Business Law Chapter 37

a partnership agreement generally states the intention to create a partnership. contribute capital, share profits and losses, and participate in management.

Partnership formation

Caused by any change in the relation of the partner that shows unwillingness or inability to carry on partnership business. To continue the business, a partner can organize a new partnership.

Partnership termination

(1) creditors, including partners who are creditors; (2) partners and former partners receive unpaid distributions of partnership assets and, except as otherwise agreed, a return on their contributions and amounts proportionate to their share of distribution

Priority to assets on Dissolution

property acquired by a partnership is normally partnership property. A partner can use this property only on the firm's behalf. A partner is not co-owner of this property and has no interest in it that can be transferred. A partner's interest is subject to a judgment creditor's lien, attachable through a charging order

Property rights-rights of partners-Partnership operation

the agreement can be oral, written, or implied by conduct. some must be in writing under the statue of frauds. partners can agree to any term that is not illegal or contrary to public policy

the partnership agreement-formation

a partner must account to the firm or "any property, profit, or benefit" in the conduct of its business or from a use of its property, and refrain from dealing with the firm as an adverse party or competing with it.

Duty of loyalty-fiduciary of partner

a partner's right to participate in the firm's business ends. The duty of loyalty ends. The duty of care continues only with respect to events that occurred before dissociation, unless the partner participates in winding up the firm's business.

Effects of dissociation-the partner

sue partnership as one.

Entity

a partner owes the firm and its partners duties of loyalty and care

Fiduciary Duties and liabilities of partners

The appropriate form must be filed with a central state agency. The business's name must include "Limited Liability Partnership" or LLP. Annual reports must be filed with the state.-basically the same as a general partnership

Formation of LLP

is a public, formal proceeding; there must be two or more partners (at least one of whom is a general partner), and certificate of limited partnership must be signed and filed with a designated state official (typically secretary of state)

Formation of limited partnership

dissociation in any form -retirement, death, or mental incompetence- of a general partner dissolves the firm, unless continued by all other partners. Illegality, expulsion, or bankruptcy of a general partner dissolves a firm

General partnership dissolution of limited partnerships

agency principles apply to all partnerships. oral partnerships are valid

Agency concepts and partnership law

each partner is an agent of the partnership in carrying out its business, unless designated otherwise. Authorized vs. unauthorized: a partner can't act purportedly on behalf of the partnership outside the scope of the business.

Authority of powers-duties and liabilities of partners

a partnership arises from an agreement between two or more persons to carry on a business for profit

Basic partnership concepts

a partnership for a term ends on a specific date or the completion of a particular project. Dissolution without consent of all partners before the end of the term is a breach of the agreement. if there is no fixed term, a partnership is at will, and any partner can dissolve the firm at anytime.

Duration of the partnership-formation

occurs when a partner ceases to be associated in the carrying on of the partnership business. The partner can have his or her interest bought by the firm, which otherwise continues in business.

Dissociation of a partner

a partner must refrain from "grossly negligent or reckless conduct, unintentional misconduct, or a knowing violation of law"

Duty of care-fiduciary of partner

a partner has a right to complete information concerning the conduct of partnership business. Partnership books must be kept at the principal business office. Right to inspect books for a legit reason

Inspection of the books- rights of partners-Partnership operation

unless the partners agree otherwise, profits and losses are shared equally

Interest in the partnership-rights of partners

In most states, partners are jointly and severally liable for all partnership obligations, including contracts, torts, and breaches of trust. A partner who commits a tort must reimburse the partnership for any damages it pays. (can go after a single partner to settle a debt.)

Joint and several liability-liability of partners

General partners assume liability for all partnership debts. A limited partner is liable only to the extent of any contribution that is promised ti the firm or any part of a contribution that was withdrawn. But participation in management results in a limited partner's personal liability for partnership debt, if creditors knew of participation

Liabilities of partners in a limited partnership

The UPA exempts partners in an LLP from personal liability for any partnership obligation "whether arising in contract, tort, or otherwise"

Liability in an LLP

A LLP enjoys the tax advantages of a partnership, while partners avoid personal liability for the wrongdoing of other partners

Limited liability partnership

limited partnerships must include at least one general partner and one are more limited partners. General partners assume management responsibilities and liability for all partnership debts

Limited partnerships

a partnership doesn't exist if profits received as payment of 1. a debt by installments or interest on a loan 2. wages of an employer 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 goodwill of a business or property

Receipt of profits and partnerships status

limited partnerships have essentially the same rights as general partners- a right of access to the partnership bools and other information regarding partnership business.

Rights and duties in a limited partnership

1.A sharing of profits or losses 2. A joint ownership of the business 3. An equal right in the management of the business (can't have a non-profit partnership)

When does a partnership exist?

sue individuals in the partnership

aggregate

doing partnership business is a partner's duty and not compensable

compensation-rights of partners-Partnership operation

a partnership is "an association of two or more persons to carry on as co-owners a business for profit". The intent to associate is a key element. a corporation can be a partner

definition of partnership

partners can agree to dissolve the partnership at any time. a partnership dissolves on the occurrence of an event specified in the partnership agreement for its dissolution

dissolution by agreement- partnership termination

dissolution terminates the right of the partnership to exist as an ongoing concern, but the firm remains long enough to wind up its affairs.

dissolution-partnership termination

the partner's interest in the firm must be purchased according to the rules in the UPA 701. To avoid liability for obligations under a theory of apparent authority, a partnership should notify creditors of a partner's dissociation and file a statement of dissociation in the appropriate state office.

effects of dissociation-the partnership

dissociation occurs when a partner gives notices and withdraws, declares bankruptcy, assigns his or her interest, dies, becomes incompetent, or is expelled by the firm or by a court. other events can be specified in the partnership agreement.

events causing dissociation

In some states, partners are only jointly liable for partnership obligations, including contracts. this does not include debt arising from torts, and a creditor must sue all of the partners together.

joint liability-Liability of partners

the joint ownership of property is not enough to create a partnership. sharing profits form ownership doesn't by itself establish a partnership

joint property ownership and partnership status

death or assignment of interest of a limited partner doesn't dissolve the firm, nor does personal bankruptcy.

limited partnership no dissolution of limited partnerships

All partners have equal rights to manage the firm. each partner has one vote.

management-rights of partners-Partnership operation

when parties who are not partners hold themselves out as partners and make representations that third persons rely on in dealing with them, liability is imposed. A partner who misrepresents a non-partner's status is also liable (and the non-partner's act may bind the partnership).

partnership by estoppel-formation

1. Alter the essential nature of the firm's business or capital structure 2. admit new partners or enter a new business 3. assign property into a trust for the benefit of creditors 4. dispose of the firm's goodwill 5. confess judgment against the firm or submit firm claims to arbitration. 6. undertake any act that would make conduct of partnership business impossible 7. Amend partnership articles

unanimous concent management-rights of partners-Partnership operation

Involves collecting and preserving partnership assets, paying debts, and accounting to each partner for the value of his or her interest. no new obligations can be created on behalf of the firm. (put in liquid form-$)

winding up and distribution of assets- partnership termination

dissociation is wrongful if it is in breach of the partnership agreement, or occurs before the expiration of its term or completion of its undertaking. A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation.

wrongful dissociation