Partnership

After merger, a partner of the surviving entity is liable for:

(i) all obligations for which he was personally liable before the merger, (ii) all of the surviving entity's obligations that were incurred by a party to the merger before the merger (although those obligations must be satisfied by the entity's property), and (iii) all obligations incurred by the surviving entity after the merger takes effect, unless otherwise provided by law.

Property may be acquired in the name of the partnership by a transfer to either:

(i) the partnership in its own name or (ii) one or more of the partners in their capacity as partners, provided the name of the partnership is indicated in the instrument transferring title to the property. Note: Property is presumed to be partnership property if it was purchased with partnership assets or if partnership credit is used to obtain financing.

Property is rebuttably presumed to be a partner's separate property when:

(i) the property is acquired in the name of one or more partners, (ii) the instrument transferring title to the property does not indicate the person's capacity as a partner or the existence of a partnership, and (iii) partnership assets were not used to acquire the property. The use of property for partnership purposes is not enough to overcome this presumption.

Effect of dissociation

1. A dissociated partner generally does not have the right to participate in the management or conduct of the partnership business. 2. A partner's duty not to compete terminates upon dissociation. The dissociated partner's other duties of loyalty and care terminate with respect to post-dissociation events. 3. When a partner dissociates from the partnership but the partnership is not dissolved, the partnership must buy out the dissociated partner's partnership interest.

Liability to Third Parties

1. As a separate entity, a partnership is subject to suit for its obligations. 2. A partner is jointly and severally liable for all partnership obligations.

Special partnership business

A decision as to a matter outside the ordinary course of the partnership's business requires the consent of all partners. An amendment of the partnership agreement also requires the consent of all partners.

Dissociated partner's pre-dissociation actions

A dissociated partner is generally liable for partnership obligations incurred before dissociation. An exception exists when the partnership creditor, with notice of the partner's dissociation, agrees to a material change in the obligation's terms to which the dissociated partner did not consent.

Liability to third parties of general partners

A general partner is personally liable to third parties for the obligations of the limited partnership.

Liabilities of Partners and the Partnership

A limited partner in an LLP is not personally liable for an obligation of an LLP, regardless of the type of obligation (e.g., tort, contract). A limited partner is personally liable for his own personal misconduct (e.g., negligence, negligent supervision).

Ordinary partnership business

A majority of the partners can make a decision as to a matter in the ordinary course of the partnership's business, such as a distribution of partnership profits.

Partner's power to dissociate

A partner has the power to dissociate from the partnership at any time, even if the dissociation is wrongful.

Partner's Power to Bind the Partnership

A partner is an agent of the partnership for the purpose of its business and can contractually bind the partnership when the partner acts with either actual or apparent authority.

Partner's Duty of care

A partner is required to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.

Indemnification and a partner's personal liability

A partner may incur a personal liability in the ordinary course of conducting partnership business or in order to preserve the partnership's business or property. The partnership is required to indemnify the partner for such liabilities.

Limitation on dissociated partner's liability

A partner who has dissociated from a partnership generally continues to be liable for any partnership obligation incurred before the dissociation. In addition, a dissociated partner may be liable for partnership obligations incurred after the dissociation.

Limits on partnership agreement restrictions

A partnership agreement cannot prevent a partner from withdrawing from the partnership, but it can require that the partner's notice of withdrawal be in writing. Similarly, a partnership agreement cannot prevent the partnership or other partners from seeking judicial expulsion of a partner.

Partnership as a separate entity

A partnership is a legal entity that is distinct from its partners. A partnership may hold property and can also sue and be sued. Partners are not protected from personal liability for the partnership's obligations (unlike shareholders in a corporation, who are not personally liable for their corporation's obligations).

Formation of a Partnership

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

Limitation on incoming partner's liability

A person admitted as a partner into an existing partnership is not personally liable for any prior partnership obligations. However, any capital contribution made by an incoming partner to the partnership is at risk for the satisfaction of such partnership obligations.

Partnership agreement

Although a formal agreement is not required to create a partnership, if the partners have entered into such an agreement, then the agreement, rather than the state default rules, generally governs the relations among the partners and between the partners and the partnership when there is a conflict between the agreement and state rules.

Partnership Agreements and Statute of Frauds

Although a written agreement is not necessary to form a partnership, a partnership agreement is subject to the Statute of Frauds, which requires contracts that cannot be performed in one year to be in writing.

Persons who may wind up

Any partner who has not wrongfully dissociated may participate in winding up the partnership's business, including the legal representative of the last surviving partner.

Judicial supervision of winding up

Any partner, legal representative, or transferee may seek judicial supervision of the winding up.

Implied Authority

Based on a partner's reasonable belief that an action is necessary to carry out his express authority.

Express Authority

Can arise from the partnership agreement itself, an authorization of the partners, or a statement of authority filed with the state.

Access to Records

During business hours, a partnership must provide its partners and their agents (including attorneys) with access to all its records, including its financial records, and permit them not only to inspect but also to copy such records.A partnership agreement may not restrict this access unreasonably. Note: A transferee who does not become a partner is not entitled to access information concerning partnership transactions nor to inspect or copy the partnership books or records.

Management Rights

Each partner has equal rights in the management and conduct of the partnership.

Statement of dissociation

Filed with state--gives third parties notice of a dissociated partner as of 90 days after the statement is filed.

Third party's knowledge or notification

For the partnership to escape liability, the third party generally must possess actual knowledge of the partner's lack of actual authority. An exception exists when the partnership has notified the third party in writing of the partner's lack of authority and the third party is aware of the notification or the notification is delivered to the third party's place of business or other place for receiving communications.

"Person" defined

For the purpose of a partnership, a "person" is an individual or legal entity, such as a corporation, limited liability company, trust, estate, governmental entity, or another partnership. The person must have the capacity to contract.

Dissociated partner's post-dissociation actions

If a partner dissociates from the partnership but the partnership is not dissolved, then the dissociated partner can enter into a transaction with a third party that binds not only the dissociated partner as a partner, but also the partnership. The partnership is bound when, at the time of the transaction, the other party to the transaction (i) reasonably believes that the dissociated partner is a partner, (ii) does not have notice of the partner's dissociation, and (iii) is not deemed to have knowledge of the dissociated partner's lack of authority. Liability is limited to transactions entered into within two years of the partner's dissociation.

Approval of Merger

If a partnership is a party to the merger, then the merger must be approved by all of the partners, unless otherwise specified in the partnership agreement. If a limited partnership is a party to the merger, then the merger must be approved by either (i) the vote required by the law of the jurisdiction in which the limited partnership is organized or (ii) in the absence of a law, by all partners or by whatever number of partners is specified in the partnership agreement.

Transfer to a third party

If not addressed in partnership agreement, partners may freely transfer their partnership interest. If the partnership agreement contains a restriction that prohibits the transfer of a partnership interest, then a transfer in violation of this restriction is ineffective as to a transferee who has notice of the restriction. Note: A transfer of a partner's partnership interest does not make the transferee a partner unless the other partner or partners consent to making the transferee a partner.

Safe Harbor for Potential Partnership Opportunities

In addition, the agreement may provide a safe harbor with respect to a transaction between a partner and the partnership. Under a safe harbor, a certain number or percentage of the other partners—after full disclosure of the material facts—could authorize or ratify the transaction.

Distribution of partnership assets

In winding up a partnership's business, creditors have priority over partners to the partnership's assets.

Plan of Merger

Must set forth (i) the name of each partnership or limited partnership that is a party to the merger, (ii) the name of the surviving entity into which the other entities will merge, (iii) the type of entity the surviving entity will be, (iv) any terms and conditions of the merger, (v) the manner of converting interests and obligations of the merging entities into interest or obligations of the surviving entity, and (vi) the street address of the surviving entity's executive office. R

Partnership to Limited Partnership

Notwithstanding a contrary provision in the limited partnership agreement, the conversion must be approved by all of the general and limited partners. Once the conversion is approved, the partnership must file a certificate of limited partnership. Limited Partnership shields limited partners from personal liability but not general partners. Limited partners are partners who have no control over management (i.e., they just provided an investment).

Use of Partnership Property

Property is partnership property if it is acquired in the name of the partnership. It is property of the partnership and not of the partners individually. A partner may use or possess partnership property only on behalf of the partnership (absent an agreement to the contrary).

Termination of Partnership

Termination of a partnership is a two-step process—dissolution and winding up. The happening of an event triggers dissolution, the first step in the termination of a partnership. Next, the partnership must wind up its business, which is a process that entails liquidating the assets, paying off creditors, and distributing any remaining funds to the partners. The partnership is not terminated until the partnership business is wound up.

Valuation of dissociated partner's interest

The dissociated partner's interest is valued as if the partnership business was wound up on the date of the dissociation. For this purpose, the partnership is valued as the greater of either the liquidation value of its assets or the value of the partnership as a going concern.

LLP Name

The name of an LLP must end with "Registered Limited Liability Partnership," "Limited Liability Partnership, "R.L.L.P.," "L.L.P.," "RLLP," or "LLP."

Necessary agreement to form Partnership

The only agreement necessary to create a partnership is the agreement to conduct a for-profit business as co-owners. Such an agreement may even be implied by the conduct of the parties when they have not entered into a written or oral agreement.

Apparent authority

To apply, the partner must perform the unauthorized act in the ordinary course of apparently carrying on either the partnership business or business of a kind carried on by the partnership. In addition, the third party with whom the partner was dealing cannot hold the partnership liable when that party knew or had received notification that the partner lacked authority.

Required intent to form Partnership

To form a partnership, at least two persons must intend to carry on a business for profit as co-owners, but it is not necessary that such persons have the specific intent to form a partnership.

Withdrawal of limited partner

Unless the written partnership agreement provides otherwise, a limited partner must give six months' prior written notice to each general partner before withdrawing.

Indemnification of a dissociated partner

When a partnership purchases a dissociated partner's interest, the partnership must generally indemnify the partner against all partnership liabilities, whether the liabilities were incurred before or after the dissociation.

Limited Liability Partnerships

a partnership in which a partner's personal liability for obligations of the partnership is eliminated. To enjoy LLP status, the partnership must file a statement with the state. In other respects, an LLP is governed by the same rules as a partnership.

To become a partner, . . .

a person must secure the consent of all of the existing partners.

The sharing of profits creates . . .

a rebuttable presumption that the arrangement is a partnership. Rent, wages, interest payments are not partnership, payment of debt.

Partnership Profits and Losses

dictated by agreement, in the absence of an agreement: Profits are shared equally and losses follow the profits.

Doing the following acts by a limited partner does not constitute control sufficient to turn a limited partner into a general partner:

i) Being a contractor for, or an agent of, the limited partnership or a general partner; or being an officer, director, or shareholder of a corporate general partner; ii) Consulting with or advising a general partner with respect to the limited partnership's business; iii) Acting as surety for the limited partnership or guaranteeing or assuming an obligation of the limited partnership; iv) Requesting or attending a meeting of partners; v) Winding up the limited partnership; or vi) Proposing, approving, or disapproving limited partnership matters, such as the sale or transfer of substantially all of the assets of the limited partnership or the admission or removal of a general or limited partner.

Under the duty of loyalty, a partner is required to refrain from the following activities:

i) Competing with the partnership business; ii) Advancing an interest adverse to the partnership; and iii) Usurping a partnership opportunity or otherwise using partnership property or business to derive a personal benefit, without notifying the partnership.

The sharing of profits from a business does not create a rebuttable presumption that the arrangement is a partnership and the recipients are partners in six statutorily enumerated circumstances:

i) Debt payments, including installment payments; ii) Interest or other loan charges, even though the payment varies with the profits of the business; iii) Rent; iv) Wages or other compensation paid to an employee or independent contractor; v) Goodwill payments stemming from the sale of a business, including installment payments; and vi) Annuities or other retirement or health benefits paid to a beneficiary, representative, or designee of a deceased or retired partner.

Upon winding up, the partnership's assets are distributed to the following parties in order:

i) Partnership creditors, including partners who are creditors; then ii) Partners and former partners who are entitled to distributions that have accrued but not been paid; then iii) Partners for the return of their contributions; and finally iv) Partners in the proportions in which they share distributions.

The following events trigger a partner's dissociation from the partnership:

i) The partner's notice to the partnership of the partner's express will to withdraw; ii) An occurrence specified in the partnership agreement; iii) The expulsion of the partner pursuant to the partnership agreement; iv) The expulsion of the partner by the unanimous vote of the other partners, if it is unlawful to carry on the partnership business with that partner; v) The expulsion of the partner by court order because the partner has either (i) engaged in misconduct that adversely and materially affected the partnership business, (ii) willfully and persistently caused a material breach of the partnership agreement, or (iii) breached a duty owed to the partnership or other partners; vi) The partner's voluntary or involuntary bankruptcy, a general assignment of the partner's interest for the benefit of the partner's creditors, or appointment of a trustee, receiver, or liquidator of the partner's property; vii) The partner's death; viii) The appointment of a guardian or general conservator for the partner, or a specific judicial determination that the partner has become incapable of performing his duties under the partnership agreement; or ix) The termination of an entity partner (such as a limited liability company), or the distribution by an estate or a trust of the partnership interest.

For liability as a purported partner to be imposed, the following elements must be established:

i) There must be a representation—orally, in writing, or implied by conduct—that a person is a partner in an actual or purported partnership; ii) The purported partner must make or consent to the representation; iii) A third party must have reasonably relied on the representation; and iv) The third party must have suffered damages as a result of that reliance.

For a partnership that is for a definite term or undertaking, the partner's dissociation is wrongful when, before the expiration of the term or completion of the undertaking, the partner:

i) Withdraws, unless withdrawal follows within 90 days of another partner's wrongful dissociation or dissociation due to death, bankruptcy, or other circumstances described below; ii) Is expelled by court order; iii) Is a debtor in bankruptcy; or iv) Is not an individual, a trust, or an estate, and the partner willfully dissolved or terminated.

A partnership agreement may not eliminate the duty of loyalty, but the agreement may

identify specific types or categories of activities that do not violate this duty, if not manifestly unreasonable.

For a partnership that is unlimited by time or undertaking, a partner's dissociation is wrongful only when . . .

it is in breach of an express provision of the partnership agreement.

Even if a limited partner participates in the control of the business, she is personally liable only to . . .

persons who transact business with the limited partnership, reasonably believing, based on the limited partner's conduct, that the limited partner is a general partner.

Fiduciary duties do not apply to:

prospective partners and former partners.

A partner who wrongfully dissociates is liable to:

the partnership and the other partners for damages caused by the dissociation.