Twomey

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Twomey JenningsBUSINESS LAW

• Chapter 40
• Partnerships

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Nature of a Partnership

• A partnership is a relationship
• created by the voluntary association of two or
  more persons,
• to carry on as co-owners a business for profit.
• Partnership consists of
• Voluntary relationships.
• Capital or in-kind contributions.
• If no profit intended, then an unincorporated
  association.

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Nature of a Partnership

• The existence of a partnership may be found from
  the existence of shared control in the running of
  the business and the fact that the parties share
  profits and losses.
• The sharing of gross returns, as opposed to
  profits, is very slight evidence of a
  partnership.

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Partnership Agreement

• The partnership agreement governs the partnership
  during its existence and may also contain
  provisions relating to dissolution.
• The partnership agreement will generally be in
  writing this may be required by the statute of
  frauds.

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Partnership Property

• Partners hold title to firm property by tenancy
  in partnership. Surviving partners receive
  property.
• A creditor of a partner cannot proceed against
  any specific item of partnership property but
  must obtain a charging order to seize the
  debtor-partners share of the profits.
• An assignee of a partners interest does not
  become a partner without the consent of the other
  partners and is entitled only to a share of the
  profits and the assignors interest upon
  dissolution.

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Authority of Partners

• Scope of authority is determined by partnership
  agreement.
• Majority of partners prevails.
• Individual partners may have express authority
  under agency theory.
• Implied powers as co-owner of business.
• Partnership may be bound by act of partner with
  third party if third party did not know of
  limitations.

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Authority of Partners
Make contracts.
Adjust claims for or against the partnership.
Execute commercial paper in the name of the firm.
An individual partner can
Sell goods in the regular course of business.
Purchase items needed by the business.
Buy insurance.
Hire employees.
Borrow money for the firms purposes.
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Limitations on Authority of Partner to Bind
Partnership
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Prohibited Transactions

• Certain transactions a partner cannot undertake
  without express approval
• Cessation of business.
• Suretyship.
• Arbitration.
• Confession of judgment (admission).
• Assignment of partnership property.
• Personal obligations.

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Duties and Rights of Partners

• Duties (general agency law)
• Loyalty and good faith.
• Obedience.
• Rights
• Management.
• Inspection of Books.
• Share of Profits.
• Contribution and Indemnity.

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Liability of Partners

• Partnership Contracts Partners are jointly
  liable.
• Partnership Torts Partners are jointly and
  severally liable for torts within scope of
  business.
• Partner who has paid has right to contribution.
• Liability of New Partners.

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Dissolution and Termination

• A partnership may be dissolved by the parties
  themselves in accordance with the terms of the
  partnership agreement, by the expulsion of a
  partner, by the withdrawal of a partner, or by
  the bankruptcy of the firm or one of the
  partners.
• A court may order dissolution of a partnership
  upon the petition of a partner because of the
  insanity, incapacity, or major misconduct of a
  partner.

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Dissolution (contd)

• Dissolution may be decreed because of lack of
  success, impracticability, or other circumstances
  that equitably call for dissolution.
• Dissolution ends the right of the partnership to
  exist as a going concern.
• Notice of dissolution, except dissolution by
  operation of law, must be given.

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Winding Up

• Dissolution is followed by a winding-up period
  and the distribution of assets.
• After the firms liabilities to non-partners have
  been paid, the assets are distributed among the
  partners as follows
• (1) refund of advances,
• (2) return of contributions to capital, and
• (3) division of remaining assets in accordance
  with the partnership agreement or, if no
  agreement is stated, division of net assets
  equally among the partners.

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Rights, Liabilities of Partners