from that activity
o
Transferability
partner only has the right to transfer the
value
of
her partnership interest, not the interest itself
Can pass down the value of her partnership interest but not
the right to be a partner
o
Formation
a partnership is an association of two or more co-
owner who carry on a business for profit
Each co-owner
general partner
Easy to form –
but they should have a written agreement
o
Taxes -
entity does not pay for taxes itself
°
Terminating a Partnership
°
A dissociation occurs when a partner
quits.
Dissociation
o
A partner always has the power to leave a partnership but may not
have the right
o
Might have to pay damages for any harm that her departure causes
o
The partnership can either buy out the departing partners
and continue in business or wind up the business and
terminate the partnership
Three Steps to Termination
o
1. Dissolution
Depend on the partnership
If the partners agreed in advance how long the partnership
will last
term partnership
A partner is dissociated and ½ of the remaining
partners vote to wind up the partnership business
All the partners agree to dissolve
Or the term expires or the partnership achieves its
goal
Partners can leave at any time for any reason
partnership
at will
Event occurs that the partners had agreed would
cause dissolution
Partnership becomes illegal or
A court determines that the partnership is unlikely to
succeed
o
2. Winding up
all debts of the partnership are paid, and the remaining
proceeds are distributed to the partners
o
3. Termination
happens automatically once the winding up is finished
partnership is not required to do anything official; it can go
out of the world even more quietly and simply than it came in
°
Limited Partnership
°
(
generally only used for estate planning purpose
and high highly
sophisticated investment vehicles
)
°
Structure
Must have at least one
limited
partner and one
general
partner
°
Liability
Limited partners are not personally liable but general partners are.
Limited partners risk only their investment in the partnership which is
called their capital contribution
General partners are personally liable for the debts of the organization
°
°
Taxes
Limited partnerships are not taxable entities, Income is taxed only once
before landing in a partners pocket
°
°
Formation
The general partners must file a
certificate of limited partnership
with their secretary of state. Although most limited partnerships do have a
partnership agreement, it is not required
°
Management
General partners have the right to manage a limited partnership. Limited
partners are essentially passive investors with few management rights
beyond the right to be informed about the partnership business
°
Transfer of Ownership
Limited partners have the right to transfer the
value
of their partnership
