Chapter 36

POWER, RIGHT

Partners has the _______ to dissociate from a partnership at any time but sometimes not the ________

UPA's Definition of Partnership

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

Dissolution

occurs when any partner (or partners) initiates proceeding to terminate the partnership or when an event specified in the partnership agreement occurs

Authority of Partners

under the same principles a partner may also subject a partnership to liability in tort

Partnership

voluntary contract between two or more competent persons who agree to place some or all of their funds or other assets, labor, and skills in a business with the understanding that profits and losses will be shared

Three essential elements of Partnerships

1- A sharing of profits & loss 2- A joint ownership of the business 3- An Equal right in the management of the business

Dissolution of Partnership can be brought about

1- Acts of Partners 2- Operation of Law 3- Judicial Decree

Agency Concepts Also Applied to Partnership

1- Apparent Authority 2 - Actual Authority 3- Ratification (Implied Authority is Broader for partnerships)

Terms Commonly Included in a Partnership Agreement

1- Basic Structure 2- Capital Contributions 3 - Sharing of Profits and Losses 4 - Management and Control 5- Accounting and Partnership Records 6 - Dissolution 7

Stages of Terminating a partnership

1- Dissolution 2- Winding up, once that is done partnership is legally terminated

Partnership's assets are distributed according to the following:

1- Payments of debts, including those owed to partner and non partner creditors 2- Return of Capital contributions and distribution of profits to partners

LLP is attractive to

1- Professional Services (Attorney's & Accountants) 2- Family Businesses

Ways to be Dissociated from a partnership

1- Voluntarily express will to withdraw 2- Occurence of an event agreed to in the partnership agreement 3- Unanimous vote of the other partners under certain circumstances 4- By court order or arbitrator if wrongful act affects partnership 5- declaring bankruptcy , death, incapacitated

Wrongful Dissociations

1- if its in breach of a partnership agreement 2-before expiration of the term or the completion of the undertaking

Profit and Losses are not the following

1-Debt by installments or interest on loan 2- Wages of am employee or for services of an independent Contractor 3- Rent to Landlord 4- An annuity to a surviving spouse or representative of a deceased partner 5- a sale of the goodwill of a business or property

The rights of partners in a partnership relate to

1-Mangement 2- Interest In the Partnership 3- Compensation 4- Inspection of Books, Accounting and Property

Dissociation takes into affect

2 years after, can file a statement with the state to make it 90 days after

For federal income tax purposes is a partnership a seperate legal entity or aggregate

An Aggregate, a partnership is a not a tax paying entity. Profits and Losses flow through the partners individual returns.

A Partnership is sometimes called

Comapny or a Firm, because it suggest that the partnership is an entity seperate and apart from its aggregate members

Compensation Rights

Devoting time, skill, and energy to a partnership business is a partners duty and generally not a compensable service. Some Exceptions can be that the partnership agrees on salary in addition to the profit portions

Duties and Liabilities of Partners

Each partner is an agent of every other partner and acts as both a principal and an agent in any business transaction within the scope of the partnership business; each partner is also a general agent of the partnership in carrying out the usual business of the firm.

What do partnerships need to file with the IRS?

Information return, this is a return that only reports the income earned by the business.

Partnership in Common Law is or isn't treated as a seperate legal entity?

Isn't. most states provide specifically that a partnership can be treated as an entity for certain purposes, purposes such as capacity to sue or be sued, to collect judgements, and to have all accounting procedures carried out in the name of the partnership

Does Joint owner ship pf property create a partnership?

Not exactly.

What happens is a partnership at will is terminated without consent?

Nothing will happen, this type of partnership at any time without violating the agreement and without incurring liability for losses to other partners that results from the termination

Inspection of Books Rights

Partnership books and records must be kept accessible to all partnerships, whether active, inactive, or a personal representative of a deceased partners estate.

Are Corporations permitted to be in a partnership?

Per UPA, corporations are permitted to be in a partnership. UPA defines persons as a corporation too.

Accounting Rights

Required to determine the value of each partners share in the partnership. An accounting can be voluntary or it can be compelled by court order.

Partnership By Estoppel- Definition

a judicially created partnership that may, at the courts discretion, be imposed for purposes of fairness. The court ca prevent those who present themselves as partners from escaping liability if a third person relies on an alleged partnership in good faith and is harmed as a result.

Partners Interest In the Firm

a personal asset consisting of a proportionate share of the profits earned and a return of capital on the partnership;s termination.

LLLP (Limited Liability Limited Partnership

a type of LP

Articles of Partnerships

a written agreement that sets forth each partner's rights and obligations with respect to the partnership

Management Rights

all partners have equal rights in mgmt and conduct; unless partners agree otherwise; each partner has one vote no matter of the proportional size of of their interest; Majority rule controls decisions on ordinary matters; Unanimous Consent is required for decisions that significantly affect the nature of the partnership

Advantage of LLP

allows a partnership to continue as a pass through entity for tax purposes but limits the personal liability of the partners

Confession of Judgement

an act by debtor permitting a judgement to be entered againest him or her by a creditor for an agreed sum, without the institution of legal proceeding

Buyout Price

based on the amount that would have been distributed to the partner if the partnership were wound up on the date of dissociation. Offset againest the price are amounts owed by the partner to the partnership, including damages for wronful dissociation

Partnerships are governed by...

both common law concepts and by statutory law

Limited Partnership

consist of at least one general partner, one or more limited partners. are like general partnership

Partnership Fiduciary Duties

duty of loyalty and the duty of care, according to UPA; these duties may not be waived in a partnership; partner may purse his or her own interests. however without automatically violating these duties

Partnerships are similar to Agency Relationships because

each partner is deemed to be the agent of the other partners and of the partnerships; also partners are also bound by the fiduciary ties that bind an agent and principal under agency law

Interest Rights

each partner is entitled to the proportion of business profits and losses. If the agreement does not apportion profits., UPA provides that profits be shared equally and if there is no specification on how to apportion losses the UPA states that losses will be apportion in the same ratio as profits

Changing Order

entitles the judgement creditors to the profits of the partner and to any assets available to the partner on dissolution. Neither an assignment nor a court's charging order will cause the dissolution of the firm

Partnership By Estoppel

exist and impose liability - but not partnership rights - on the alleged partner or partners

The Uniform Partnership Act

governs the operation of partnerships in the absence of express agreement and has done much to reduce controversies in the law relating to partnerships

Liability of Incoming Partners

has limited liability for whatever debts and obligations the partnership incurred prior to the new partners admission. but any capital contributions made by the new partner is subject to these debts

LLP

hybrid form of business designed mostly for professional who normally do business as partners in a partnership

Winding Up

is the actual process of collecting and distributing the partnership's assets.

In federal law partnership are frequently permited to be treated as a seperate entity in such matters as

lawsuits in federal courts, bankruptcy proceedings, and the filing of federal information tax returns

Joint Liability

liability shared between the partners, but each partner is liable for the full amount

FLLP

limited liability partnership in which the majority of the partners are persons related to each other (example Agriculture)

Partnership and Charitable Donations

need to be ratifed by ALL partners

Partnership at will

no fixed duration is specified

Partnership Agreements can be

orally, written, or implied by conduct. But some partnerships need to be in writting to be legally enforcable within the statue of Frauds.

Dissociation

partner ceases to be associated in the carrying on of the partnership business.

Property Rights

partner has two basic rights 1- has an interest in the partnership. 2 - partner has a right im specific partnerhsip property

What a partners is liable if he or she wrongfully dissociates

partner is liable to the partnership and to the other partners for damages caused by the dissociation

Disadvantage to Partnership

partners are personally liable for the debts of the partnerships; the liability is essentially unlimited.

Partner Acts within the scope of authority

partnership is legally bound to honor the partners commitments to third parties.

Partnership Property

property aquired by a partnership is the property of the partnership and not the partners individually; Property aquired in the name of the partnership or partner is partnership property if the person's capacity as a partner or the existence of the partnership is indicated in the instrument transferring title.; if nothing refers to the aforementioned then the property still presumed to be partnership property

Buy-sell agreement (Buy Out Agreement)

provides for one or more partners to buy out the other or others, should the situation warrant

Effects of Dissociation

right to participate in the mgmt and conduct of the partnership business terminates; duty of loyalty ends; interest in partnership must be purchased according to the rules

Certificate of Limited Partnership

similar to a corporate chater; must be files with the designated state official

What is required by partnershp by estoppel

that a third person reasonably and detrimentally rely on the representation that a person was part of the partnership

What happens if a Partnership for a Term is terminated prior to the expiration of the partnership without consent?

the dissolution constitues as a breach of the agreement. the responsible partner can be held liable for any resulting losses

Partnerships rights and duties are governed by...

the specifi terms of their partnership agreement, in the absence of that the imposes the rights and duties

Joint and Several Liability

third part may sue all of the partners seperately(Severally) or at his or her option. This is true even if the partner did not participate in what gave rise the cause of action.

Dissolved

to end, break up

Partnership for a term

will continue partnership until a designated date or until the completion of a particular project