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Partnership (Creation (No Articles of Incorporation, An association of two…
Partnership
Creation
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General Partnership:
- a handshake is sufficient, signed writing not required
- shared profits (a prima facie showing of a p'ship).
- Types (specific undertaking, a term, at will).
- Test is the intent of the parties.
- Personally liable w/o limitation for p'ship obligations
Limited Partnership:
- Contribute capital and share in profits, but take no part in the control or mgmt of the business
- liability is limited to the contributions
- Formed by filing a certificate w/ Sec'y of State
- Must have at least one general partner and one limited partner
Working Life
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Authority:
- express
- apparent - based on the nature and course of business
- Restrictions - 3rd party must know about restrictions on authority or p'ship will be bound
- Partner who acted w/o authority a may be liab. for breach of p'ship agreement
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Liabilities:
- All partners are jointly and severally liable for obligs. of the p'ship
- each partner is individually liable for the entire amount of the p'ship obligs.
- partner is entitled to indemnification by the p'ship for any payments he makes on the p'ship's behalf
- Partner may seek contribution from other partners if if he pays more than his share of liab.
- Retiring partner remains liab. on all obligations incurred before retirement
- Incoming partner is not personally liable for any p'ship obligs. incurred prior to her arrival.
Winding UP/ Termination
Every dissolved partnership must go through winding up before termination. Winding up = reducing p'ship assets to cash and then distributing cash to the entitled parties (creditors).
Order of distribution
1) Costs of the Sale
2) Outside Creditors
3) Inside Creditors (i.e., advances by one partner to keep a failing business afloat)
4) Capital Contributions
5) Profits
Partners need to contribute enough to cover liabilities.you either
1) Add up loans and capital contributions
2) Subtract from available cash
3) divide up losses equally to cover liabilities
P'ship Property
- Originally brought in--part of capital contrib.
- Subsequently acquired
- Purchased w/ p'ship funds
Partner's individual property
- Intent evidenced that any property originally brought in was not to be p'ship property
- Partners have a contrary intention of law.
Dissociation/Dissolution
Dissociation referes generally to a partner's separation from the p'ship including death, withdrawal, bankruptcy, or expulsion. P'ship is technically still alive at this point as the law wants business to continue. Generally, the P has the right to dissociate
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