Business Law ch 18 Partnerships

Entity Theory

the concept that the legal firm is a legal person

Sharing the Profits

two aspects: Business is for profit and If there is sharing of profit

Partnerships

"the association of two or more persons to carry on as co-owners a business for profit...whether or not the persons intend to form a partnership.

Co-Owners of a Business

Co-ownership comes in many guises. The four most common are joint tenancy, tenancy in common, tenancy by the entireties, and community property. In joint tenancy, the owners hold the property under a single instrument, such as a deed, and if one dies, the others automatically become owners of the deceased's share, which does not descend to his heirs. Tenancy in common has the reverse rule: the survivor tenants do not take the deceased's share. Each tenant in common has a distinct estate in the property. The tenancy by the entirety and community property (in community-property states) forms of ownership are limited to spouses, and their effects are similar to that of joint tenancy. These concepts are discussed in more detail in relation to real property in Chapter 31 "The Transfer of Real Estate by Sale".

Joint in Tenancy

In joint tenancy, the owners hold the property under a single instrument, such as a deed, and if one dies, the others automatically become owners of the deceased's share, which does not descend to his heirs.

Which is false? An oral agreement to form a partnership is valid. Most partnerships have no fixed terms and are thus not subject to the Statute of Frauds. Strict statutory rules govern partnership agreements. A partnership may be formed by estoppel.

Strict statutory rules govern partnership agreements.

Tenancy in Common

Tenancy in common has the reverse rule: the survivor tenants do not take the deceased's share. Each tenant in common has a distinct estate in the property.

Three elements that determine a partnership

The three elements are (1) the association of persons, (2) as co-owners, (3) for profit.

Association of Person

This element is pretty obvious. A partnership is a contractual agreement among persons, so the persons involved need to have capacity to contract. But RUPA does not provide that only natural persons can be partners; it defines person as follows: "'Person' means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity."RUPA, Section 101(10). Thus unless state law precludes it, a corporation can be a partner in a partnership

For profit businesses

Unincorporated nonprofit organizations (UNAs) cannot be partnerships.

Express Partnership

a partnership that is expressed in words, orally or written

joint venture

an association of persons to carry on a particular task until completed; Joint venturers are fiduciaries toward one another. Although no formality is necessary, the associates will usually sign an agreement. The joint venture need have no group name, though it may have one. Property may be owned jointly. Profits and losses will be shared, as in a partnership, and each associate has the right to participate in management. Liability is unlimited.Sometimes two or more businesses will form a joint venture to carry out a specific task—prospecting for oil, building a nuclear reactor, doing basic scientific research—and will incorporate the joint venture. In that case, the resulting business—known as a "joint venture corporation"—is governed by corporation law, not the law of partnership, and is not a joint venture in the sense described here

Partnerships are free to select any name not used by another partnership must include the partners' names in the partnership name can be formed by two corporations cannot be formed by two partnerships

can be formed by two corporations (also two partnerships)

Existence of a partnership may be established by

co-ownership of a business for profit estoppel a formal agreement

implied partnership

exists when there are two or more persons carrying on a business co-owners for profit

Partnerships are not taxable entities may buy, sell, or hold real property in the partnership name may file for bankruptcy have all of the above characteristics

have all of the above characteristics

Co-ownership sharing of profits

hile co-ownership does not establish a partnership unless there is a business, a business by itself is not a partnership unless co-ownership is present. RUPA provides that "a person who receives a share of the profits of a business is presumed to be a partner in the business," but this presumption can be rebutted by showing that the share of the profits paid out was (1) to repay a debt; (2) wages or compensation to an independent contractor; (3) rent; (4) an annuity, retirement, or health benefit to a representative of a deceased or retired partner; (5) interest on a loan, or rights to income, proceeds, or increase in value from collateral; or (5) for the sale of the goodwill of a business or other property.

Written versus oral agreements

if a business cannot be performed within one year from the time that the agreement is entered into the partnership agreement should be in writing or else it will be invalid under the Statute of Frauds

Partnership by estoppel

if the salesman believes rich guy is in the partnership because of something rich guy says and the people do not pay. Rich guy is liable. Two elements: (1) a representation to a third party that there is in fact a partnership and (2) reliance by the third party on the representation.

Other factors

right to participate in decision making, duty to share liabilities and the manner in which the business operated

The basic law of partnership is currently found in

statutory law

Aggregate Theory

that a partnership is an aggregation of individuals