partnerships rule statements

partnership formation

a general partnership is an association of two or more persons to carry on a for-profit business as co-owners

intent is not necessary

liability

can recover from partners in their individual capacities because each general partner is personally liable for debts and obligations

a partner is jointly and severally liable for all partnership obligations

a judgment against a paratnership is not a judgment against its partners

new partner liability for preexisting obligations

a person admitted as a partner into an existing partnership is not personally liable for any prior partnership obligations. however, any capital contribution made by an incoming partner to the partnership is at risk for the satisfaction of such partnership obligations

duty of loyalty and care

a partner is prohibited from using partnership property or business to derive a personal benefit without notifying the partnership.

a partner is prohibited from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law

legal action between partners

a partnership may pursue legal action against a partner for breach of the partnership agreement or for violating a duty owed to the partnership that caused the partnership harm

a partner may pursue a legal action against the partnership or another partner to enforce the partner’s rights under the partnership agreement

effects of wrongful dissociating partner

a partner who wrongfully dissociates is liable to the partnership and the other partners for damages caused by the dissociation. a dissociated partner generally does not have the right to participate in the management or conduct of the partnership business and cannot participate in winding up the business

effects of wrongful dissociation on partnership

dissociation may but does not necessarily result in dissolution of the partnership and the winding up of its business

wrongful dissociation creates a possibility of dissolution if within 90 days of dissociation, a majority of the remaining partners express a will to wind up the business

if dissolution results, the dissociated partner is not entitled to any payout until the end of the original term unless they can prove to the court that earlier payment would not cause undue hardship to the business

effects of rightful dissociation on partner

the partner is not liable for damages and would retain the right to participate in the dissolution and winding up the partnership

effects of rightful dissociation on partnership

the partnership may choose to resume carrying on its business as if dissociation had never occurred. all partners must agree to waive the right to terminate the partnership within 90 days of association

dissociated partner’s liability during winding-up process

after dissolution, the partnership is bound by a partner’s act that is appropriate for winding up the partnership

each partner is liable to the other partners for his share of partnership liability incurred by such post-dissolution acts

a dissociated partner loses any right to participate in the business. apparent authority to bind the partnership lingers after dissociation for up to two years

transfer of partnership interest

may transfer the right to share in the profits and losses of the partnership and to receive distributions

transferee rights to books and records

a transferee is not entitled to participate in the management or conduct of the partnership business or access partnership records

a transfer of a partner’s partnership interest does not make the transferee a partner unless the other partners consent to making them a partner

partnership property

property is partnership property if it is acquired in the name of the partnership. it is the property of the partnership and not of the partners individually. a partner may use or possess the property only on behalf of the partnership

conversion of partnership to LLP

filing of a statement of qualification

a LLP is a partnership where a partner’s personal liability for obligations of the partnership is eliminated

a LLP is governed by the same rules as a partnership

liability for pre-partnership obligations for LLP

a partner is jointly and severally liable for all partnership obligations. even though a limited partner in an LLP is not personally liable for the obligations of an LLP, the status is generally only effective the date that the statement of qualification is filed with the state

conversion of general partnership to LLP

must be approved by all of the partners of the general partnership

must file articles of qualification with the state

a GP who becomes a LP as a consequence of a conversion remains liable for any obligation incurred by the partnership before the conversion

limited partnership

formed by two or more persons that has at least one general partner and at least one limited partner

must file a certificate of limited partnership with the state and include the name and address of each general partner. must be signed by all general partners

when LP fails, a GP is formed