2. Partnership

Tom Clancy v. his wife

1. FACTS: a. Husband and wife enter into agreement. P says that he reserved the right to get out of their contract. Q is whether P was asking to leave his contract in bad faith because the marriage had gone south 2. HOLDING: a. Partnership agreement can alter certain duties, but case was remanded to determine whether asking to leave the contract was in bad faith. b. Cannot eliminate the covenant of good faith and fair dealings even though agreement says he has final authority and can compete w/ partnership, might have breached duty to good faith

Meinhard v. Salmon

1. FACTS: a. P and D were partners on a property. As the end of their contract was approaching, D entered into an agreement with another party. P sues D for breach of fiduciary duty for failing to inform P of the new opportunity. 2. HOLDING: D breached fiduciary duty by not informing P of the deal. D had a higher duty because he had more knowledge. Failure to disclose was breach of duty . Opportunity belongs to partnership, dissent didn't think so b/c partnership had not renewed (term partnership)

Partnership Presumptions under RUPA (1) Losses (2) Managing the business (3) Ownership assigment

1. Losses are divided in the same proportion as profits 2. Each partner has equal right to manage the business; disputes are decided by a majority of partners regardless of ownership interests 3. A partners' power cannot be transferred and no one can become a partnership without unanimous consent of all other partners

Assume that PAC Surfboards had a profit of $99k in 201X; and further assume that the PT agreement provides the 2/3 of the profits are to be allocated to Capel. Aggey and Prop take the position that the partnership should not make any distribution to the partners, but rather should use the $99K to increase the advertising budget for the business . Capel comes to you and ask whether he can compel the partnership to distribute his share of the profits to him.

A partner has a right to receive Distributions but not a right to compel one. This would require an affirmative vote for an amendment change 401 (k) RUPA §401 (h) - Each partner has equal rights in mgmt and conduct of the partnership RUPA §401 (K) - A difference arising as to a matter in the ordinary course of business of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business of a partnership and an amendment to the partnership agreement may be undertaken only with the affirmative vote or consent of all the partners.

You represent Pac Surfboards, which had profits of $250,000 last year. Propp and Capel want to use these funds to further expand the business. Aggey however needs her share of the profits in order to pay back school loans. What do you advise?

Aggey can not demand profits but can exit out the partnership and is entitled to their ownership of equity -401K majority vote is needed because Partner cannot compel a distribution -If you are paying taxes on the profit, but you want have the cash to pay the taxes because the profits are not distributed

Who is liable in partnership?

All partners are jointly & severally liable. Individual partners are personally liable

Admission of new Partners: The pT agreement of PAC is silent as the issue of admitting new partners. Maynard has offered to invest $100,000 in PAC surebaors. Aggey and Propp are in favor of admitting Maynard as a new parter, but Capel is opposed. B) A&P have asked you whether they can amend the partnership to provide that admission of new partners requires the approval of a simple majority of the partners?

Amedning the partnership agreement is possible, BUT Amendment requires all votes 401 (K) - default rule

how to solve the problem of a partner dying ahead of time? (Problem is having to pay the estate partners's portion, which could be a liquidity issue for firm)

By purchasing life insurance on the partner

Partnership Salaries: Propp, Aggey & Capel are the sole partners in PAC surfboards . Aggey and Propp work in the business but Capel does not. B) Assume the partnership agreement of PAC surf provides that Aggey shall receive an annual salary of 30K and that Propp is to receive n annual salary of 25K . Capel has asked you whether he can prevent Aggey and Propp from increasing thier salaries. How do you respond?

Capel would need an amendment to the partnership agreement in order to stop them from increasing their salary , Capel now has veto power - this will give Capel protection

Under a default rule Under RUPA, how are decisions made in the (1) ordinary course of business & (2) outside the ordinary course of business?

Decisions in ordinary course of biz can be made by majority; decisions outside course of biz needs everyone's vote

Assume that PAC surfboards is a partnership. Propp, Aggey and Capel are he sole partners. The partnership agreement contains no previous provisions regarding the withdrawal of a. partner. The partnership agreement does provide that the partnerhsip is to have a ten year term. What will happen if Propp meets a tragic and premature death in YR2 of the partnership - assuming that the partnership agreement contains no provisions with respect to dissociation or dissolution and is not a partnership for term?

Dissociation by Death - partnership will continue unless ½ of other partners elect to dissolve - dead partner's share given to estate and based on greater of going concern or liquidation value paid w/in 120 days, giving estate leverage b/c partnership might not have cash to buy out estate -

Assume that Propp, Aggey and Capel are the only partners in PAC surf. Their pt agreement includes no provision with respect to dissolution, or dissociation, or duration of Partnership. Assume Capel dies on April 1, his widow wants the partnership to dissolve, but aggey and Propp want to continue to operate the partnership?

Dissociation by Death - partnership will continue unless ½ of other partners elect to dissolve dead partner's share given to estate and based on greater of going concern or liquidation value Þpaid w/in 120 days, giving estate leverage b/c partnership might not have cash to buy out estate Can solve this ahead of time by purchasing life insurance on partners. we go to buy out --- Purchase of Interest Of Dissociated Partner (RUPA § 701) 1. If dissociation WITHOUT causing dissolution and winding up, buyout price will be HIGHER OF: a. Liquidation value; OR b. The value based on a sale of the entire business as a going concern without the person

How to Form a Partnership (RUPA §202) What are the two Elements? association of 2+ people to carry on as co-owners of a business for profit (intent to form partnership NOT needed)

Elements: (1) Intent = intent to operate a business for profit, not intent to form a partnership (2) Co-ownership = do parties share benefits, risks, and management of business? Do they believe they're doing business together? 1. Factors (Keytronics carwash biz case) - (1) profit & loss sharing; (2) control sharing (or right to exercise control); (3) contribution; and (4) co-ownership of property 2. Ziegler ice fishing case - court does not find that Ps had managerial control, fee structure more like independent contractor vs profit sharing Þ failed in showing co-ownership (3)Profit motive- must be agreement that the purpose is to generate profit

Zeigler v. Dahl

FACTS: 1. D marketing an ice fishing guide service. D asked P to help guide fishermen. P gave D a check and claimed it was a capital investment, but D said marketing. P claiming partnership HOLDING: NO Partnership a. Intent: i. There was no evidence that D intended to form partnership with P b. Co-ownership: i. P failed to demonstrate that they had any role in management, and there was no profit sharing ii. Fee structure was more similar to independent contractor as opposed to partnership

PAC surfboards is a partnership but there is no provision in their agreement with respect to the issues raised in this problem. Propp, Aggey & Capel are the sole partners. Aggey and Capel want the partnership to lease a building from Maynard. Propp disagrees. Propp has asked you whether the partnership can enter into a lease agreement with Maynard even tho Proop opposes the business decision? How do you answer?

If the partners have apparent authority, they can bind the partnership -401K states that a majority vote is needed -401 (h) each partner has the right to participate (default rule ) but it's a ordinary course of business so majority is only needed -requiring unanimous vote can lead to deadlock

Admission of new Partners: The pT agreement of PAC is silent as the issue of admitting new partners. Maynard has offered to invest $100,000 in PAC surebaors. Aggey and Propp are in favor of admitting Maynard as a new parter, but Capel is opposed. c) if Maynard is admitted as a new partner, will Maynard be personally liable for all of the partnerships existing debts?

No , §306(b) Þ partner isn't personally liable for partnership obligations incurred before that partner's admission as a partner

Partnership Salaries: Propp, Aggey & Capel are the sole partners in PAC surfboards . Aggey and Propp work in the business but Capel does not. a) Can aggey and Propp receive a salary from the partnership?

No - 401 J - a partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership you can amend the pt agreement but you need all partners (401K) - thus you can do employment agreements and create a principal agent agreement to hire another employee

Does the Equipment in a partners garage - that was previously used to make surfboards before the formation of the partnership -- automatically become partnership property?

No - Property previously owned is separate in the absence of a transfer agreement. RUPA §203 - Property acquired by a partnership is the property of the partnership and not of the partners individually.

Partnership Salaries: Propp, Aggey & Capel are the sole partners in PAC surfboards . Aggey and Propp work in the business but Capel does not. C) Can Capel now compel the partnership to empty him and pay him salary?

No - it has to be agreed upon -It can be done thur an employment contract 401K -As an lawyer you need to choose your battles when drafting provisions

Admission of new Partners: The pT agreement of PAC is silent as the issue of admitting new partners. Maynard has offered to invest $100,000 in PAC surebaors. Aggey and Propp are in favor of admitting Maynard as a new parter, but Capel is opposed. a) A & P have asked you if they can admit Maynard as a new parter - notwithstanding Capel's objections?

No - requires unanimous vote - not under the default rule 402 (b)

Assume that PAC surfboards is a partnership. Propp, Aggey and Capel are he sole partners. The partnership agreement contains no previous provisions regarding the withdrawal of a. partner. The partnership agreement does provide that the partnerhsip is to have a ten year term. (Term partnership) if Propp withdraws, will it trigger mandatory dissolution?

No not mandatory for term partnership - half remaining partners must vote to dissolve RUPA § 801. 1. If a partner is a term partnership ceases to be a partner, HALF REMAINING CAN VOTE TO DISSOLVE If partner's dissociation results in dissolution and winding up of partnership Þ Mandatory buyout [§701(a)] i. §701(b) determines buyout price Þ amount attributable to value of biz on date of dissolution (pick the greater of either liquidation or going concern), then offset by damages caused by wrongful dissociation 1. Buyout price can be altered in partnership agreement, BUT provision for complete forfeiture upon dissociation wouldn't be enforceable

Can a partnership agreement restrict the right of 3rd parties?

No!! 103(b)(10) - partnership agreement CAN'T restrict rights of 3rd parties Þ partnership liable for partners tort to 3rd party if there is apparent authority

To Operate a business as a partnership do you need a written partnership agreement or attorney​? Do Propp, AGEEY & Capel need a lawyer? Do they need more than one lawyer?

No, you don't need a partnership agreement or an attorney to set up a partnership, but you will be subject to default partnership rules RUPA § 105 (b) It may be wise for each partner to have an attorney if they decide to change that default provisions that govern partnerships

Must the parties intend to form a partnership?

No- a. Intent can be INFERRED from CONDUCT regardless of party's subjective intent b. Intent will outweigh even if the relationship doesn't necessarily appear to be partnership

Overland v. Scheper Kim & Harris

Overland v. Scheper Kim & Harris

Kansallis Finance v. Fern

Partner issued an opinion letter on partnership letterhead to the corporation in order to induce it to make a loan. Letter contained several intentional misrepresentations. Partner was held criminally liable, but was insolvent. P seeking compensation from partnership. To show it's w/in the scope of what would normally happen: (1) normal; (2) happened w/in authorized time and geographic limits ot partnership; (3) motivated to serve the partnership (issue here is w/ #3) Partnership WAS liable 1. If partner acting with apparent authority OR partnership receiving some benefit & within scope

Personal Liability of Partners. RUPA § 306

Partners are jointly and severally liable for all debts, obligations, and other liabilities of the partnership unless otherwise agreed by the claimant or provided by law a. A new partner is NOT personally liable for preexisting debts, UNLESS expressly agreed to b. A dissociated partner is NOT liable for obligations incurred after dissociation (§ 703) c. A dissociated partner is liable on a transaction entered into AFTER dissociation ONLY IF: i. A partner would be liable on the transaction; AND ii. It is less than TWO YEARS since the dissociation AND the other party reasonably believes person is still partner

What type of business entity is a partnership

Partnership is the default form of business entity (sole proprietor Þ co-owner = partnership)

Property purchased w/ partnership $, even if purchased in name of one of partners - Owner?

Presumed to be partnership property

Property purchased in name of a partner, w/o indication of capacity as partners & w/o use of partnership $ - Owner?

Presumed to be property of individual partner

Assume that PAC surfboards is a partnership. Propp, Aggey and Capel are he sole partners. The partnership agreement contains no previous provisions regarding the withdrawal of a. partner. The partnership agreement does provide that the partnerhsip is to have a ten year term. Assume Propp withdraws wrongfully, how much will Propp be paid for his partnership Interest?

Propp will receive the higher price of Liquidation value or he value based on a sale of the entire business as a going concern without the person, minus any damages at the end of the term since it is a wrongful withdrawal Purchase of Interest Of Dissociated Partner (RUPA § 701) 1. If dissociation WITHOUT causing dissolution and winding up, buyout price will be HIGHER OF: a. Liquidation value; OR b. The value based on a sale of the entire business as a going concern without the person

Assume that PAC surfboards is a partnership. Propp, Aggey and Capel are he sole partners. The partnership agreement contains no previous provisions regarding the withdrawal of a. partner. The partnership agreement does provide that the partnerhsip is to have a ten year term. if prop withdraws and it is considered wrongful( leaves before term), when will Prop be paid for his partnership interest?

Purchase of Interest Of Dissociated Partner (RUPA § 701) - If WRONGFUL dissociation: a. No payout until end of term; AND Amount received will be reduced by any damages incurred as a result of wrongful withdrawal

1. partnership agreement controls, BUT if doesn't address something then default rules of RUPA apply a. Partnership agreement CANNOT: i. Eliminate fiduciary duty (loyalty, care, good faith), but CAN limit it ii. Vary the power to disassociate iii. Restrict rights of third parties

RUPA § 103

Assume that PAC surfboards is a partnership and that Proop, Aggey , Capel are the sole partners. IN the course of her work for the partnership, aggey injures Vicotoria through her negligent actions d) Suppose that Victoria sues PAC surfboards and obtains a judgment against the partnership. How can she enforce the collection?

She take the judgment over to the partnership

Assume that Propp, Aggey and Capel are the only partners in PAC surf. Their pt agreement includes no provision with respect to dissolution, or dissociation, or duration of Partnership. ON April 1, Capel decides to withdraw What if Capel wants the partnership to dissolve, but Proff and aggey want to continue to operate the partnership?

Since there is not provision with respect to dissociation or the duration of the partnership agreement, the partnership will dissolve DISSOLUTION §801 - partnership MUST dissolve if: In partnership at will, partner gives notice of express with to withdraw

Assume that Capel, a partner in PAC surf, dissociates from the partnership on April 5th. Is Capel liable on the following obligations b) To Vic Timm on his product liability claim arising out of July 13 surfing accident that occurred while Vic Timm was using a surfboard that he purchased from Pac Surfboards.

Vic can sue Capel if he is not aware that Capel has dissociated i. §703(a) Þ a dissociated partner remains personally liable for partnership obligations incurred while he was a partner, before his dissociation (obligations = debts arising during ordinary course of biz)

Assume that PAC surfboards is a partnership and that Proop, Aggey , Capel are the sole partners. IN the course of her work for the partnership, aggey injures Vicotoria through her negligent actions E) Suppose that Victoria sues PAC surfboards and Aggey in a single lawsuit and obtains a judgment against both parties. From whose assets can Victoria collect on this judgment?

Victoria can chose who to collect from first. Aggey is liable because she is the tortfeasor , the partnership is liable thru vicarious liability. The exhaustion rule 307 (d) does not apply - If partner is tortfeasors no obligation to exhaust partnership assets first. Only exhaust partnership assets if partnership and partner (not tort feasor) and need judgment against partner.

Assume that PAC surfboards is a partnership and that Proop, Aggey , Capel are the sole partners. IN the course of her work for the partnership, aggey injures Vicotoria through her negligent actions a. Can Victoria sue and recover from PAC Surfboards?

YES. It was a wrongful act that occurred in the ordinary course of business RUPA §305 1. Partnership is liable for loss/injury caused to person, as a result of wrongful act/omission of partner acting in the ordinary course of business of the partnership ORwith actual/apparent authority of partnership

Assume that PAC surfboards is a partnership and that Proop, Aggey , Capel are the sole partners. IN the course of her work for the partnership, aggey injures Vicotoria through her negligent actions b) Can Victoria sue and recover from aggey?

YES. Under negligence cause of action—partnership is sued under § 305 and A sued under tort claim.

Transfer or sale of Partnership Interest: Assume that PAC surfboards is a partnership and the sole partners are Propp, Aggey & Capel. Propp has now decided to sell his interest In the partnership and to use the proceeds to invest in a. new business venture. B) if Maynard decided to buy Props partnership Interest from PAC surfboards , will Maynard have a right to participate in the business decison making of the partnership?

Yes

Transfer or sale of Partnership Interest: Assume that PAC surfboards is a partnership and the sole partners are Propp, Aggey & Capel. Propp has now decided to sell his interest In the partnership and to use the proceeds to invest in a. new business venture. a) if Maynard pieced to by Propp's partnership interest, will Maynard have a right to participate in the business decision making?

Yes , M will have a transferable interest 102 (23) Ask Professor

Assume that Capel, a partner in PAC surf, dissociates from the partnership on April 5th. Is Capel liable on the following obligations a) To Tee Pee, a long time suppliers of Ws products to PAC surfboard, for finish wax products that were delivered to PAC Surf on April 11

Yes , if order was made before dissociation §703(a) --> a dissociated partner remains personally liable for partnership obligations incurred while he was a partner, before his dissociation (obligations = debts arising during ordinary course of biz)

After the formation of the partnership, suppose that PAC surfboard decides to expand its business, operations by purchasing new equipment to make surfboards. Is the new equipment partnership property.

Yes - it was purchased with partnership assets RUPA §204 (c) Property is presumed to be partnership property if purchased with partnership assets

Assume that Capel, a partner in PAC surf, dissociates from the partnership on April 5th. Is Capel liable on the following obligations a) To Maynard on the 10 year lease that PAC Surf and Maynard exceed on Jan 15

Yes because it happened before dissociation

PAC surfboards is a partnership; and aggey, Propp & Capel are the sole partners. Their partnership agreement includes the following provision:: " Capel shall serve as the managing partner, and shall have the authority to lease property on behalf of the partnership without consulting any other partner." Without consulting Aggey or Propp, Capel rents a building for the partnership from Maynard for ten years with rest set at $10,000 annually. Is the partnership legally obligated to pay rent to Maynard?

Yes the partnership is liable if Capel is acting with apparent authority Rupa 105 -. It is possible for a contract to give all managerial authority to one party and the partnership can be bound by his/her conduct

Suppose the the business uses funds ( that were originally provided by Capel ( angel investor) to buy Black Acre, which has a building on the property that PAC surfboards plans to use as the business's primary manufacturing facility where the surfboards will be produced. Is Black-acre partnership property?

Yes, Black Acre was purchased with funds of the partnership and Capel cant also claim property rights § 501.M If Capel would have purchased the property in his own name, it would not belong to PAC surfboards but rather CAPEL §204 (d) RUPA §204 (d) - Property acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership and without use of partnership assets, is presumed to be separate property, even if used for partnership purposes. RUPA §501 - A partner is not a co-owner of partnership property and had no interest in partnership property which can be transferred.

PAC surfboards is a partnership; and aggey, Propp & Capel are the sole partners. Their partnership agreement includes the following provision: " No partner may lease property on behalf of the partnership without first obtaining the express consent of the other partners." Notwithstanding this provision, Capel wihtout consulting the other partners, rents a building on behalf of the partnership from Maynard for ten years with rest set at $10,000 annually. is the partnership legally obligated to pay rent to Maynard?

Yes, Capel does not have actual authority but has apparent authority because the plaintiff will be able to prove the facts 301 (1) and nothing in the partnership agreement can waive that right. Also, you can't restrict rights of third parties in partnership agreements RUPA § 301: 1. Each partner is an agent of the partnership for the purpose of its business. a. 103(b)(10) - partnership agreement CAN'T restrict rights of 3rd parties Þ partnership liable for partners tort to 3rd party if there is apparent authority

Is a person who receives any portion of a business's profit presumed to be a partner?

Yes, a. UNLESS profits are received as some type of payment

Assume that Propp, Aggey and Capel are the only partners in PAC surf. Their pt agreement includes no provision with respect to dissolution, or dissociation, or duration of Partnership. Assume that Pac SURF agreement provides for a 10 year term. IN yr 3 , Capel decides to withdraw. Can Propp and Aggey continue the partnership?

Yes, both remaining parters must elect to keep the partnership going, if either one votes no, the partnership will dissolve.

Assume that Propp, Aggey and Capel are the only partners in PAC surf. Their pt agreement includes no provision with respect to dissolution, or dissociation, or duration of Partnership. Assume that Pac SURF agreement provides for a 10 year term. IN yr 3 Capel dies. Can Propp and Aggey continue the partnership?

Yes, both remaining parters must elect to keep the partnership going, if either one votes no, the partnership will dissolve. same as Capel wanting to withdrawal wrongfully.

Assume that PAC surfboards is a partnership and that Proop, Aggey , Capel are the sole partners. IN the course of her work for the partnership, aggey injures Vicotoria through her negligent actions c) Can Victoria sue and recover from Capel

Yes, this would be smart bc Capel has the deepest pockets and RUPA §306 (a) allows you to sue all partners RUPA §306 (A) Partners are jointly and severally liable for all debts, obligations, and other liabilities of the partnership unless otherwise agreed by the claimant or provided by law

Assume that PAC surfboards is a partnership. Propp, Aggey and Capel are he sole partners. The partnership agreement contains no previous provisions regarding the withdrawal of a. partner. The partnership agreement does provide that the partnerhsip is to have a ten year term. a) Can Propp withdrawal Fromm the partnership in the partnership's third year? b) is it wrongful?

a) Propp can withdraw anytime but this will be considered wrongful b) Yes a. Wrongful dissociation §602 - liable to partnership and other partners for damages caused by dissociation i. Wrongful if: (2) Before definite term expires

Assume that PAC's surfboards is a partnrship and that Prop , Aggey & Capel are sole partners. There is no provision in their agreement as to the allocation of profits. Capel has invested $1,000,000 in the partnership and Prop has invested $20,000. Aggy has made no contribution of capital. Instead aggy works for the business and is paid a salary for her services . In year 201X, the partnership makes a profit of $99,000 a) how will the profit be allocated among three partners? b) Would your answer be different if PAC surfboards partnership agreement provided that 2/3 of the profits shall be allocated to Capel , 1/6 to Aggey, and 1/6 to Propp?

a)Each partner will receive 33K under RUPA § 401 (a) Each partner is entitled to an equal share of the partnership distribution and, except in the case of a limited liability partnership, is sharable with a share of the partnership losses in proportion to the partner's share of the distributions. b) Allocation will be based on the agreed provision. RUPA 401 K lets partners change the agreement RUPA §401 (K) - A difference arising as to a matter in the ordinary course of business of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business of a partnership and an amendment to the partnership agreement may be undertaken only with the affirmative vote or consent of all the partners.

Financing the Partnership & Ownership of Assets: Partnership property

a. - property acquired by partnership is property of partnership, not individual partners Unless otherwise agreed, each partner has equal right to possess and use partnership property for partnership purposes

How does a partnerships take on another partner?

a. Need all partner's consent to take on another partner

Duty of Loyalty §404(b

a. refrain from competing with partnership in same biz before dissolution of the partnership Þ opportunity belongs to the partnership

Financing the Partnership & Ownership of Assets: What Can a Partner contribute?

a. some courts require contribution by each partner (can be financial, skill, property, knowledge, past service, etc.)

RUPA § 307 Exhaustion rule

can't go after partner's individual assets until assets of partnership have been exhausted Does NOT apply if claim is against the partner and partnership only being held liable on theory of vicarious liability

Allocations and Distributions to Partners : Losses

chargeable w/ share of losses in proportion to partner's share of profits

How are - matters w/in ordinary course of biz voted ? 401(j) outside of ordinary course of business?

decided by majority, Unanimous vote for everything outside ordinary course of biz + amending partnership agreement + bringing on new partner

DISSOLUTION §801 partnership MUST dissolve if:

i. Becomes unlawful to continue biz ii. All partners agree iii. Created for specific period of time/undertaking and time has expired or undertaking completed iv. Partner ceases being partner in term partnership and ½ of other partners agree to dissolve v. Court determines economic purpose frustrated, another partner makes it unreasonable to continue biz, or not practicable to carry on in conformity w/ agreement vi. In partnership at will, partner gives notice of express with to withdraw

What is the taxing structure of a business entity

i. Under RUPA Þ taxed as an entity ii. Congress 1920s tax laws Þ profits allocated through each partner - individual partner pays income tax on it (could create cashflow problems)

DISSOCIATION = when a partner ceases to be a co-owner Þ occurs upon the following events [§601] (Read)

i. Upon occurrence of event of which partnership agreement says to end that partner's ownership (wrongful if dissociate before term ends) ii. Partner becomes debtor in bankruptcy iii. Expelled by unanimous vote of other partners, BUT ONLY IF: 1. Unlawful to carry on biz w/ that partner 2. Transfer of all of partner's transferable interest in partnership 3. w/in 90 days after partnership notifies partner of expulsion b/c filed a certificate of dissolution, charter revoked, or right to do biz suspended 4. partnership being dissolved iv. Judge expels partner b/c of wrongful conduct that (1) materially and adversely affected the biz, (2) partner materially willfully or persistently breached duty owed or agreement, or (3) partner acted in way to make it not practicable to do biz w/ that partner (all wrongful) v. Partner dies or gets appointed a guardian/conservator, or judge says incapacity vi. Voluntary withdrawal §103(b)(6) Þ can't limit unilateral right to dissociate

Wrongful dissociation §602

i. Wrongful if: 1. Breach of provision of agreement or other duty 2. Before definite term expires 3. Willfully dissociates unless 90 days after another partner's dissociation by death 4. Partner expelled by court 5. Becoming a debtor in bankruptcy

One partner wants to spend profits on advertising and 1 partner wants to have her own distribution paid out to her b/c this decision is w/in ordinary course of biz

only need majority --> if majority agrees to spend it on advertising, 1 adverse partner will NOT get her distribution

Remuneration for services §401(h)

partner not entitled to remuneration for working for the partnership unless it's being dissolved BUT, common that agreement will give certain partners share of profits + salary if they're working regularly

Duty of Care §404(d)

refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or violating the law

Assume that PAC surfboards is a partnership and that Proop, Aggey , Capel are the sole partners. IN the course of her work for the partnership, aggey injures Vicotoria through her negligent actions f) Suppose that Victoria sues PAC surfboards and Capel in a single lawsuit and obtains a judgment against both parties. From whose assets can she collect on this judgment?

typically a partnership creditor will bring suit against both the partnership and its partners in one lawsuit so that, if successful, the plaintiff can levy on the partnership assets first and then seek satisfaction against the partners without having to return to court for an additional judgment. This will save the embarrassment of having to go back and obtain a separate judgment. But, V must exhaust partnership assets first before she goes after Capel Rupa 307 (d) Exhaust rule - A judgment creditor of a partner may not levy execution against the assets of the partner to satisfy a judgment based on a claim agiast the partnership unless the partner is personally liable for the claim under 306 and: (2) the partnership is a debtor in bankruptcy

Allocations and Distributions to Partners: Profits

unless otherwise agreed, profits distributed equally i. Can have a structure to determine % based on certain factors if you don't want to be locked in to a %