An association of two or more persons engaged in a business enterprise in which the profits and losses are shared proportionally

. The legal definition of a partnership is generally stated as "an association of two or more persons to carry on as co-owners a business for profit"

The formation of a partnership requires a voluntary "association" of persons who "coown" the business and intend to conduct the business for profit. Persons can form a partnership by written or oral agreement, and a partnership agreement often governs the partners' relations to each other and to the partnership. The term person generally includes individuals, corporations, and other partnerships and business associations. Accordingly, some partner-ships may contain individuals as well as large corporations. Family members may also form and operate a partnership, but courts generally look closely at the structure of a family business before recognizing it as a partnership for the benefit of the firm's creditors. Certain conduct may lead to the creation of an implied partnership. Generally, if a person receives a portion of the profits from a business enterprise, the receipt of the profits is evidence of a partnership. If, however, a person receives a share of profits as repayment of a debt, wages, rent, or an Annuity, such transactions are considered "protected relationships" and do not lead to a legal inference that a partnership exists.

Relationship of Partners to Each Other
Each partner has a right to share in the profits of the partnership. Unless the partnership agreement states otherwise, partners share profits equally. Moreover, partners must contribute equally to partnership losses unless a partnership agreement provides for another arrangement. In some jurisdictions a partner is entitled to the return of her or his capital contributions. In jurisdictions that have adopted the RUPA, however, the partner is not entitled to such a return. In addition to sharing in the profits, each partner also has a right to participate equally in the management of the partnership. In many partnerships a majority vote resolves disputes relating to management of the partnership. Nevertheless, some decisions, such as admitting a new partner or expelling a partner, require the partners' unanimous consent. Each partner owes a fiduciary duty to the partnership and to copartners. This duty requires that a partner deal with copartners in Good Faith, and it also requires a partner to account to copartners for any benefit that he or she receives while engaged in partnership business. If a partner generates profits for the part-nership, for example, that partner must hold the profits as a trustee for the partnership. Each partner also has a duty of loyalty to the partnership. Unless copartners consent, a partner's duty of loyalty restricts the partner from using partnership property for personal benefit and restricts the partner from competing with the partnership, engaging in self-dealing, or usurping partnership opportunities.

Relationship of Partners to Third Persons
A partner is an agent of the partnership. When a partner has the apparent or actual authority and acts on behalf of the business, the partner binds the partnership and each of the partners for the resulting obligations. Similarly, a partner's admission concerning the partnership's affairs is considered an admission of the partnership. A partner may only bind the partnership, however, if the partner has the authority to do so and undertakes transactions while conducting the usual partnership business. If a third person, however, knows that the partner is not authorized to act on behalf of the partnership, the

In many states each partner is jointly and severally liable for the wrongful acts or omissions of a copartner. Partnership Books Generally. Some states that have adopted the RUPA provide that a partner is jointly and severally liable for the debts and obligations of the partnership. a court may allow a partnership creditor to proceed against an individual partner in an attempt to satisfy the partnership's obligations. Partnership Interests A partner's interest in a partnership is considered personal property that may be assigned to other persons. such property is presumed to be partnership property and is held in the partnership's name." but other jurisdictions expressly state that the partnership may own property. Partnership Property A partner may contribute Personal Property to the partnership. If assigned. Rather. it was thought that the partnership could not own property but that the individual partners must actually own it. certain conditions must be met. Without the consent of all the partners. the assignee only receives the economic rights of the partner. and the RUPA has expressly stated that the partnership may own partnership property. Such a right is a separate interest and remains with the partner. Finally. such as the right to receive partnership profits.partnership is generally not liable for the partner's unauthorized acts. The books must be kept at the partnership's principal place of business. Moreover. Because the aggregate theory is that the partnership is not a separate entity. which is the approach contained in the UPA. Although a partner may be sued individually for all the damages associated with a wrongful act. but the contributed property becomes partnership property unless some other arrangement has been negotiated. a partnership maintains separate books of account. This approach has led to considerable confusion. before a partnership's creditor can levy a judgment against an individual partner. and each partner must have access to the books and be . is the result of adopting an aggregate approach to partnerships. The tenant in partnership concept. each partner is jointly liable with the partnership for the obligations of the partnership. including the return of an unsatisfied writ of execution against the partnership. A partner may also agree that the creditor need not exhaust partnership assets before proceeding to collect against that partner. In some jurisdictions the partnership property is considered personal property that each partner owns as a "tenant in partnership. Nevertheless. however. which typically include records of the partnership's financial transactions and each partner's capital contributions. the person receiving the assigned interest does not become a partner. Similarly. partnership agreements generally provide for indemnification of the partner for the portion of damages in excess of her or his own proportional share. if the partnership purchases property with partnership assets. In addition. Liability Generally. individual partners may not sell or assign partnership property. A partner who is new to the partnership is not liable for the obligations of the partnership that occurred prior to the partner's admission. The partnership may convey or transfer the property but only in the name of the partnership. a partnership is not responsible for a partner's wrongful acts or omissions committed after the dissolution of the partnership or after the dissociation of the partner. an assignment of the partner's interest does not give the assignee any right to participate in the management of the partnership.

if any. the partnership is considered legally dissolved.allowed to inspect and copy them upon demand. Rather. . the partnership is dissolved under the RUPA. If. In a court action for an accounting. dissociation occurs upon receipt of a notice from a partner to withdraw. Taxation One of the primary reasons to form a partnership is to obtain its favorable tax treatment. Although the term dissolution implies termination. Thus. the profits of the partnership "pass through" to the individual partners. a change in the relationship between the partners. If a partnership denies a partner access to the books. usually sets forth a partner's right to a predissolution accounting. but the partnership is legally a new and different partnership. or an event that makes the partnership business illegal. Dissolution A dissolution of a partnership generally occurs when one of the partners ceases to be a partner in the firm. who must then pay individual taxes on such income. however. events that would otherwise cause dissolution are instead classified as the dissociation of a partner. he or she usually has a right to obtain an Injunction from a court to compel the partnership to allow him or her to inspect and copy the books. Partnership Accounting Under certain circumstances a partner has a right to demand an accounting of the partnership's affairs. For instance. A partnership agreement may provide for a partner to leave the partnership without dissolving the partnership but only if the departing partner's interests are bought by the continuing partnership. State law also generally allows for an accounting if copartners exclude a partner from the partnership business or if copartners wrongfully possess partnership property. if the partnership carries on the business and does not dissolve. After dissolution. If. Dissociation Under the RUPA. however. an agreement of all partners to dissolve. Such taxation is considered "pass-through" taxation in which only the indimvidual partners are taxed. the partners must provide a report of the partnership business and detail any transactions dealing with partnership property. if a partner resigns or if a partnership expels a partner. In addition. the remaining partners may carry on the partnership business. In addition. Nevertheless. each of the partners is taxed on her or his proportional share of partnership profits. if a partnership operates a gambling casino and gambling subsequently becomes illegal. dissolution is actually the beginning of the process that ultimately terminates a partnership. the partner may be liable for damages as a result of the untimely or unauthorized withdrawal. Instead. The causes of dissociation are generally the same as those of dis-solution. dissolution begins the process whereby the partnership's business will ultimately be wound up and terminated. or by bankruptcy-related events such as the bankruptcy of a partner. Accordingly. the partnership will be considered legally dissolved. Although a partnership is required to file annual tax returns. The partnership agreement. in essence. it is not taxed as a separate entity. unless the partnership agreement states otherwise. a partner may withdraw from the partnership and thereby cause a dissolution. the partners who bring a court action for an accounting may examine whether any partners have breached their duties to copartners or the partnership. the partner withdraws in violation of a partnership agreement. Other causes of dissolution are the Bankruptcy or death of a partner. Because partnerships are generally considered an association of co-owners. then its affairs must be wound up and terminated. Dissolution is distinct from the termination of a partnership and the "winding up" of partnership business. Dissociation does not immediately lead to the winding down of the partnership business. It is. it must buy back the former partner's interest. by expulsion of a partner.

and other states have relied on either revision to the uniform act or on both revisions to the uniform act. a limited partnership may govern its affairs according to a limited partnership agreement. Only partners who have not wrongfully caused dissolution or have not wrongfully dissociated may participate in winding up the partnership's affairs.Winding Up Winding up refers to the procedure followed for distributing or liquidating any remaining partnership assets after dissolution. Generally. Limited Partnerships A limited partnership is similar in many respects to a general partnership. State partnership statutes set the procedure to be used to wind up partnership business. Generally. The limited partnership did not exist at Common Law. such profits and losses are charged to the partners' capital accounts. acts as a general partner. then partners who have contributed capital to the partnership are entitled to their capital contributions. Accordingly. such as making payments to non-partner creditors or to remaining partners. if a partner has a negative balance upon winding up the partnership. then he or she is not considered a general partner with the accompanying potential liability. . Safe harbors include consulting with the general partner with respect to partnership business. followed by partners who are also creditors of the partnership. being a contractor or employee of a general partner. Any remaining assets are then divided among the remaining partners in accordance with their respective share of partnership profits. the liquidators of a partnership pay non-partner creditors first. however. or knowingly allows her or his name to be used in partnership business. however. In addition. including any partners who are also creditors. If profits or losses result from a liquidation. Winding up also provides a priority-based method for discharging the obligations of the partnership. with one essential difference. Like a general partnership. If any assets remain after satisfying these obligations. States have for the most part relied on the Uniform Limited Partnership Act in adopting their limited partnership legislation. If a limited partner is engaged solely in one of the activities defined as a safe harbor. a few states have retained the old uniform act. Although one partner may be both a limited and a general partner. A limited partnership must have one or more general partners who manage the business and who are personally liable for partnership debts. Unlike a general partnership. The Uniform Limited Partnership Act was revised in 1976 and 1985. However. "safe harbors" exist in which a limited partner will not be found to have participated in the "control" of the partnership business. that partner must pay the amount necessary to bring his or her account to zero. Any excess funds are then distributed according to the partnership's distribution of profits and losses. the extent of liability for a limited partner is the limited partner's capital contributions to the partnership. Under the RUPA. however. For this reason. or winding up the limited partnership. Accordingly. at all times there must be at least two different partners in a limited partnership. A partner who has such limited participation is considered a "limited partner" and does not generally incur personal liability for the partnership's obligations. Limited partnerships are frequently used in real estate and entertainment-related transactions. creditors are paid first. will be subject to applicable state law. Such an agreement. contributes services to the partnership. the partnership agreement may alter the order of payment and the method of liquidating the assets of the partnership. limited partnerships are often used to provide capital to a partnership through the capital contributions of its limited partners. a limited partnership has one or more partners who cannot participate in the management and control of the partnership's business. A limited partner may lose protection against personal liability if she or he participates in the management and control of the partnership.

etc.. charged on Drawings and the relevant rates of interest Aspects relating to salaries. The contents of the certificate. the law of general partnerships applies equally to limited partnerships. however. and the names and addresses of general partners and limited partners. It is a document containing the various aspects agreed upon by the partners. drawings that can be made etc. Loans given by partners to the firm. everything that is relevant to the relationship between the partners forms part of the agreement. In addition. the character of the limited partnership's business. Business Partnership Advantages y Partnerships are relatively easy to establish. to be paid to partners The ratio in which the profits and losses are to be shared among partners Goodwill valuation methodology at the time of incorporating changes in the partnership.Except where a conflict exists. the certificate must state the date on which the limited partnership will dissolve. a certificate of limited partnership includes the limited partnership's name. Agreement may be Written or Oral The contract/agreement that forms the basis of the relationship between the partners specifies the terms and conditions that bind the partners into the relationship. Rights and Duties of Partners inter se among themselves. and because the limited partnership has a set term of duration. It is also called a "Partnership Agreement" or "Articles of Partnership" Contents of the Partnership Deed The partnership generally covers/includes the following aspects           Names of the partners of the firm and their addresses Duration of Partnership Capital contribution of each Partner and aspects relevant to it like introduction of additional capital. This agreement may be written or oral. Unlike general partnerships.. will vary from state to state. however time should be invested in developing the partnership agreement. Even aspects relating to Arbitration (in case of disputes among themselves) etc. limited partnerships must file a certificate with the appropriate state authority to form and carry on as a limited partnership. To say in brief. Name of the Bank/Banks where the business banking accounts should be maintained and the person/persons who are vested with the power to operate the accounts. The person/persons responsible for accounting for the business transactions and the place where the books of accounts are to be kept generally. . will be part of the agreement. Generally. depending on which uniform limited partnership act the state has adopted. however. Interests to be paid on Capital. The agreement between the partners put down in writing forms the "Partnership Deed". commissions.

y With more than one owner. Profits must be shared with others. . Since decisions are shared.Debt vs Equity may be increased. y The profits from the business flow directly through to the partners' personal tax returns. y The business usually will benefit from partners who have complementary skills. the ability to raise funds . disagreements can occur. it may end upon the withdrawal or death of a partner. y Prospective employees may be attracted to the business if given the incentive to become a partner. Some employee benefits are not deductible from business income on tax returns. The partnership may have a limited life. Business Partnership Disadvantages y y y y y Business Partners are jointly and individually liable for the actions of the other partners.

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