Chapter 25 – The Business Person: An Introduction
6. It is possible to solve the problem of unlimited liability through the formation of a
registered limited liability partnership.
D. Alternative Business Entities
1. Potential partners who are considering a business plan should think about forming a
registered limited liability partnership rather than a general partnership.
2. The problems associated with the start of new business are not unlike the problems
associated with establishing a stable national economy.
3. Similar to the goal of a national economic reform movement, the goal of a business
plan is to organize entrepreneurs and use capital to fashion a product or service the
sale of which produces a profit.
4. Similar to instituting a national economic reform movement, the initiation of a new
business results in unintended negative consequences.
5. Managers of a new business, like the managers of a national economic reform
movement, should remember that establishment must be preceded by a fact-finding
6. Orthodox, traditional, business entities include the sole proprietorship, general
partnership, limited partnership, limited liability partnership, private corporation,
public or state-owned corporation, quasi-public cororation, limited liability
corporatioin, joint venture, and franchise.
7. Unorthodox, nontraditional, business entities include the failure-proof public
corporation, public-private corporatioin, cross-owned corporation, public bodies
corporation, social corporation, cooperative cooperation, cooperative corporation with
wage-earning employes, and cooperative with nonemployee owners.
III. Partnership Formation (25-3)
A. Formation of a Partnership by Contract
1. One of the most common ways to form a partnership is by an express agreement
between the parties.
2. The agreement can be oral, but it is best to put the terms in writing.
3. Both the RUPA and the UPA are default statutes, which means the partners are free to
enter any type of agreement they desire; however, if they neglect to include
something in the agreement, the RUPA or the UPA will fill in the gaps.
B. Formation of a Partnership by Proof of Existence
1. The RUPA states that a business arrangement will be considered a partnership if it
involves two or more persons, in association with one another, who are carrying on a
business as co-owners for profit.
2. Signs that indicate that the parties are co-owners include the existence of management
power and the sharing of profits, with certain exceptions.
IV. Partnership Property Rights and Duties (25-4)
1. Capital contributions, considered property of the partnership, are sums contributed by
the partners as permanent investments and that the partners are entitled to have
returned when the partnership is dissolved.
2. Loans belong to the partners on an individual basis, and other forms of partnership
propery belong to the partnership in its status as an entity.
B. Partnership Liability
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or
distribution without the prior written consent of McGraw-Hill Education.