RSM225 Final Exam Notes

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University of Toronto St. George
Rotman Commerce
Professor Laurence

Partnerships General Partnership Creation: 1. Partnership Act - GPP arises automatically if 4 requirements met: (1) 2 or more legal entities (e.g. individuals, corporations) (2) Carrying on a business usually ongoing transactions, active commercial enterprise [not passive investment] (3) Jointly operating the same business together Distinguished form merely sharing premises/assets Distinguished from co-marketing/promotion Distinguished from employer & employee relationship (4) to make and share profits **strong indicator of GGP sharing revenues & expenses 2. Indicators of GPP: PP Act Rules: PP Act Rules maybe helpful where not clear whether requirement (2) or (3) above is met sharing profit is considered strong indication of GPP sharing profit + managing the business is even stronger indication of GPP butsharingprofitforthefollowingreasonsisnoindicationfororagainstexistenceof GPP: to repay debt (i.e. debt paid only from profits) remuneration of employee/agent part of purchase price for business 3. Relevance of Parties Agreeing Whether They are Partners: what parties call themselves or agree upon re: being partners (or not partners) is irrelevant to whether or not they are partners 4. Apparent Partner/Partner by Estoppel: does not create GPP but creates personal liability as if you were partner of a GPP applies where A represents him/herself to be, or allows him/herself to be represented as, Bs partner if a third party gives money or credit to B in reliance on that representation, A is personally liable for repayment of that money or credit (if B cannot repay) General Partnerships (GPP) - Consequences: 1. Personal Liability: each partner liable for ALL debts of GPP incurred while he/she was a partner (to extent GPP cannot pay) includes debts arising under contracts includes debts resulting from torts committed by partners or employees in course of carrying on the GPP business (e.g. theft of client funds, negligence) remain liable for those debts even after cease to be a partner 2. Fiduciary Duties of Partners to Each Other: information: make available to the other partners any information you have or learn, in your capacity as partner, that is relevant to the GPPs business personal benefits: turn over to the GPP any benefits you receive, without the consent of the other partners, from: using GPP property, name or business connections for your own purposes, or taking personal advantage of a business opportunity offered to the GPP competing: not carry on a business that competes with the business of the GPP without the consent of the other partners turn over to the GPP any benefits you receive from carrying on a competing business without the consent of the other partners3. Implied Terms: every GPP has a partnership agreement because PP Act sets out basic terms (implied terms) that applies to all GPPs each of the implied terms can be changed by the partners if they agree to something else implied terms: Profit/ Loss shared equally among partners Capital Contribution same from each partner mgmt of GPP business each partner can participate disagreements re: GPP business majority (of partners) decides change in GPP business all partners must consent admitting new partner all partners must consent GPP books/records each partner can see and copy Assigning partners share in the GGP [1] recipient only gets your share of profits [2] no right to manage or inspect GPP books Termination of GPP [1] if duration of GPP is indefinite (no fixed end date), any partner can terminate GPP at any time upon notice to the other partners [2] GPP terminates automatically on death, bankruptcy or insolvency of any partner 4. Authority to Bind GPP: each partner can bind the GPP to contracts, etc. unless: (i) no actual authority to bind GPP, and (ii) 3 party unaware that that person is a partner of the GPP General Partnerships (GPP) - Termination: 1. Implied Terms: 2. Illegality: GPP terminates automatically if GPP business becomes illegal (or if it becomes illegal to carry on that type of business in partnership) 3. Court Order: a partner can seek court order to terminate GPP:
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