from that activity o Transferability partner only has the right to transfer the

From that activity o transferability partner only has

This preview shows page 19 - 22 out of 46 pages.

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
Image of page 19
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 )
Image of page 20
° 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
Image of page 21
Image of page 22

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture