Partnership Law

Types of Partnerships Partnership Pros & Cons

At Will: Any partner can walk away at any time without An association of two or more persons to carry on as co- + Taxed once
causing a breach. Thus, no damages and partnership owners a business for profit. Sharing of profits is prima + Personal assets protected
just dissolves. facie evidence of partnership but no such inference shall - No liability protection
At Term: For a specific time or goal. When a partner be drawn if such profits were received in payment as
leaves there is a breach and damages. The other wages of an employee
partner can continue the business as it wasn’t
Liability
dissolved.
Jointly & Severally: everything
General: Two or more people associated together to Fenwick 8 Factors to Determine the
chargeable to the partnership
carry on as co-owners of a business for profit. Each Existence of a Partner Relationship Jointly: other debts and
partner is an agent of the other. Manage partnership 1. Intention of the parties obligations of partnership
and have unlimited liability.
2. Right to share in profits Vicarious: other partner’s tortious
Limited: Basically silent investors, have no say in
3. Obligation to share in losses conduct when acting in the
management or control. No liability for partnerships
4. Ownership and control of the partnership ordinary course of business or
debts beyond capital contributions and investments.
property and business with authority from the
By Estoppel: Representation that one is the partner of
partnership
another. Requires holding out of partnership, a change 5. Community of power in administration
of position, with consequent injury, by the third person 6. Language in the agreement
in reliance. 7. Conduct of the parties toward third persons
Service: One partner contributes only labor. Raising Capital
Permanent: No end date. Requires mutual approval for 8. Rights of the parties on dissolution Unless agreement says otherwise,
dissolution. no partner:
- Can be forced to contribute
Formation anything
What Triggers Dissolution - Can be added without
1. Change in relationship of partners 1. Agreement of partners and compliance with
requirements of contract law consent of all existing
2. Express will of partner with no definite term by; partners
a. Act, operation of law, court order 2. Partners must have legal capacity
- Their share cannot be
b. Express will 3. Agreement can be oral unless SOF requires a changed without their
c. Without violation of agreement writing consent
3. Event which makes it unlawful for the business to
be carried on Partners’ Rights
4. Death of any partner
 Each repaid contributions and share equally in Default Positions
5. Bankruptcy of any partner  Majority of partners rule
profits and surplus, must contribute to losses and
6. Decree of court order where partner’s conduct  Agreement > UPA
capital
a. Lunatic or unsound mind
b. Incapable of performing
 Must indemnify every partner for liabilities  Partners have equal rights
reasonably incurred
c. Willfully & persistently breaches the
 Receive interest on capital contributed
agreement ETC.
 Equal rights in management and conduct
d. Impractical to carry on  No person can become member without consent of  Where agreement is silent,
all partners UPA fills in gaps
 Any difference is decided by a majority  In order for a creditor to be
Dissolution a partner in a firm, the
Order of dissolution: debts to (1) creditors, (2) creditor must be closely
partners for noncapital contributions, (3) partners for Partner does not violate duty or obligation enough associated with the
capital contributions, (4) partners for profit when… firm so as to make it a co-
Liquidation: Sale of assets, former partners can bid on  Merely because conduct furthers his own interest owner carrying on the
the firm at auction  Lends money and transact other business as business for profit.
After dissolution: partnership must be wound up, creditor with partnership
firm’s assets are distributed to partners  They can transact business so long as they disclose
Expulsion: wrongful dissolution, must have been a the opportunity so it can be equalized Buy Out Agreements
bona fide or in good faith without violation of Allows a partner to end their
partnership agreement relationship with the other
Joint Venture Elements partners and receive a payment in
1. Contribution by the parties of money, property, return for their interest.
Fiduciary Duties time, or skill in some common undertaking, but Triggered by;
1. Loyalty the contributions need not be equal or of the - Death
2. In winding up – use partnership’s property or same nature - Retirement
appropriation of a partnership opportunity 2. A proprietary interest and right of mutual control - Partners or partnership
3. Not dealing with adverse parties over the engaged property
4. Not competing 3. An express or implied agreement for the sharing
5. Care of profits, and usually, but not necessarily, of
6. Good faith and fair dealing losses
*The existence and scope of a fiduciary duty depends
on language of agreement*
4. An express or implied contract showing a joint
venture was formed.