Chapter 30 Formation and Internal Relations of General Partnerships 546

general partnership

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

joint venture

an unincorporated business association of two or more persons to carry out a particular business enterprise for profit

limited partnership

an unincorporated business association consisting of at least one general partner and at least one limited partner

limited liability company (LLC)

an unincorporated business association that provides limited liability to all of its owners (members) and permits all of its members to participate in management of the business

limited liability partnership (LLP)

a general partnership that, by making the statutorily required filing, limits the liability of its partners for some or all of the partnership’s obligations

limited liability limited partnership (LLLP)

a limited partnership in which the liability of the general partners has been limited to the same extent as in an LLP

corporation

a legal entity separate and distinct from its owners

business trust

a trust (managed by a trustee for the benefit of a beneficiary) established to conduct a business for a profit

partnership

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

legal entity

an organization having a legal existence separate from that of its members; the Revised Act considers a partnership a legal entity for nearly all purposes

legal aggregate

a group of individuals not having a legal existence separate from that of its members; the Revised Act considers a partnership a legal aggregate for a few purposes

partnership agreement

the agreement, whether written, oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement

Tests of partnership existence

the formation of a partnership requires all of the following: (1) association, (2) business for profit, and (3) co-ownership

partnership capital

total money and property contributed by partners for permanent use by the partnership

Partnership property

sum of all of the partnership’s assets, including all property acquired by a partnership

fiduciary duty

duty of utmost loyalty, fairness, and good faith owed by partners to each other and to the partnership; includes duty not to appropriate partnership opportunities, not to compete, not to have conflicts of interest, and not to reveal confidential information

Duty of obedience

duty to act in accordance with the partnership agreement and any business decisions properly made by the partners

Duty of care

duty owed by partners to manage the partnership affairs without gross negligence, reckless conduct, intentional misconduct, or knowing violation of law

interest in the partnership

includes the partner’s transferable interest and all management and other rights

partner’s transferable interest

the partner’s share of the profits and losses of the partnership and the partner’s right to receive distributions

Assignability

a partner may sell or assign his transferable interest in the partnership; the new owner becomes entitled to the assigning partner’s right to receive distributions but does not become a partner

Creditors’ rights

a partner’s interest is subject to the claims of creditors, who may obtain a charging order against the partner’s transferable interest

charging order

judicial lien against a partner’s transferable interest in the partnership

distribution

transfer of partnership property from the partnership to a partner

Share in profits

each partner is entitled to an equal share of the profits unless otherwise agreed

Return of capital

a partner does not have a right to receive a distribution of the capital contributions in his account before his withdrawal or the liquidation of the partnership

Indemnification

if a partner makes an advance (loan) to the firm, he is entitled to repayment of the advance plus interest; a partner is entitled to reimbursement for payments made and indemnification for liabilities incurred by the partner in the ordinary course of the business

Compensation

unless otherwise agreed, no partner is entitled to payment for acting in the partnership business

management

each partner has equal rights in management unless otherwise agreed

Choose associates

under the doctrine of delectus personae, no person can become a member of a partnership without the consent of all of the partners

Information

each partner has the right (1) without demand, to any information concerning the partnership and reasonably required for the proper exercise of the partner’s rights and duties; and (2) on demand, to any other information concerning the partnership

Legal action

a partner may maintain a direct suit against the partnership or another partner for legal or equitable relief to enforce the partner’s rights; the partnership itself may maintain an action against a partner for any breach of the partnership agreement or for the violation of any duty owed to the partnership