Formation, management, and control of general partnerships - Next Generation Bar Exam

1. Under RUPA (1997), when is property acquired by a partner presumed to be partnership property?

   When it is acquired in the partnership's name or with partnership funds. Property acquired in a partner's own name without partnership funds is presumed to be that partner's separate property.

2. Two friends open a bakery, contribute equally, split the profits, and never sign any agreement. What business form have they created?

   A general partnership. Co-owning a business for profit creates a partnership regardless of intent or formalities.

3. What formalities are required to form a general partnership?

   Neither a writing nor a filing is required. The parties' conduct alone can create a partnership.

4. Under RUPA (1997), what right does a partner have to compensation for services to the partnership?

   Only reasonable compensation for services in winding up the business, by default. Partners are compensated through their share of profits.

5. Under RUPA (1997), what vote is required for matters outside the ordinary course or to amend the partnership agreement?

   The consent of all partners. Unanimity protects each partner against fundamental changes.

6. Under RUPA (1997), what management rights does each partner have by default?

   Equal rights in the management and conduct of the partnership business. Management rights do not depend on the size of a partner's capital contribution.

7. What is the effect of sharing gross returns on whether a partnership exists?

   It does not by itself establish a partnership. Sharing gross revenue, as opposed to profits, is consistent with many non-partnership arrangements.

8. Under RUPA (1997), when does a partner's act bind the partnership?

   When apparently carrying on partnership business in the ordinary course, unless the third party knew of no authority. Each partner is an agent of the partnership for the purpose of its business.

9. What presumption arises when a person receives a share of a business's profits?

   That the person is a partner. The presumption does not apply if the share is received as debt repayment, wages, rent, an annuity, interest, or payment for goodwill.

10. Under RUPA (1997), what does a transferee of a partner's interest receive?

    Only the right to receive the partner's distributions. The transferee does not become a partner and acquires no management or information rights.

11. How is a general partnership formed?

    By the association of two or more persons to carry on as co-owners a business for profit. A partnership forms whether or not the parties intend to create a partnership.

12. What is the legal status of a partnership under RUPA (1997)?

    An entity distinct from its partners. The partnership can own property and sue and be sued in its own name.

13. Under RUPA (1997), how are matters in the ordinary course of partnership business decided by default?

    By a majority of the partners. Each partner has one vote, regardless of capital contribution.

14. Under RUPA (1997), how are profits and losses shared by default?

    Profits equally, and losses in the same proportion as profits. Default sharing is per capita, not in proportion to capital contributions.

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