Chapter36 - C hapter 36 P artnerships and Limited Liability...

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Chapter 36 Partnerships and Limited Liability Partnerships §1: Basic Partnership Concepts Partnerships are governed both by common law and by statutory laws. Agency Concepts and Partnership Law: Each partner is deemed to be an agent of the other. There may be imputation of liability. Each partner is a fiduciary of the other. Uniform Partnership Act Partners are agents and fiduciaries of one another, but differ from agents in that they are also co-owners and share in profits and losses. In the absence of a partnership agreement, the Uniform Partnership Act, as adopted by most states, governs the partnership. When Does A Partnership Exist? Partnership is created when two or more persons agree to carry on business for profit as co-owners with equal right to manage and share profits (UPA). Definition of Partnership Definition of Partnership Advanta ges Disadvantages Easy to create and maintain Partners are personally liable for all torts/contracts Flexible, informal Dissolved upon death Partners share profits and losses equally Difficult to raise financing
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If a commercial enterprise shares profits and losses a partnership will be inferred. Exceptions: Partnership not inferred if profits received as payment in the following situations: Debt by installments of interest on a loan. Wages of an employee. Rent to a landlord. Annuity to a widow or representative of a deceased partner. Sale of good will. Joint Partnership Ownership and Partnership Status At common law, the partnership was not a separate legal entity from its owners. Today, many states recognize the partnership as a separate legal entity for the following purposes: To sue and be sued (for federal questions, yes; for state questions, differs). To have judgments collected against it’s assets, and individual partners’ assets. Partnership as an Entity Partnerships are recognized as separate legal entities ( cont’d ): To own partnership property. To convey partnership property. At common law -- property owned in tenancy in partnership, all partners had to be named and sign the conveyance. Under UPA partnership property can be held and sold in firm name. Entity vs. Aggregate
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Chapter36 - C hapter 36 P artnerships and Limited Liability...

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