is no right to compensation for services rendered to the partnership unless done in the course of winding up the business.
Liability
Partner in LLP is not liable personally for LLP obligations except their own torts or someone under their direct supervision. LLP is liable for tots of employees in the course and scope.
Formation
Filing Certificate of Limited Partnership, signed by each general partnership setting forth name of partnership, name and address of registered agent and each GP, and that the partnership is an LP
Liability
General and limited partners enjoy limited liability and are not personally liable for the debts and obligations of the corporation.
Actual & Apparent Authority
Actual Authority: Express authority to bind the partnership.
Apparent Authority: Held out to third party as having authority, and third party acts in reliance on the belief that the person is authorized to act.
Both give rise to liability for the partnership, and the partner's individually (joint & several)
Effect of Disassociation
Partnership buys out the dissociation partner and continues without them. Their right to management and fiduciary duties cease.
Apparent Authority continues 1 year after dissociation but partnership can notify creditors or file a statement of disassociation which is effective 90 days after filing.
Liability to existing creditors remain, and to partners for wrongful dissociation.
Management Rights
All partners have equal rights in management of partnership business absent an agreement otherwise.
An agreement to split profits other than equally itself does not change the equal voting rule.
decisions in the ordinary course of business can be done by majority vote, but matters outside the course of business require unanimous consent.
Formation
Statement of Qualification:
1. Name of Partnership
2. Address of Chief Exec Office
3. Name and address of registered agent
4. Statement that partnership elects to be LLP
5. Deferred defective date, if any
Components
Made up of General Partners and Limited Partners.
General - Manage day to day operations and remain personally liable.
Limited - No management authority and no personal liability.
Either can maintain direct or derivative action against partnership
Factors for finding existence of partnership
Courts look to the intent of the parties. If they intend to carry on business as co-owners, there is a partnership even without subjective intent. They look at factors:
1. Capital investment
2. Control
3. Entitled to receive share of profits and losses presumed to be a partner
Not conclusive, but additional evidence of partnership - sharing of property in JT or TIC, designate relationship as partnership, undertaken venture requires extensive activity, sharing of gross returns
Dissolution & Winding Up
1. Event specified in the partnership agreement
2. Event makes it unlawful to continue
3. Judicial decree to wind up
4. Notification by a partner at will unless the remaining unanimously consent to carry on
5. Partnership for definite term and tasks is complete, unanimous agreement to wind up, or half the partners agree to wind up within 90 days of a partner's death, bankruptcy, incapacity, or wrongful dissociation
Partner Duties
1. Duty of Care
2. Duty of Loyalty
3. Good Faith and Fair Dealing
4. Provide without demand information a partner needs to exercise their rights, and on reasonable demand any other information.
Annual Report
Must file an annual report between Jan 1 and May 1. Required to maintain LLP status. Revocation of statement of qualification can result from failure to file but must be given 60 days notice of intent to revoke and the LLP can apply to reinstate within 2 years.
Requirements of LP
Filing with State
Partnership Agreement setting forth (1) amount or value of contribution of each partner, (2) times at which future contributions are to be made, (3) any person who is both general and limited partner, specification of transferable interest the person owns in each capacity and (4) events of dissolution.
Annual Report Filing
Partnership Property v. Separate Property
Deemed Partnership Property:
1. Acquired in partnership name, or
2. Acquired in the name of one or more partners in the instrument transferring title indicates they're acting for a partnership.
Presumed Partnership Property: Purchased with partnership funds.
Separate Property: Personal funds used, no indication that acquired in capacity as partner
Distribution of Assets
2. Partners in settlement of their accounts
Partnership creditors have priority over creditors that are partners with regard to partnership assets.
Admitting New Partners
Requires unanimous consent
Outgoing partners remain personally liable unless they have been released by the creditor.
Profits & Losses
Allocated on the value of capital contribution unless otherwise provided in the partnership agreement.
includes profits, losses and distributions based on capital contribution.
Transfer of interest to receive profits is proper, and does not cause dissolution or disassociation.
Rights in Property
Limited rights - partners are not co-owners. The property belongs to the partnership. Use for partnership purposes only unless the other partners consent.
Partner's creditors cannot reach the partnership property to satisfy personal obligations of the partner.
Liability & Statement of Authority
Partners and the partnership are jointly and severally liable for debts and obligations of the partnership. Agency rules apply to determine liability - actual and apparent. Partnership resources must be exhausted before recovering from a partner.
Statement of Authority: Grants or limits authority of partner on behalf of partnership. It must be filed with the Department of State and remains valid for five years. Required for a grant or limit on authority to transfer real property.
A partner listed in a statement of authority may limit their authority by filing a statement of denial with the department of state.
Merger/Conversion into other entity - liability arising during the partnership remains.