ch 37

Dissolution occurrences:

-Agree to Dissolve -Operation of Law-A partnership for a fixed term or a particular undertaking is dissolved by operation of law at the expiration of the term or on the completion of the undertaking. -Judicial Decree

Entity v. Aggregate and Taxes

-Joint and Severally Liable-a majority of the states follow the UPA and treat a partnership as an entity for most purposes. For instance, a partnership usually can sue or be sued, collect judgments, and have all accounting performed in the name of the partnership entity. Additionally, federal procedural laws permit the partnership to be treated as an entity in suits in federal courts and bankruptcy proceedings. -Tax Treatment-The partnership is a pass-through entity and not a taxpaying entity. A pass-through entity is a business entity that has no tax liability. The entity's income is passed through to the owners, who pay income taxes on it. Thus, the income or losses the partnership incurs are "passed through" the entity framework and attributed to the partners on their individual tax returns. The partnership itself pays no taxes and is responsible only for filing an information return with the Internal Revenue Service.

Rights of Partners

-Management-all partners have equal rights in managing the partnership [UPA 401(f)]. Unless the partners agree otherwise, each partner has one vote in management matters regardless of the proportional size of his or her interest in the firm. -Interest-Each partner is entitled to the proportion of business profits and losses that is specified in the partnership agreement. If the agreement does not apportion profits (indicate how the profits will be shared), the UPA provides that profits will be shared equally. If the agreement does not apportion losses, losses will be shared in the same ratio as profits -Compensation- a partner's income from the partnership takes the form of a distribution of profits according to the partner's share in the business. -Inspection-Partnership books and records must be kept accessible to all partners. Each partner has the right to receive full and complete information concerning the conduct of all aspects of partnership business -Accounting-An accounting of partnership assets or profits is required to determine the value of each partner's share in the partnership. -Property Rights-Property acquired by a partnership is the property of the partnership and not of the partners individually -Assignment

Impact of Dissociation

-Participation-On a partner's dissociation, his or her right to participate in the management and conduct of the partnership business terminates -Duty of Loyalty-ends -Duty of Care-continues with respect to events that occurred before dissociation

Uniform Partnership Act

-Requires Intent -Writing?- governs the operation of partnerships in the absence of express agreement and has done much to reduce controversies in the law relating to partnership

Winding Up and Distribution of Assets-

-The partners cannot create new obligations on behalf of the partnership. They have authority only to complete transactions begun but not finished at the time of dissolution and to wind up the business of the partnership -Winding up includes collecting and preserving partnership assets, discharging liabilities (paying debts), and accounting to each partner for the value of his or her interest in the partnership. Partners continue to have fiduciary duties to one another and to the firm during this process.

Partnership Termination

-The same events that cause dissociation can result in the end of the partnership if the remaining partners no longer wish to (or are unable to) continue the partnership business. -The termination of a partnership is referred to as dissolution, which essentially means the commencement of the winding up process. Winding up is the actual process of collecting, liquidating, and distributing the partnership assets.

Partnership Formation

-Written/Oral -File with the Recorders Office -Terms -Parties -Capital- Amount of capital that each partner is contributing. -Profits/losses-Percentage of the profits and losses of the business that each partner will receive. -Management-How management responsibilities will be divided among the partners -Accounting -Disassociation-Events that will cause the dissociation of a partner or dissolve the firm, such as the retirement, death, or incapacity of any partner -Arbitration

Wrongful Dissociation of Partner

A partner has the power to dissociate from a partnership at any time, but she or he may not have the right to do so. If the partner lacks the right to dissociate, then the dissociation is considered wrongful under the law

Incoming Partner

A partner newly admitted to an existing partnership is not personally liable for any partnership obligations incurred before the person became a partner

Partnership at Will

If no fixed duration is specified

Elements of a Partnership

When Does A Partnership Exist-To determine whether a partnership exists, courts usually look for the following three essential elements, which are implicit in the UPA's definition: -A sharing of profits or losses. -A joint ownership of the business. -An equal right to be involved in the management of the business. When Does A Partnership Not Exist -Joint Ownership and Sharing Profits -A court will not presume that a partnership exists, however, if shared profits were received as payment of any of the following [UPA 202(c)(3)]: - A debt by installments or interest on a loan. - Wages of an employee or for the services of an independent contractor. - Rent to a landlord. - An annuity to a surviving spouse or representative of a deceased partner. -A sale of the goodwill (the valuable reputation of a business viewed as an intangible asset) of a business or property.

Partnership

arises from an agreement, express or implied, between two or more persons to carry on a business for a profit. Partners are co-owners of the business and have joint control over its operation and the right to share in its profits.

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). All partners in a partnership can be held liable even if a particular partner did not participate in, know about, or ratify the conduct that gave rise to the lawsuit.

Joint liability

means that a third party must sue all of the partners as a group, but each partner can be held liable for the full amount. If, for instance, a third party sues one partner on a partnership contract, that partner has the right to demand that the other partners be sued with her or him.

Dissociation of Partner

occurs when a partner ceases to be associated in the carrying on of the partnership business. Dissociation normally entitles the partner to have his or her interest purchased by the partnership. It also terminates the partner's actual authority to act for the partnership and to participate in running its business Events Causing Dissociation: -Notice. By the partner's voluntarily giving notice of an "express will to withdraw." -Agreement Trigger. By the occurrence of an event specified in the partnership agreement. -Expelled = Others /Court. By order of a court or arbitrator if the partner has engaged in wrongful conduct that affects the partnership business. The court can order dissociation if a partner breached the partnership agreement or violated a duty owed to the partnership or to the other partners. -Death/Incapacity

Partnership for a Term

partnership agreement can specify the duration of the partnership by stating that it will continue until a designated date or until the completion of a particular project

Duties and Liabilities- Fiduciary Duties

that a partner owes to the partnership and to the other partners are the duty of care and the duty of loyalty -duty of care is limited to refraining from "grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law" -duty of loyalty requires a partner to account to the partnership for "any property, profit, or benefit" derived by the partner in the conduct of the partnership's business or from the use of its property

Partnership by Estoppel

when nonpartners have held themselves out to be partners, or have allowed themselves to be held out as partners, and others have detrimentally relied on their misrepresentations