Partnership Top Rules

Partner who pays more than his share of debt entitled to contribution

If a partner fails to contribute to the partnership's debt, all of the other partners must contribute the additional amount necessary in proportion in which the partners share losses. Where a partner is forced to pay more than his share of the partnership's debt, he is entitled to contribution from the others to equalize it.

Limited Liability Partnerships

The R.U.P.A. allows the creation of Limited Liability Partnerships. The major advantage of operating as a limited liability partnership (LLP) is that the partners are not personally liable for the limited liability partnership's obligations. A partner in a limited liability partnership is not personally liable (directly, indirectly, or by way of contribution) for the obligations of the partnership or other partners, whether arising in contract, tort, or otherwise, solely by reason of being or acting as a partner. However, the partner REMAINS PERSONALLY LIABLE FOR HER OWN WRONGFUL ACTS.

Apparent Authority

The act or contract of any individual partner will bind the partnership if the action was in the ordinary course of the partnership business (or was a type of action that the business ordinarily conducts) unless: the partner has no authority to act for the partnership in the particular manner; AND the person with whom the partner was dealing knew or had received notification that the partner lacked authority. NOTE: Look at the above from the viewpoint of a third party.

Change of Partnership Membership Affects Partners' liability

1. Liability of Incoming Partner: A person admitted as a partner (DEFAULT IS THAT UNANIMOUS CONSENT IS REQUIRED) into an existing partnership is not personally liable for any partnership obligation incurred before the person's admission as a partner (of course, any property or capital the incoming partner contributes to the partnership is at risk for satisfying existing partnership debts.) 2. Liability of outgoing (Dissociated) partner: In general, the partner is liable for acts done not only until he has withdrawn from the partnership, but also until 90 days after has filed a notice of dissociation with the department of state. A dissociated partner may be liable for certain debts arising within one year after the date of dissociation if the other party to the transaction (i) reasonably believed when entering the transaction that the dissociated partner was still a partner, and (ii) did not have notice of the partner's dissociation. NOTE: Every partner has a right to dissociate; Again look at this from the third party that was dealing with the dissociated partner.

Remuneration

Absent agreement to the contrary, a partner is not entitled to remuneration except for reasonable compensation for services rendered in winding up the partnership business. NOTE: Not entitled to be paid unless there is an agreement to the contrary or services were rendered in the winding up of the partnership business.

Relations between Partners: Right to participate in Management

Absent an agreement to the contrary, all partners have equal rights in management of the partnership business. Decisions regarding matters within the ordinary course of business of the partnership may be controlled by a majority vote, but matters outside of the ordinary course of business require the consent OF ALL PARTNERS.

Partnership's Profits

Absent an agreement to the contrary, profits are shared equally; Losses are shared in the same way as profits.

Liability for limited partner

A limited partner is not personally liable for an obligation of the limited partnership solely by reason of being a limited partner, even if the limited partner participates in the management and control of the limited partnership.

Rights of partners in Partnership property

A partner is not a co-owner of partnership property and has no interest in partnership property. Thus, a partner's creditors may not reach partnership property to satisfy the personal obligations of a partner.

Derivative Action

A partner may maintain a derivative action to enforce the right of a limited partnership if (1) the partner first makes a demand on the general partners to bring an action to enforce the right any of the general partners do not bring the action within a reasonable time, or (2) making such a demand would be futile (i.e. the general partners are the ones who committed the tort).

Liability of Partners

All partners are jointly and severally liable for all obligations of the partnership including contracts made by the partnership and torts committed by any partner in the ordinary course of the partnership. Each partner is personally and individually liable for the entire amount of partnership obligations.

Partners' Accounts

Each partner is deemed to have an account that is credited with the net amount equal to the partner's contribution, plus or minus the partner's share of any profits or losses, less any partnership liabilities.

Partnership Defined

Florida has adopted the Revised Uniform Partnership Act ("R.U.P.A"), which defines partnership as "an association for two or more persons to carry on as co-owners of a business for for profit"

Limited Liability Limited Partnerships

LLLP is a status elected by limited partnerships (LPs). The partnership continues to be the same entity that existed before the filing of the statement of qualification (i.e., it is a change in status from LP to LLLP, not creation of a new entity). The limitations on liability of partners in an LLLP apply to both general and limited partners (unlike the original LP, where only limited partners were protected).

When can a manager or member bind an LLC in contract?

Member managed LLC signing a contract will hold the company liable.

Charge of the transferable interest (attachment)

On application to a court with jurisdiction, the creditor of a partner may charge (attach) the transferable interest of the debtor partner to satisfy the judgment. The charging order becomes a lien on the interest. The court may also appoint a receiver of the debtor's share of the distribution due to or become due from the partnership. Note: The lien is not attached to the partnership itself.

Indemnification and Other payment

The partnership must indemnify partners for payments reasonably made and obligations reasonably incurred by a partner in carrying on the business for the partnership. Similarly if a partner makes any payment or advance on behalf of the partnership beyond the amount the partner agreed to contribute, the partnership must repay the partner. In any case, such payment, obligations, and advances constitute loans to the partnership, which must be repaid with interest.

Right to Distributions in a Limited Partnership

Unless otherwise provided in the partnership agreement, distributions in a Limited Partnership are made on the basis of the partners' contributions (in proportion to the value of each partner's contributions). Note this is different from the rule for General partnerships, which provides that profits and losses are to be shared equally (unless otherwise provided for).