Partnership Outline

Partnership Outline - Partnership Law Business organization...

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Partnership Law Business organization law is based in large part on agency law, which is based in common law. Therefore, you should quickly realize that business organization law is state based. So although there are partnerships and corporations that are national and international in scope and reach, the underlying organization is based in state law. Basic principles of agency law include how do you create and dissolve the agency relationship, what is the authority or powers within that relationship, what duties or rights are owed within the organization, and finally what are the liabilities within the organization. I. Formation of a general partnership based in state law, often states have adopted the UPA (uniform partnership act). (1) Express: oral or written; really the formation of a contractual relationship. A partnership agreement is required if the underlying business is covered by the statute of frauds. Any person with the capacity to enter a contract can be a partner. Usual contents of Partnership Agreement: 1. Operating name of partnership 2. Fixed term with a duration stated or at will. 3. Contributions to be made by individual partners if any. 4. Manner of dividing profits and losses; salaries, compensation for special duties if any. 5. Restrictions on the authority of any partners. 6. Conditions for withdrawal from partnership; 7. Continuation of partnership such as a buy-sale agreeement. (2) Implied: implied from conduct of the party. (3) By Estoppel (justifiable reliance by third party) II. Definition: (1) Four criteria: 1. Voluntary association of 2 or more persons; 2. Carrying on business; 3. As co-owners; 4. For profit. (2) Factors to consider in deciding whether there is a partnership or not: Share of business profit and management; Receipt of profits unless in payment of a debt, wage, rent, annuity, interest on loan, sale of goodwill of a business. Share in business losses. (3) Vohland v. Sweet: II. Classifications of Partnerships (1) General Partnership: general conduct of a particular kind of business (2) Special Partnership: single transaction; e.g. purchase, resale property (3) Trading partnership: organized for purpose of buying, selling; e.g., retail grocery chain (4) Nontrading partnership: professional not commerce, law, medicine, accounting
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III. Nature of Partnership Entity Theory: contracts Aggregate Theory: income tax; tort liability IV. Authority of Partners 1. Authority of Majority: majority vote 2. Express authority of individual partners; in agreement or by agreement of the partners; 3. Customary or implied authority: a. Contracts: To enter in the usual and necessary contracts to carry out firm’s operation, including selling the firm’s goods or services in the regular course of business. Implied authority would NOT include equipment NECESSARY to operating the business. This sale of equipment would be beyond the customary power and would require majority vote for approval. b.
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Partnership Outline - Partnership Law Business organization...

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