Summary of Partnership Material

1. Partnership may be for a Term or At-Will.

a. Default is at-will.
b. You can imply a term, if the parties contemplate that debt will be paid by
the partnership.
2. Partners are entitled to share in control of the company.
a. At minimum, all partners should have access to information and should be
allowed to vote.
b. This can be altered by agreement.
3. When a majority deprivesdenies a partner mana!ement and control and
partnership action" then there is a violation of the !eneral rules of a
partnership. (Prentiss
a. !ree"e out.
b. Prentiss found free"e-out as a reason to dissolve.
#. $nder the $PA" dissolution has to be %ound up. The partnership is still in
e&istence durin! this %indin! up period of time.
a. #n some circumstances, if one of three partners die, dissolution happens.
The remaining partners handle winding up. This could be changed by an
agreement.
b. $ourt can handle this process, too. Auction, bro%er, etc. $ourt has the
discretion to choose the method.
'. Partner may bid on assets of the partnership.
a. Page& partners still owe each other fiduciary duty to act in good faith.
b. 'ad faith is hard to determine.
(. When partner dissolves and bids on the assets" the partner has to pay the
other partner fair compensation for assets. )ther%ise" the company canm
find bad faith on the part of the biddin! partner.
*. +iduciary duty bet%een partners in a partnership.
a. $ardo"o(s view on fiduciary duty)partners have to be utterly selfless. Do
what is best for the partnership.
b. Sidley Austin standard)less than $ardo"o standard.
,. Practical issues if you are a departin! partner.
a. *a%e sure creditors %now that you are no longer a partner.
b. Try and obtain a release from creditors.
c. +et an indemnification agreement from the rest of the partners)attorneys
fees and e,penses included.
d. #n limited partnership, file an amended partnership certification with
secretary of state to show that you are no longer a general partner.
-. .uy-out a!reements
a. -rotects the entity itself so it can continue.
b. -rotects the individuals (. allows you to have the ability to leave and (/
helps you get out with fair value.
1/. Tri!!er events for buy-out0
a. Death0
b. Disability0
c. 1ill of any partner0
d. 2esignation0
e. 2etirement.
11. )bli!ations and )ptions
a. Thin% about if you want things to always apply0 or
b. Apply only at will of partner.
./. Three Types of 1estrictions&
a. 1i!ht of +irst 1efusal0 you find buyer and before you can sell, you must
tell the other shareholders. The shareholders have the right to buy at the deal
price you offered to the potential buyer.
b. 1i!ht of +irst )ffer0 !irst go to the company and shareholder, they will
give an offer. Then you have a period of time to go out and find a buyer that
will give you a better deal.
c. Shot!un1ussian 1oulette& +o and tell other shareholders that you are
offering to sell at a certain price. The other shareholders have the option to
sell to you at that price, or ma%e you buy their shares at that price.
d. 3ote& you will not have all three in an agreement. The first two are
opposite and the third stands alone.
.3. 2aluation&
a. *ar%et 4alue0
b. Yearly valuation (hard one to maintain0
c. !ormula0
d. 'oo% value (this sometimes undervalues a company0
e. Appraiser.
$34+)1M PA1T351S64P A7T
8 (0 Partnership 9efined
8 *0 1ules for 9eterminin! the 5&istence of a Partnership
8 ,0 Partnership Property
8 -0 Partner A!ent of Partnership as to Partnership .usiness
5 .6& $onveyance of 2eal -roperty of the -artnership
8 110 Partnership .ound by Admission of Partner
8 120 Partnership 7har!ed %ith :no%led!e of or 3otice to Partner
8 1;0 Partnership .ound by Partner<s Wron!ful Act
8 1#0 Partnership .ound by Partner<s .reach of Trust
8 1'0 3ature of Partner<s =iability
8 1(0 Partner by 5stoppel
5 .7& 8iability of #ncoming -artner
8 1,0 1ules 9eterminin! 1i!hts and 9uties of Partners
8 1-0 Partnership .oo>s
8 2/0 9uty of Partners to 1ender 4nformation
8 210 Partner Accountable as a +iduciary
8 220 1i!ht to an Account
5 /3& $ontinuation of -artnership 'eyond !i,ed Term
8 2#0 5&tent of Property 1i!hts of a Partner
8 2'0 3ature of Partner<s 1i!ht in Specific Partnership Property
8 2(0 3ature of Partner<s 4nterest in the Partnerships
8 2*0 Assi!nment of Partner<s 4nterest
5 /9& -artner(s #nterest :ub;ect to $harging <rder
8 2-0 9issolution 9efined
8 ;/0 Partnership not Terminated by 9issolution
8 ;10 7auses of 9issolution
8 ;20 9issolution by 9ecree of 7ourt
8 ;;0 ?eneral 5ffect of 9issolution on Authority of Partner
8 ;#0 1i!ht of Partner to 7ontribution from 7o-partners after 9issolution
8 ;'0 Po%er of Partner to .ind Partnership to Third Persons after 9issolution
8 ;(0 5ffect of 9issolution on Partner<s 5&istin! =iability
8 ;*0 1i!ht to Wind $p
8 ;,0 1i!hts of Partners to Application of Partnership Property
8 ;-0 1i!hts %here Partnership is 9issolved for +raud or Misrepresentation
8 #/0 1ules for 9istribution
8 #10 =iability of Persons 7ontinuin! the .usiness in 7ertain 7ases
8 #20 1i!hts of 1etirin! or 5state of 9eceased Partner When the .usiness is
7ontinued