Law for the Entrepreneurship Chapter 23

Duties partners owe each other

1. Duty to serve 2. the duty of loyalty 3. the duty of care 4. the duty of obedience 5. the duty to inform copartners 6. the duty to account to the partnership

standard on the duty of loyalty in three circumstances

1. to account to the partnershp and hold as trustee for it any property, profit, or benefit derived by the partner in teh conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity. 2. to refrain from dealing with the partnership in the conduct or winding up of the partnershp business as or on behalf of a party having an interest adverse to the partnership. 3. to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.

right to choose partners

a business partnership is often analogized to a marriage partnership. both, there is a relationship of trust and confidence between the parties, poor judgement, negligence or good partnership, the partners are firends, whatever else the legal relationship imposes. no one is compelled to accept a partner against his or her will

Personal liability of partners, in general

a form of business orgination is that it imposes liability on the partners personally and without limit. all partners are liable jointy and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.

Liability of Incoming Partners

a new partner has no personal liability to existing creditors of the partnership. only capital investment in the firm is at risk for the satisfication of existing partnership debts.

Duty to inform co-partners

a partner is expected to inform copartners of notices and matters coming to her attention that woul be of intereset to the partnership.

Duty to serve

a partner is expected to work for the firm

rights in specifc property: RUPA approach

a partner is not a co-owner of partnership property and has no interest in partnership property which can be tranferred either voluntarily or involuntarily. partnership property is owned by the entity.

right to compensation

a partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for service rendered in winding up the business of the partnership. a partner get his money from the firm by sharing the profits, not by salary or wages.

Right to indemnification

a partner who incurs liabilities in the normal course of business or to preserve its business or property is entitled to ____

delectus personae

a person may become a partner only with the consent of all of the partners.

Partner's personal liability for torts

all partners are also liable for any partner's tort committed in the scope of partnership business under agency law

right to management

all partners are entitle to share equally in the management and conduct of the business, unless the partnership agreement provides otherwise.

Liability of Existing Partners

all partners are liable. and each is several. under UPA, contract liability is joint only not also several. This means the partners must be sued in a joint action brought against them all. a partner who is not named cannot later by sued by a creditor in a separate proceeding, though the ones who were named could see a proportionate contribution from the one who are not

voluntary assignment

an assignment of a partner's interest in the business would result in a legal dissolution of the partnership. the interest is assignable. transferable interest- is a more limited concept and means only his share of the profits and losses and right to recieve distributions, (the partner's economic interests). by itself does cause the dissolution of the partnerhips, it does entitle the transferee to access to firm information, to participate in running the firm, or to inspect or copy the books.

statement of amendment or cancellation

any of the foregoing

involuntary assignment

consequence of the right to own property. if a partner is sued in his personal capacity and a judgement is rendered against him, the question aries, may the judgment creditor seize partnership property (charging order)- which charges the partner's interst in the partnership with obligation to satisfy the judgement. creditor not entitled to partnership property. as with voluntary, involuntary assignment does not become a partner.

fiduciary duty

due to each other and as to the partnership. something stricter than the morals of the market place. not honesty alone but the punctilio of an honor the most senstive, is then the standard of behavior.

right to information and inspection of books

duty to account, the right to access books and records. can during ordinary business hours. can charge for copies of documents, costs of labor and material

statement of qualification

estatements that the partnership has satistifed all conditions precedent to the qualification of the partnership as a limited liability partnership.

an agent can make contracts on behalf of a principal under three types of authority: express, implied and apparent. Express auhority

explicitly delegated to the agent

Partnership statements: A statement of partnership authority

is allowed by RUPA Section 303. specifies teh names of the partners authorized, or not authorized, to enter into transactions on behalf of the partnership any other matters. a statement must specify the names of the partners authorized to execute an instrument transferring that property.

implied authority

is that necessary to the carrying out of the express authority

apparant authority

is that which a third party is led to believe that has been conferred by the principal on the agent, even though in fact it was not or it was revoked

statement of dissociation

may be filed by a partnership or a dissociated partner, informing the world that the person is no longer a partner.

right to profits and losses

may be shared according to any formula on which the partners agree. if no provision is tated then each partner is entitled to equal share of the partnership profits and is charagable with a share of the partnership losses in proportion to the partner's share of the profits. a person working for the firm who is not a partner is an associate and usually only gets only a salary.

statement of foreign qualification

means a limited liability partnership is qualifed and registered to do business in a state other than that in which it is originally registered

rights to distributions

money or other property from a partnership to a partner in the partner's capacity (profits and losses, indeminication, capital and compensation).

Activities affected by the duty of loyalty

must not compete with the partnership may not make a secret profit while doing partnership business must maintain the confidentiality of partnership information.

Duty of Obedience

no partner can disobey the partnership agreement or fail to follow any properly made partnership decision.

statement of denial

operates to allow partners an opportunity to deny any fact asserted in a statement of partnership authority

Duty of Care

partners are to faithfully serve to the best of their ability. is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconuct, or a knowing violation of law.

right to assign partnership interest

partnership interests may be assigned to some extent.

right to property of the partnership

partnership property consists of all property originally advanced or contributed to the partnership or subsequently acquired by purchase or contribution.

Duty of Loyalty

requires partners to put the firm's interests ahead of their own.

The rights that partners have in a partnership

salient rights 1. distribution of money 2. to management 3. to choose copartners 4. to property of the partnership 5. to assign partnership interest 6. to enforce duties and rights.

Partnership Liability for Torts

same as contract liability.' for tortious acts, the partners are said to be jointly and severally liable under both UPA and RUPA, the plaintiff may separately sue one or more partners. then the winner can use other partners unnamed in the original action. each partner is liable for entire debt

rights in specific partnership property: UPA approach

tenants in partnership- partners hold the partership property (inventory, the building, the money in the cash register_. vests in the surviving partners, not in the heirs. but the heirs are entitled to the deceased partner's interst in teh partnership itself.

Uniform Partnership Act Section 9(3)

the firm is not liable for five actions that no single partner has implied or apparent authority to do, because they are not "in the ordinary course of partnership" 1. assignent of partnership property for the benefit of creditors, 2. disposing of the firm's goodwill (selling the right to do business with the firm's clients to another business). 3. actions that make it impossible to carry on the business 4. confessing a judgement against the partnership 5. submitting a partnership claim or liability

Right to return of capital contribution

the partnership must reimburse a partner for an advance of funds beyond the amount of the partner's agreed captial contribution, thereby treating the advance as a loan. a partner may get a return of captial under UPA after creditors are paid off if the business is wound down and terminated.

right to enforce partnership rights

the rights and duties imposed by partnership law are, valueless unless they can be enforced.

Duty to account

to allow copartners and their agents access to the partnership's books and records and to provide "any information concerning the partnership's business and affairs reasonably required for the proper exercise of the partner's rights and duties under the partnership agreement.

limits on the reach of the fiduciary duty

two examples- RUPA does not extend to the formation of the partnership 2. fiduciary duty doesn't apply to a dissociated partner (one who leaves the firm) who can immediately begin competing without the others' consent; and it doesnt' apply if a partner violates the standard "merely because the partner's conduct furthers the partner's own interest."