Partnership Illinois Flashcards

Partnership (Illinois) Flashcards Under the Revised Uniform Partnership Act, which of the following statements regarding lawsuits involving a partnership is correct?AA partnership may sue or be sued only in the partnership name.BSuits by and against the partnership must name the individual partners.CA partnership may sue or be sued in the names of the individual partners.DPartners may not be sued in their individual capacity.

• A partnership may sue or be sued in the partnership

name or in the names of the individual partners, or both.With respect to limited partnerships, which of the following statements regarding a general partner's liability is NOT true?A General partners are jointly and severally liable for all obligations of the partnership.BGeneral partners are not personally liable on partnership obligations if the limited partnership is also a limited liability partnership.C Incoming general partners are not personally liable for any partnership obligation incurred before they became general partners.DGeneral partners are not personally liable for the obligations of the partnership beyond their agreed-upon contributions.

• General partners may be personally liable for obligations

of the partnership beyond their agreed-upon contributions.General partners are jointly and severally liable for all obligations of the limited partnership, unless the limited partnership is also a limited liability partnership. In that case, any liability incurred belongs to the partnership alone, and the general partners are not personally liable on the obligation. Incoming general partners are not personally liable for any partnership obligations incurred before they became general partners. General partners may be personally liable for obligations of the partnership beyond their agreed-upon contributions.A partner is liable for each of the following

EXCEPT:ACrimes committed by a co-partner within the

scope of partnership business of which the partner had knowledge.BTorts committed by a co-partner or an employee of the partnership within the scope of partnership business.CContracts made by a co-partner within the scope of partnership business.DFrauds committed by a co-partner in the course of partnership business, even if the other partners have no connection with, knowledge of, or participation in the fraud.

• A partner is not criminally responsible for crimes

committed by a co-partner unless the partner participated in the commission of the crime as a principal or accessory.A partner is liable for any torts committed by a copartner or by an employee of the partnership within the ordinary scope of partnership business or with authority of the partnership, including any fraud-even if the partner has no connection with, knowledge of, or participation in the fraud.Additionally, a partner is liable on contracts made by a co-partner within the scope of partnership business, as well as any other contracts expressly authorized by the partners.Under the Revised Uniform Limited Liability Company Act ("RULLCA"), which of the following statements is correct regarding the management of a limited liability company ("LLC")?AIt is presumed that members will manage an LLC.BIt is presumed that managers will manage an LLC.CIt is presumed that each member will have voting strength proportionate to his ownership interest.DIt is presumed that each manager will have voting strength proportionate to his capital contribution.

• Under RULLCA, management of an LLC is presumed to

be by all members. Other management arrangements can be made (e.g., management by only some of the members or by outside managers), but they must be specified in an operating agreement. Each member (or manager, if the LLC is manager-managed) has equal rights in the management and conduct of the LLC unless otherwise agreed.

Under the Revised Uniform Partnership Act ("RUPA"), how long does a partnership continue to exist after dissolution?A The partnership continues until a statement of dissolution is filed with the secretary of state.B The partnership continues until winding up of the business is complete.C The partnership continues for 90 days after a statement of dissolution is filed with the secretary of state.D The partnership continues for 120 days after a statement of dissolution is filed with the secretary of state.

• Under RUPA, after an event of dissolution occurs, a

partnership continues until the winding up of business is completed, at which time the partnership is terminated. A statement of dissolution does not end a partnership. The partnership will be bound by a partner's post-dissolution acts where the party with whom the partner dealt did not have notice of the dissolution. If a partner files a statement of dissolution with the secretary of state, third parties will be deemed to have notice of the dissolution 90 days after it is filed.Pursuant to the duty of loyalty, a partner must do all of the

following EXCEPT:AAccount for profits, property,

opportunities, or other benefits derived by the partner in conjunction with partnership business.BRefrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law.CRefrain from dealing with the partnership as, or on behalf of, a party having an interest adverse to the partnership.DRefrain from competing with the partnership.B Partners have a duty to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law, but this duty is part of the duty of care rather than the duty of loyalty. Partners owe the partnership and other partners the duty of loyalty. This duty

is threefold: (i) to account for profits, property,

opportunities, or other benefits derived by the partner in conjunction with the partnership business; (ii) to refrain from dealing with the partnership as, or on behalf of, a party having an interest adverse to the partnership; and (iii) to refrain from competing with the partnership.Which of the following is required to form a partnership?A A written partnership agreement.B Intent to form a partnership.C At least two persons.D Contributions to partnership capital.

• Under the Revised Uniform Partnership Act ("RUPA"), a

partnership is an association of two or more persons to carry on as co-owners a business for profit. Although the partners need not intend to form a partnership, they must intend to carry on as co-owners of a business for profit. A writing is not required; a partnership can be formed by conduct (i.e., associating to form a business for profit).Partner contributions to partnership capital are not required to form a partnership.The Uniform Limited Partnership Act ("ULPA") grants certain rights to general and limited partners. Which of the following rights is exclusive to general partners?A The right to manage the limited partnership's activities.B The right to information.C The right to distributions.DThe right to assign the partner's interest in the partnership.

• The ULPA's grant of management rights is exclusive to

general partners. However, as a matter of contract, the partnership agreement may allocate the right to manage or control the partnership to limited partners. Both general and limited partners are granted the right to information, although the right is not identical. Furthermore, both general and limited partners are granted the right to distributions and to assign the partner's interest in the partnership.The absence of an agreement to share losses

is:ANecessary to create a partnership.BNot permitted by

the Revised Uniform Partnership Act ("RUPA").CEvidence that the parties did not intend to form a partnership.DEvidence that the parties intended to form a partnership.

• While there is no requirement under RUPA that sharing

losses is necessary to create a partnership, the absence of an agreement to share losses is evidence that the parties did not intend to form a partnership.

Which of the following statements regarding actual authority of a partner is true?AIf the partnership agreement authorizes a partner to act, no further action is required for a partner to act.BA partner is prohibited from taking any action that is not specifically authorized by the partnership agreement.CA partner has actual authority to act on behalf of the partnership by virtue of being a partner.DUnanimous consent is required to grant a partner actual authority to act on behalf of the partnership in all cases.

• A partnership will be bound by an act of a partner if the

partner has actual authority. One way that actual authority can be granted is in the partnership agreement. If the agreement authorizes a partner to act, no further action is required for a partner to act. Actual authority also can be granted by the consent of the partners. Generally, a majority vote of the partners is all that is needed to grant a partner actual authority. However, for acts outside the ordinary course of business, the unanimous vote of the partners is required. A partner does not have actual authority to act on behalf of the partnership simply by virtue of being a partner (although a partner may have apparent authority to carry on business apparently within the scope of partnership business by virtue of being a partner).Under the doctrine of partnership by estoppel, even though there is no partnership agreement and the parties as between themselves are not partners, they may be held liable to third parties as if they were partners. This issue is

likely to arise when a person:ARepresents herself as a

partner and another partner extends credit to her.BFails to deny partnership status when named by another in a statement of authority.CFails to file a statement of dissociation after leaving a partnership.DHolds another person out to be her partner.

• Partnership by estoppel arises when a person, by words

or conduct: (i) represents herself as a partner or consents

to being represented by another as a partner, and a third party extends credit to the actual or apparent partnership in reliance on the representation; or (ii) holds another person out to be her partner, making the alleged partner her agent with the power to bind her to third parties as if the other were, in fact, a partner. (Note that answer (A) is incorrect because the partner extending credit to the person representing herself as a partner should know that the latter is not actually a partner.) A person held out by another as a partner is not liable as a partner unless she actually consents to the holding out; mere failure to deny a representation of partnership does not give rise to liability as a purported partner. Thus, the mere fact that one fails to deny partnership status when named by another in a statement of authority, or a partner's failure to file a statement of dissociation after leaving the partnership, does not alone give rise to liability as a purported partner.Which of the following statements regarding a partner's liability is NOT true?APartners are jointly and severally liable for all obligations of the partnership.BPartners are personally and individually liable for the entire amount of all partnership obligations.CIncoming partners are not personally liable for any partnership obligation incurred before their admission to the partnership.DOutgoing partners cease to be personally liable for any obligations incurred by the partnership while members 90 days after they leave the partnership.

• An outgoing partner remains liable on all obligations

incurred by the partnership while a member of the partnership, unless there has been payment, release, or novation, or the creditor has agreed to a material alteration in the obligation without the partner's consent. Thus, it is not true that an outgoing partner's liability automatically ends 90 days after leaving the partnership. All partners are jointly and severally liable for all obligations of the partnership, whether they arise in contract or tort. As such, an action may be brought against any one or more of the partners or the partnership. Moreover, each partner is personally and individually liable for the entire amount of all

partnership obligations. An incoming partner is not personally liable for any partnership obligation incurred before her admission to the partnership, although the incoming partner's contributions to the partnership may be used to satisfy existing partnership obligations.Which of the following factors raise a presumption that a partnership has been formed?A Sharing of