Chapter 37 All forms of Partnership

Definition of a Partnership

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

Uniform Partnerships Act

(UPA) Governs operations fo partnerships

Essential Elements of a Partnership

1. A sharing or profits or losses 2. A joint ownership of the business 3. An equal right to be involved in the management of the business

Events that cause Dissociation

1. Partner withdraws 2. By an event specified in the agreement 3. By unanimous vote 4. By Order of court 5. By the partner declaring bankruptcy.

Sharing of profits and losses

1. debits and loans 2. wages of employees or for services 3. Rent to landlords 4. annuity to survivors of deceased employees 5. the sale of the goodwill of the business

Wrongful Dissociation

A partner may have the power to end a partnership but not have the right.

Joint and Several Liability

A person can choose to sue the entire partnership or one or more of the partners separately.

Joint Liability

A person must sue all partners of the partnership, but each partner can be held liable for the full amount.

Interest on Profits

If its not written or established in the agreement then the profits/losses are distributed equally.

Limited partnerships

Limited liability for the some of the owners.

Rights of partners

Management Rights Interest in the Partnership Compensation Inspection of the Books Accounting of Partnership Property Rights

Formation of an LLP.

Must be officially set up and applied for with the UPA.

Tax treatment of partnerships

Pass through entity where the partners pay taxes on their income

Partnerships Property rights

Property acquired by the partnership belongs to the partnerships not the individual partners.

Partnership Essopel

When a non partner acts in a way that convinces a thrid party that they area partner. Court may determine Partner Estoppel.

Dissociation and Termination of a partnership

When partners ceases to be an associate of the partnership.

Inspection of the books

all partners have the rights to view the accounting records, financial books.

Partnership agreement

articles of partnership: the documents that define the partnership and each partners terms. Must follow statutory and federal regulations.

Duties and Liabilities of the partners

Duty of loyalty and Duty of care.

Agency Concepts and Partnership Law

Each partner has the responsibility to contribute skills, funds, assets or labors to the business.

Duty of Loyalty

Account to the partnerships for profits, property, or benefits. A partner must refrain from competing with the partnerships. No conflicts of interest.

Accounting of a partnerships

Accounting is required to determine the partners share in the partnerships.

Liability in an LLP

Allows for accountants and lawyers to be limited to their liability in malpractice.

Limited Liability Partnership (LLP)

Allows the partnership to function as a pass through entity for taxes, but limits the liabiltity of the partners.

Compensation

Considered a part of being a partner and time/efforts are considered part a partnership, not compensatable

Duty of Care

partners refraining from " gross negligence, reckless conduct, intentional misconduct, or a knowing violation of the Law"