Quiz 37: Partnerships and Limited Liability Partnerships

Business

Forced Sale: In the case of In re Dissolution of Midnight Star Enterprises, L.P. , 2006 SD 98, 724 N.W.2d 334 (2006), the circuit ordered the majority partners to buy the business for $6.2 million within ten days or it would be sold on the open market. The Supreme Court reversed and remanded. The Court stated that to sell an owner's property without his consent is an extreme exercise of power warranted only in specific cases. It further stated the withdrawing partner may be bought out after dissolution, making a forced sale unnecessary. The Court decided that upon remand, that if there is any value to the units after reevaluation, the majority partners should only be required to pay the value of their 6.5 partnership units. If the majority owners refuse to pay, then a forced sale is appropriate. 

A partnership occurs when there are one or more individuals sharing profits and losses, joint ownership of a business and an equal control in management issues. In this case, R is a manager, has the apparent authority as a manager to bind D in a contract with C. In addition, R has a share of the profits (20 percent) and has management control of the day-to-day business. However, there are not enough facts to prove that R has enough management control or enough of a stake in the company to be considered a partner in a situation where D could be held liable. Regardless, C can hold D liable to the contract as R had the apparent authority at a representative of the company to make this agreement.

Forced Sale: In the case of In re Dissolution of Midnight Star Enterprises, L.P. , 2006 SD 98, 724 N.W.2d 334 (2006), the circuit ordered the majority partners to buy the business for $6.2 million within ten days or it would be sold on the open market. The Supreme Court reversed and remanded. In the partnership agreement, the decision to force a sale of the partnership is a question of law reviewed de novo. The Court decided that upon remand that if the majority owners refuse to pay any amount owed to after reevaluation, then a forced sale was appropriate. 

Related Quizzes