Partnerships and Law

Vocabulary

actual notice

notice given to third parties who have knowledge of a partnership when the partnership has been dissolved

agency

relationship in which one party represents another party and is authorized to act on behalf of that party

business for profit

organization whose primary goal is making money in a recognized trade, occupation, or profession

co-owner

individual who shares management of a partnership and shares profits earned, losses taken, and costs paid to vendors

constructive notice

notice given to third parties who have knowledge of a partnership but no dealings; often given by publishing a notice in a newspaper in the area of the business

dissolution

ending of a partnership

duty of care

obligation of partners to be reasonably prudent in managing a partnership, including keeping proper business records and completing audits

duty of loyalty

obligation of partners to act in the company's best interest and not compete with the partnership or profit individually

entity

organization that exists separately and distinctly from other organizations, in the context of partnerships

expulsion

removal of a partner from a partnership by the remaining partners, such as for violating the partnership agreement

fiduciary duty

legal obligations that partners owe each other: to act loyally, in good faith, honestly, confidentially, and with the highest standard of care when making decisions requiring business judgment

fully disclosed agency

result of a partner informing a third party that the partner is acting on behalf of the identified partnership and not on behalf of themselves

joint and several liability

principle that a creditor can sue one partner or all the partners for a debt that the partnership owes. That partner is then entitled to recover their share of that debt from other partners

partner

member of a partnership who has the right to share in profits and losses and in the management rights and responsibilities of the partnership

partnership

two or more people who have joined together to own and operate a business for profit and share profits earned, losses taken, and costs paid to vendors

partnership agreement

agreement that governs a partnership and establishes rights and obligations of the partners when those rights and obligations differ from those established by state law

undisclosed agency

when a partner deals with a third party agency who does not know that the partner is acting on the partnership's behalf, not merely for themselves

Uniform Partnership Act

statute adopted in 48 states and the District of Columbia that standardizes the rules that apply to partnerships. Most states have adopted slight deviations of the act

unlimited liability

concept that partners are personally responsible for paying partnership debts, even if they have to use whatever personal assets they own