Partnerships

Formation of Limited Partnership

(1) The partners must execute a certificate setting forth the details of the partnership (2) Copy of the certificate must be recorded

Dissolution by Court Decree

A court may in certain circumstances dissolve a partnership. Insanity of partner, incapacity, improper conduct, or wherever equitable.

Causes of Dissolution

1) expiration of partnership term 2) choice of a partner 3) assignment 4) death of a partner 5) withdrawal or admission of a partner 6) illegality 7) death or bankruptcy 8) dissolution by court decree

Creditor's Rights in Partnership

A creditor of an individual partner may not attach partnership assets. He must get a judgment against the partner and then proceed against the individual partner's interest.

Joint Venture

A joint venture is an association of two or more members, agreeing to share profits. It is more limited than a partnership as it is formed for a single transaction.

Limited or General Partner (Holzman v. De Escamilla)

A limited partner is not liable as a general parnter unless, in addition to exercising his rights and powers as a limited partner, he takes part in the control of the business.

Assignments in Partnership

A partner may assign her interest in the partnership, and unless the agreement provides otherwise, such an assignment will not dissolve the partnership.

Dissociation (Giles v. Giles)

A partner may be dissociated from a partnership if he engages in conduct relating to the partnership business that makes it not reasonably practicable to carry on the business of the partnership with him in it.

Breach of Agreement (Collins v. Lewis)

A partner may not obtain a judicial dissolution of the partnership if his own inferences causes the partnership to be unprofitable.

Withdrawing Partners Removing Clients from Firm (Meehan v. Shaughnessy)

A partner must render on demand true and full information of all things affecting the partnership to said partner.

General Partner

A partner that assumes management responsibilities and full personal liability for the debts of the partnership.

Partner's Interest in the Partnership

A partner's interest in her share of the profits and surplus, which is personal property.

Effect of Conveying a Partnership Interest (Putnam v. Shoaf)

A partner's property rights include rights in specific partnership property, interests in the partnership, and the right to participate in the partnership's management.

Partnership Ownership of Property

A partnership can own and convey title to real property or personal property in its own name, without all of the partners joining in the conveyance.

Limited Partnership

A partnership formed by two or more persons and having as its members one or more general partners and one or more limited partners.

Partnership

A partnership is an association of two or more persons to carry on a business as co-owners for profit.

Partners Compared with Employees (Fenwick v. Unemployment Compensation)

A partnership is an association of two or more persons to carry on as co-owners of a business for profit.

Definition of Joint Venture Expanded (Sandvick v. LaCrosse)

A partnership is an association of two or more persons to carry on, as co-owners, a business for profit; a joint venture is like a partnership, but is more limited in scope and duration.

Sharing Profits Not Conclusive Evidence of Partnership (Martin v. Peyton)

A partnership is created by an express or implied contract between two persons with the intention to form a partnership.

Partnership by Estoppel: Liability of Affiliated Company (Young v. Jones)

A person who represents himself, or permits another to represent him, as a partner in an existing partnership or with others not actual partners, is liable to any person to whom a representation is made who has, in reliance on the representation, given credit to the actual or apparent partnership.

Entity and Aggregate Characteristics of Partnership

A partnership is treated both as separate entity from its partners and as though there is no separate entity but merely an aggregate of separate, individual partners.

Both General and Limited Partner

A person may be both a general and limited partner in the same partnership at the same time. The partner has, with respect to her contributions as a limited partner, all the rights she would have if she were not also a general partner.

Dissolution by Assignment

An assignment of a partner's interest is not an automatic dissolution. An assignee or the creditor can get a dissolution decree on expiration of the partnership term or ay any time in a partnership at will.

Consent of Other Partners

A prospective partner must have the consent of all the other prospective partners.

Differences Must Be Resolved by the Majority (Summers v. Dooley)

Absent a contrary agreement, each partner possesses equal rights to manage the partnership's affairs, and no partner is responsible for expenses incurred without majority approval.

Rights of Partners in Management

All partners have equal rights in management, even if sharing of profits is unequal.

Partnership Property

All property originally brought into the partnership or subsequently acquired, by purchase or otherwise, for the partnership, is partnership property.

Dissolution by Choice of a Partner

Any partner can terminate the partnership at will. Where a partnership is for a term or even where it is a partnership at will, if dissolution is motivated by bad faith, it may be a breach of the agreement.

Agreements to Form a Partnership

As a partnership is a voluntary association, there must be an express or implied agreement in order to form a partnership.

Significant Disagreements Between Partners (Owen v. Cohen)

Courts of equity may order the dissolution of a partnership if the partners' quarrels and disagreements are of such a nature and to such an extent that all confidence and cooperation between the parties has been destroyed or if a partner's misbehavior hinders the proper conduct of the partnership's business.

Retiring Partner's Liability for Debts Incurred by Partners Continuing the Business

Dissolution ends the power of a partner to bind the partnership except to the extent necessary to wind up its affairs. If, however, third parties do not know of the dissolution, contracts entered into with a partner bind the partnership.

Partnership Dissolution

Dissolution of a partnership does not immediately terminate the partnership. It continues until all of its affairs are wound up.

Dissolution by Illegality

Dissolution results from any event making it unlawful for the partnership to continue its business.

Rights in Specific Partnership Property

Each partner is a tenant-in-partnership with her co-partners as to each asset of the partnership.

Modern Limited Partnership

Entities created by modern statutes developed to facilitate commercial investments by those who want a financial interest in a business but does not want all the responsibilities and liable of partners.

One Partner Cannot Escape Responsibility by Notifying Creditor (National Biscuit v. Stroud)

Every partner is an agent of the partnership for the purpose of its business, and every partner's acts for apparently carrying on in the usual way the partnership's business binds the partnership, unless the acting partner has in fact no authority to act for the partnership and the person with whom he is dealing knows that he has no such authority.

Dissolution by Expiration of Partnership Term

Fixed Term: Even where the partnership is to last for a fixed term, partners can still terminate at will. Extension of Term: The partners can extend the partnership by creating a partnership at will on the same terms.

Dissolution Does Not Violate Agreement

If dissolution does not violate the partnership agreement, then the partnership assets are distributed, and no parter has any cause of action against any other partner.

Partnership Duration

If no term is specified, then the partnership is terminable at the will of any partner.

The Sharing of Losses (Kovacik v. Reed)

If one partner or joint venturer contributes the money capital and the other contributes the skill and labor necessary for the venture, neither party is entitled to contribution from the other.

Dissolution Violates Agreement

If the dissolution does violate the partnership agreement, then the innocent partners have rights to damages and continue the business.

Partnership Formalities

If the partnership is to be continued beyond one year, the Statute of Frauds requires that the agreement be written.

Dissolution Right to Damages

Innocent partners have a right to damages against the offending partner.

Partnership Duties with Regard to Outside Opportunities (Meinhard v. Salmon)

Like partners, joint adventurers owe one another the duty of loyalty.

Partners May Fashion an Agreement as to Who Makes Decisions (Day v. Sidley & Austin)

Managing partners have no fiduciary duty to disclose changes in the partnership's internal structure if the changes do not generate a profit or loss for the partnership.

Dissolution by Withdrawal or Admission of a Partner

Most partnership agreements provide that losing or admitting a partner will not result in dissolution. New partners may become parties to the preexisting agreement by signing it at the time of admission to the new partnership.

A Partner May Bid for the Partnership's Assets at Dissolution (Prentiss v. Sheffel)

Upon dissolution of a partnership, a former partner may bid on the partnership assets at a judicial sale.

Dissolution by Death of a Partner

On the death of a partner, the surviving partners are entitled to possession of the partnership assets and are charged with winding up the partnership affairs without delay. The surviving partners are also charged with a fiduciary duty in liquidating the partnership and must account to the estate of the deceased partner for the value of the decedent's interest.

Partnership by Estoppel: Liability of Alleged Partner

One who holds herself out to be a partner, or who expressly or impliedly consents to representations that she is such a partner, is liable to any third person who extends credit in good-faith reliance on such representations.

Raising Additional Capital

Partnerships are faced with the need to raise additional capital to finance their activities to find the lowest-cost method to raise such funds. Some partnership agreements provide for the sale of new partnership assets to people outside the partnership.

Capacity to Become a Partner

Persons must have the capacity to contract. Some states hold that corporations cannot be partners.

Lack of Intent to Form a Partnership (Southex Exhibition v. Rhode Island Builders)

Sharing profits is prima facie evidence of a partnership, which can be rebutted by evidence sufficiently demonstrating that the parties did not intend to create a partnership.

Uniform Partnership Act (UPA)

The UPA has been adopted by most states, so that the provisions governing partnerships are usually a part of statutory law, rather than the common law.

Distribution of Assets

The debts of the partnership must first be paid. Capital contributions plus accumulated earnings and less accumulated losses. If there is anything left over, the partners receive their agreed share of current partnership earnings. Where there are no partnership debts, or where the debts can be handled from the cash account, partnership assets may be distributed in kind to the partners. Where liabilities exceed assets, the partners must contribute their agreed shares to make up the difference.

Fiduciary Duties of Partners to Each Other

The duties of one partner to all others are based on a fiduciary relationship. A partner owes a duty of care and of loyalty.

Limited Partnership Liability

The general partner is personally liable for all obligations of the partnership. The limited partner has no personal liability for partnership debts, and her maximum loss is the amount of her investment in the limited partnership.

Dissolution Right to Continue Business

The innocent partners also have the right to continue the partnership business by purchasing the offending parties' interest in the partnership. The innocent parties may simply dissolve and wind up the business, paying the offending partner her share, less damages.

Partnership Capacity to Sue or Be Sued

The jurisdictions vary as to whether a partnership can be sued and/or sue in its own name.

Partners Are Liable Until Debts Discharged

The liability of partners for existing partnership debts remains until they are discharged.

Limited Partner

The limited partner makes a contribution of cash, other property, or services rendered to the partnership in return, but is not active in management and has limited liability for partnership debts.

Consequences of Classification as Personal Property

The partner's rights to any individual property held by the partnerships are equitable and this equitable interest is "converted" into a personal property interest.

Partnership Aggregate Theory

The partners are jointly and severally liable for the obligations of the partnership.

Individual Partner's Interest in the Partnership

The property rights of an individual partner in the partnership property are: (1) her rights in specific partnership property; (2) her interest in the partnership; and (3) her right to participate in the management of the partnership.

Rights of Limited Partners

The rights of a limited partner are substantially the same as those of a partner in an ordinary partnership, except that she has no rights with regard to management.

Buyout Agreements (G & S Investments v. Belman)

Under the UPA, a court may dissolve a partnership when a partner becomes incapable of performing under the partnership agreement, when a partner's conduct tends to affect the business prejudicially, or when a partner willfully breaches the partnership agreement's terms.

Partnership Agreement and the UPA at Dissolution (Pav-Saver v. Vasso)

Upon a wrongful dissolution of a partnership in violation of the partnership agreement, each partner who has not wrongfully dissolved the partnership is entitled to damages for breach of contract and may continue the partnership business for the term required under the partnership agreement with the right to possess the partnership upon posting a bond.

Exclusion of a Partner (Lawless v. Kightlinger & Gray)

When a partner is involuntarily expelled from a business, his expulsion must be in good faith or a dissolution to occur without violating the partnership agreement.

New Partnership Remains Liable for Old Debts

When there has been a dissolution due to debt, withdrawal, or admission of a new partner and the partnership business is continued, the new partnership remains liable for all the debts of the previous partnership.

Intent of the Parties

Where there is any question, the intent of the parties involved is determined from all of the circumstances.

Proof of Intent for Partnership Property

Where there is no clear intention expressed as to whether property is partnership property, the courts consider all of the facts related to the acquisition and ownership of the asset in question.

Dissolution by Death or Bankruptcy

Without a provision in the partnership agreement to the contrary, the partnership continues in business.