Business Environment and Concepts

D. Partners can be liable for actions of other partners.

1. For torts, the partners are jointly and severally liable. Joint liability means that all
partners must be sued together. Several liability means that a party may sue any
partner for the full amount of the claim. Thus, a partner who commits a tort in the
ordinary course of partnership business has a personal liability and has created a
liability for all other partners.
2. Each partner is jointly liable with all other partners for the contracts of the
partnership.
E. Partners are co-owners of the business. There are several separate aspects to this
co-ownership.
1. Each partner is entitled to share in the profits and surplus of the partnership.
a. The right to profits and surplus can be assigned to a nonpartner but the assignee
does
not become a partner unless admitted by unanimous vote of all partners. Profits are
also subject to attachment by creditors of the partner. b. The right to profits and
surplus can be passed to heirs at the partner's death. However,
partnership property such as buildings and equipment passes to the other partners. c.
Partners are not entitled to salaries. There is no inherent right to a salary, only to a pro
rata share of profits. A partnership agreement can specify the specific method
by
which profits (and losses) are to be allocated.
2. All partners have the right to participate in the management of the business. All
partners must agree before a change can be made to this right.
3. Each partner has the right to use specific partnership property for partnership
business.
4. A new partner cannot be admitted without the unanimous consent of all partners.
5. An incoming partner is liable only for future debts of the partnership, not for
existing debts. Money or property that the new partner puts into the partnership can
be used to satisfy existing debts.
F. Dissolution of a partnership
t. A partnership can dissolve and wind up its affairs for any of several reasons.
a. Prior agreement (e.g., partnership agreement).
b. Present agreement of partners
c. By decree of court in such cases as
(1) Partner continually or seriously breaches partnership agreement.
(2) Partner guilty of conduct that harms business.
2. Under RUPA, unlike previous law, partner's withdrawal, death, or bankruptcy
does not
automatically cause dissolution of partnership.
3. After dissolution, the partners have no authority to bind partnership except as is
necessary to wind up the partnership business.
4. Actual business may be continued but only as a new partnership.
5. If the business is not continued, the assets of the business must be distributed
according to set guidelines,
a. General creditors are paid in full first. *' '"*' b. Debts owed to individual partners
are paid next.
2 - Business Structure