Business Law Chapter 37

Events That Cause Dissociation

1. By the partner's voluntarily giving notice of an "express will to withdraw" 2. By the occurrence of an event specified in the partnership agreement 3. By a unanimous vote of the other partners under certain circumstances 4. By order of a court or arbitrator if the partner has engaged in wrongful conduct that affects the partnership business 5. By the partner's declaring bankruptcy

Partnership by Estoppel

When a third person has reasonably and detrimentally relied on the representation that a nonpartner was part of a partnership

The rights of partners in a partnership

management, interest in the partnership, compensation, inspection of books, accounting, and property.

Joint and several liability

means that a third party has the option of suing all of the partners together (jointly) or one or more of the partners separately (severally)

Dissociation

occurs when a partner ceases to be associated in the carrying on of the partnership business.

Buy-Sell Agreement

provides for one or more partners to buy out the other or others

Certificate of Limited Partnership

required for the formation of a Limited Partnership

Winding up

the actual process of collecting, liquidating, and distributing the partnership assets

Partnership at will

the partnership can be dissolved at any time

Pass-through entity

a business entity that has no tax liability—the entity's income is passed through to the owners of the entity, who pay income taxes on it.

Limited Partnership (LP)

a business organizational form that limits the liability of some of its owners. Consists of at least one general partner and one or more limited partners.

Information Return

a form Partnerships must file with the IRS

Events that cause Dissolution

a general partner's voluntary dissociation, bankruptcy, retirement, death, or mental incompetence of a general partner will cause the dissociation of that partner and the dissolution of the limited partnership unless the other members agree to continue the firm

Limited Liability Partnership

a hybrid form of business designed mostly for professionals who normally do business as partners in a partnership

A family limited liability partnership (FLLP)

a limited liability partnership in which the partners are related to each other—for example, as spouses

Articles of Partnership

a partnership agreement

Joint liability

a third party must sue all of the partners as a group, but each partner can be held liable for the full amount.

The Uniform Partnership Act (UPA)

governs the operation of partnerships in the absence of express agreement

Exception to Partnership

1. A debt by installments or interest on a loan 2. Wages of an employee or for the services of an independent contractor 3. Rent to a landlord 4. An annuity to a surviving spouse or representative of a deceased partner 5. A sale of the goodwill of a business or property

How to determine whether a partnership exists

1. A sharing of profits and losses 2. A joint ownership of the business 3. An equal right to be involved in the management of the business

Unanimous consent is required for these decisions

1. Alter the essential nature of the firm's business as expressed in the partnership agreement 2. Change the capital structure of the partnership 3. Amend the terms of the partnership agreement 4. Admit a new partner 5. Engage in a completely new business. 6. Assign partnership property to a trust for the benefit of creditors, or allow a creditor to enter a judgment against the partnership, for an agreed sum, without the use of legal proceedings 7. Dispose of the partnership's goodwill 8. Submit partnership claims to arbitration. 9. Undertake any act that would make further con-duct of the partnership business impossible

Dissolution

The termination of a partnership

Dissolution of a partnership can be brought about by:

acts of the partners, by operation of law, or by judicial decree

Partnership for a term

an agreement that specifies the duration of the partnership by stating that it will continue until a designated date or until the completion of a particular project.

Partnership

arises from an agreement, express or implied, between two or more persons to carry on a business for a profit.

General partner

assumes management responsibility for the partnership and has full responsibility for the partnership and for all its debts

Buyout Price

based on the amount that would have been distributed to the partner if the partnership had been wound up on the date of dissociation

Limited Partner

contributes cash or other property and owns an interest in the firm but is not involved in management responsibilities and is not personally liable for partnership debts beyond the amount of his or her investment

Limited Liability Limited Partnership (LLLP)

differs from a limited partnership in that a general partner in an LLLP has the same liability as a limited partner in a limited partnership. The liability of all partners is limited to the amount of their investments in the firm.

Charging order

filed by a partner's creditor to attach the partner's interest in the partnership t satisfy the partner's obligation