General and Limited Partnerships: every key term you need (+ practice quiz)
25 flashcard terms for Business Associations Topic 2, written to match the course framework. Study them here, then drill them as interactive flashcards, or test yourself with the 15-question quiz — free, no account needed.
An association of two or more persons to carry on as co-owners a business for profit, formed by conduct without any filing, and treated as an entity distinct from its partners under RUPA.
Revised Uniform Partnership Act
The modern default statute, known as RUPA, adopted in most states; it embraces the entity theory, codifies partner fiduciary duties, and replaces automatic dissolution with a dissociation regime.
Profit-sharing presumption
Receipt of a share of business profits raises a presumption of partnership unless the payments were for wages, rent, interest on a loan, an annuity, or the sale of goodwill.
Partnership by estoppel
A person who represents themselves, or consents to being represented, as a partner is liable to a third party who extends credit in reliance on the representation.
Partnership agreement supremacy
The agreement governs relations among partners and displaces most statutory defaults, but it may not eliminate the duty of loyalty outright or unreasonably reduce the duty of care.
Partner as agent
Each partner is an agent of the partnership for apparently carrying on its business in the usual way, so a partner's ordinary-course act binds the firm unless the third party knew of a limit.
Joint and several partner liability
Under RUPA every partner is jointly and severally liable for all partnership obligations, though a creditor must generally exhaust partnership assets before reaching a partner's personal property.
Incoming partner liability
A person admitted as a partner is not personally liable for obligations incurred before admission; the new partner's capital contribution is nonetheless exposed to those claims.
Statement of partnership authority
A filed statement that may give constructive notice of limits on a partner's authority to transfer real property and can be recorded to protect the firm against unauthorized conveyances.
Partnership property
Property acquired in the partnership name, or with partnership funds, belongs to the entity; a partner has no transferable interest in specific firm assets and cannot pledge them individually.
Transferable interest
The only freely assignable partnership right is the share of profits, losses, and distributions; an assignee gets no management voice and does not become a partner without unanimous consent.
Default sharing of profits and losses
Absent agreement, profits are shared equally regardless of unequal capital contributions, and losses follow profits, a rule that surprises partners who invest very different sums.
Equal management rights
Each partner has an equal vote in ordinary business decisions, decided by majority, while acts outside the ordinary course or amendments to the agreement require unanimous consent.
Partner duty of loyalty
A partner must account for firm profits and property, refrain from dealing as an adverse party, and refrain from competing with the partnership before dissolution is complete.
Partner duty of care in a partnership
Limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law, so ordinary negligence in management is not actionable.
Partner information rights
Partners may inspect books and records kept at the chief executive office, and the firm must furnish without demand information material to the proper exercise of a partner's rights.
Dissociation
A partner's withdrawal from the firm by notice, expulsion, death, or bankruptcy; under RUPA the business may continue and the dissociated partner's interest is bought out.
Wrongful dissociation
Withdrawal in breach of the agreement, or before the end of a definite term, which makes the partner liable to the firm for damages and may delay payment of the buyout price.
Dissolution and winding up
Dissolution begins the process of liquidating assets, settling claims, and distributing what remains; the partnership continues in existence only for purposes of winding up its affairs.
Priority of partnership distributions
Assets pay outside creditors first, then partner creditors and loans, then partner capital accounts; any surplus is distributed as profit under the sharing ratio.
Limited partnership
A partnership formed by filing a certificate, containing at least one general partner with unlimited liability for firm debts and limited partners whose exposure is capped at their contributions.
Control rule for limited partners
Older statutes stripped a limited partner's shield if the partner participated in control; modern acts largely abandon that trap and protect limited partners regardless of management activity.
Limited liability partnership
A general partnership that files a statement of qualification, converting partner liability for firm obligations, including other partners' malpractice, into a shield resembling corporate limited liability.
Limited liability limited partnership
A limited partnership that elects LLP status so that even the general partner is shielded from the firm's obligations beyond its own wrongful conduct and its contribution.
Partnership taxation
Partnerships are pass-through entities: income, deductions, and credits flow to the partners and are reported on individual returns, avoiding the two layers of tax imposed on a C corporation.