Ch. 2: Partnerships and Limited Liability Partnerships – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Partnership: An association of two or more persons who
carry on, as co-owners, a business in which they
Ch. 2: Partnerships and Limited Liability Partnerships – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP FORMATION
Partnership Agreement: A written agreement – sometimes
called articles of partnership – that sets forth the rights and
obligations of each partner with respect to the partnership.
Partnership Duration: The partnership agreement may
specify the duration of the partnership in terms of a date or
dissolution personally liable for any resulting losses.
A partnership agreement silent as to duration implies a
partnership at will. Any partner may dissolve the
partnership at any time without incurring liability.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
MANAGEMENT & VOTING RIGHTS
partners, except in the following cases, which require
unanimous consent:
(a) altering the essential nature of the partnership’s
business or entering a wholly new business;
(b) admitting new partners or altering the capital
(e) amending the partnership agreement.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP INTEREST
Compensation: Unless otherwise agreed, partners do
not receive a salary for any work they do for the
partnership’s benefit; rather, they are paid a share of the
partnership’s profits, plus a return of their initially-
produce, full and complete information concerning all
aspects of partnership business.
Each partner (including the personal representative of a
deceased partner’s estate) has the rights to inspect on
Ch. 2: Partnerships and Limited Liability Partnerships – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PROPERTY RIGHTS
existence or the acquirer’s capacity as a partner.
Otherwise, the UPA presumes property belongs to an
individual partner, even if she uses it for partnership business.
assign his interest in the partnership, entitling the
assignee to receive the partner’s share of profits and,
upon termination, the partner’s capital contribution.
Lien on Partnership Interest: A partner’s interest may
PARTNERS’ FIDUCIARY DUTIES
Duty of Care: A partner must refrain from “grossly negligent
or reckless conduct, intentional misconduct, or a knowing
business or from use of partnership property, and
refrain from competing with, or dealing as an adverse
party to, the partnership.
fiduciary duties; however, the agreement may specify
acts or omissions that violate a partner’s fiduciary duties.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 7
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
concepts of actual authority, apparent authority, and
ratification apply to a partner’s acts and omissions.
Any act within the scope of a partner’s actual or
apparent authority binds the partnership unless the
the partnership only if the other partners ratify the act.
Implied Powers: In most partnerships, any partner may
exercise all implied powers reasonably necessary and
customary to carry on the partnership’s business.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERS’ LIABILITY
The knowledge of one partner regarding partnership affairs is
imputed to all other partners.
Liability for Partnership Obligations: In some states,
partners incur only joint liability for partnership debts and
defendants (and share the burden of any judgment).
Joint and Several Liability: A third party may sue one
or more individual partners, without suing all of the
partners, and hold any partners sued fully liable for any
debts and obligations incurred before they joined the
partnership only to the extent of their capital contribution.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 2
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP FORMATION
Partnership Agreement: A written agreement – sometimes
called articles of partnership – that sets forth the rights and
obligations of each partner with respect to the partnership.
Partnership Duration: The partnership agreement may
specify the duration of the partnership in terms of a date or
dissolution personally liable for any resulting losses.
A partnership agreement silent as to duration implies a
partnership at will. Any partner may dissolve the
partnership at any time without incurring liability.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 3
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
MANAGEMENT & VOTING RIGHTS
partners, except in the following cases, which require
unanimous consent:
(a) altering the essential nature of the partnership’s
business or entering a wholly new business;
(b) admitting new partners or altering the capital
(e) amending the partnership agreement.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 4
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP INTEREST
Compensation: Unless otherwise agreed, partners do
not receive a salary for any work they do for the
partnership’s benefit; rather, they are paid a share of the
partnership’s profits, plus a return of their initially-
produce, full and complete information concerning all
aspects of partnership business.
Each partner (including the personal representative of a
deceased partner’s estate) has the rights to inspect on
Ch. 2: Partnerships and Limited Liability Partnerships – No. 5
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PROPERTY RIGHTS
existence or the acquirer’s capacity as a partner.
Otherwise, the UPA presumes property belongs to an
individual partner, even if she uses it for partnership business.
assign his interest in the partnership, entitling the
assignee to receive the partner’s share of profits and,
upon termination, the partner’s capital contribution.
Lien on Partnership Interest: A partner’s interest may
PARTNERS’ FIDUCIARY DUTIES
Duty of Care: A partner must refrain from “grossly negligent
or reckless conduct, intentional misconduct, or a knowing
business or from use of partnership property, and
refrain from competing with, or dealing as an adverse
party to, the partnership.
fiduciary duties; however, the agreement may specify
acts or omissions that violate a partner’s fiduciary duties.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 7
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
concepts of actual authority, apparent authority, and
ratification apply to a partner’s acts and omissions.
Any act within the scope of a partner’s actual or
apparent authority binds the partnership unless the
the partnership only if the other partners ratify the act.
Implied Powers: In most partnerships, any partner may
exercise all implied powers reasonably necessary and
customary to carry on the partnership’s business.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 8
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERS’ LIABILITY
The knowledge of one partner regarding partnership affairs is
imputed to all other partners.
Liability for Partnership Obligations: In some states,
partners incur only joint liability for partnership debts and
defendants (and share the burden of any judgment).
Joint and Several Liability: A third party may sue one
or more individual partners, without suing all of the
partners, and hold any partners sued fully liable for any
debts and obligations incurred before they joined the
partnership only to the extent of their capital contribution.