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PARTNERSHIP OUTLINE1

1. INTRODUCTION
a. Partnership is the simplest form of business organization.
It requires no formalities to create. It does not protect the
partners from liability. It ceases to exist at a stated time,
when a partner dies or a partner leaves the partnership.
Management of the partnership is in the hands of the
partners.
b. Partnership can last for a definite time or until a specified
event or at will.
2. DEFINITION
a. A partnership is an agreement by two or more persons to
go into business for a profit.
b. No formalities are required. This means that partnerships
are not chartered by the state, no writing is required and
the partners dont even have to have a subjective intent to
form a partnership. A partnership may be inferred from
conduct.
c. Partnerships can own property. Partners may be any
legal entity recognized by law as a person; i.e. a
corporation. Partners must have contractual capacity.
Sharing of profits raises a presumption of partnership.
Participation in management raises presumption.
d. Payment out of partnership proceeds does not raise a
presumption of partnership if payments are made to pay a
debt, for services, payment of a loan, or for sale of
goodwill.
3. PROPERTY OF A PARTNERSHIP
a. Property titled in the name of the pship is presumed to be
pship property.
b. Property purchased with pship funds is pship property.
c. Property that is in a partners name is presumed to be
property of that partner if pship funds were not used to
buy the property even if the property is used for pship
purposes.
d. Pship property does not belong to the individual partners,
but rather to the pship.
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4. PARTNERS INTEREST IN THE PSHIP.


a. Partners can sell or assign their rights to profits and
distributions. Partners cannot sell their interest in the
pship. An assignee of such an interest does not become
a partner, has no management rights, nor the other rights
associated with being a partner such as accounting.
b. Creditors of partner cannot levy directly of P-ship
property. Creditor may get judgment against partner and
then execute on partner's interest in partnership. Has no
right to manage, see books, or force dissolution of p-ship.
5. PARTNERS RIGHTS AND DUTIES
a. Partners owe each other the fiduciary duties of loyalty and
care.
b. Duty of loyalty is
i. Duty to account for profits or other business
opportunities,
ii. To not deal with the pship as an adverse party,
iii. To not compete.
iv. Seems similar to the duty of loyalty of corporate
directors and officers.
c. Duty of care is to refrain from engaging in grossly
negligent or intentional conduct in connection with pship
business. Seems to be similar to the business judgment
rule in corporations.
d. Partner has a right to inspect the books, is entitled to an
accounting and distribution on dissolution, indemnification
for expenditures on behalf of pship business.
e. Partner has right to participate in management of the
business, and to share in profits and losses.
6. PARTNERSHIP LIABILITY TO THIRD PARTIES
a. Each partner is an agent of other partners and the
partnership.
b. The rules of agent authorityactual authority, apparent
authority and ratificationapply.
c. Partners with apparent or actual authority can bind
partnership in contract.
d. Partners are liable on a contract made by any partner
acting in the scope of pship business.
e. Partners are liable in tort for torts committed by a partner
in the course of pship business.

f. Dont forget the pship is also liable.


g. Partners are jointly and severally liable.
h. Each partner is personally liable for all pships liabilities.
Partner is entitled to indemnification from the pship.
Partner is entitled to contribution from the other partners.
7. ENDING OF PSHIP
a. The following events cause dissolution of a pship
i. Partner leaves
ii. A pship agreement may provide the pship
terminates at a particular time or at the happening
of a particular event.
iii. Partner becomes bankrupt
iv. Partner dies.
b. Any dissolution event begins the winding up process.
c. Remaining partners, between the dissolution event and
winding up, may decide to continue the pship. The effect
is that the new pship has the liabilities of the old pship.
d. If the remaining partners do not waive dissolution the
pship winds up, that it is it continues to function to take
care of whatever business is necessary. Remaining
contracts, final accounting and distribution of assets and
liabilities.
e. Disassociated partner must be bought out of his
ownership interest.
8. Other kinds of business organizations
a. Limited Liability Partnership
i. Advantage is that partners are not personally liable
for obligations of pship.
ii. Must file with Sec. of State. Must be executed by
at least two partners. Statement must contain:
1. name and address of pship;
2. statement that pship elects to be an LLP;
iii. Must file annual report
iv. Name must contain "LLP" or the equivalent.
v. Partner remains personally liable for his own
wrongful acts.
b. Limited Partnership
i. One or more general partners
ii. One or more limited partners
iii. Certificate of limited pship

iv.
v.
vi.

vii.

viii.
ix.

1. filed with SOS


2. pship name
3. name and address of agent for service
4. name and address of each general partner
Name of pship may not contain name of any limited
partner unless he is also a general partner. Must
include "Limited Pship"
General partner is personally liable for pship's
obligations
Limited partners only liable to the extent of his
contribution, unless
1. limited is also a general
2. limited participates in control of business and
third party reasonably believes limited is a
general,
a. safe harbor provision for providing
services to pship such as being an
employee, or taking part in extraordinary
activities such as winding down, voting
for sale of pship, or bringing derivative
action
Rights of both generals and limited partners
1. share profits and losses
2. assign pship interest
3. transact business w pship
4. right to withdraw
5. remove general
general has right to manage business
limited has right to vote on specific matters, inspect
and copy books, tax returns, and other information,
upon reasonable demand.