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
