Ch. 2: Partnerships and Limited Liability Partnerships – No. 9
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Dissociation: A partner may cease being associated with the
more of the circumstances set forth in UPA § 601,
PARTNERSHIP DISSOCIATION
Ch. 2: Partnerships and Limited Liability Partnerships – No. 10
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
participate in partnership management;
no longer owes the partnership a duty of loyalty;
owes the partnership an ongoing duty of care only with
would have received had the partnership wound up on
the date the partner dissociated, less any amount the
dissociated partner owes the partnership as of the date of
dissociation.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 11
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP TERMINATION
(5) bankruptcy of a partner or of the partnership, or
(6) judicial decree.
Notice Required: Dissolution requires either express (in
words) or implied (by actions) notice to each partner. In
Ch. 2: Partnerships and Limited Liability Partnerships – No. 12
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
WINDING UP
preserve partnership assets, pay partnership debts, and
account to each partner for the value of his interest in the
partnership).
When a partnership terminates, creditors of the partnership, as
distribution of profits to the partners, in proportion to
their pre-termination share of profits, unless otherwise
agreed.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 13
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP BUY-SELL AGREEMENTS
To prepare for the smooth dissolution of the partnership
should circumstances change, the partners should make
express arrangements during the formation of the partnership
to provide for one or more partners to buy out the others.
A “buy-sell agreement”, sometimes called a buy-out
agreement, sets forth the terms of the buy-out transaction.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 14
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
LIMITED LIABILITY PARTNERSHIPS
Formation: Each state has a statute governing, inter
alia, forming an LLP and maintaining LLP status.
Liability: The LLP shields the limited partners from
personal liability for another partner’s or the LLP’s
which the majority of the partners, all of whom must be
natural persons, are persons related by blood or marriage or
fiduciaries of persons so related.
Limited Liability Limited Partnership (LLLP): An LP in
Ch. 2: Partnerships and Limited Liability Partnerships – No. 15
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
LIMITED PARTNERSHIPS
Limited Partnership (LP): An entity composed of one or
more general partners, who manage the business and are
personally liable for its debts, and one or more limited
Liability: A limited partner’s liability is limited to the
amount of his capital contribution as long as he does not
participate in management. If he does, the limited partner is
subject to the same liability as a general partner.
Duties: The general partner and each limited partner owe one
another a fiduciary duty to exercise good faith.
Dissolution: An LP will dissolve for most of the same
reasons as a general partnership, but only in the event that a
general partner dissociates or withdraws.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 10
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
participate in partnership management;
no longer owes the partnership a duty of loyalty;
owes the partnership an ongoing duty of care only with
would have received had the partnership wound up on
the date the partner dissociated, less any amount the
dissociated partner owes the partnership as of the date of
dissociation.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 11
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP TERMINATION
(5) bankruptcy of a partner or of the partnership, or
(6) judicial decree.
Notice Required: Dissolution requires either express (in
words) or implied (by actions) notice to each partner. In
Ch. 2: Partnerships and Limited Liability Partnerships – No. 12
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
WINDING UP
preserve partnership assets, pay partnership debts, and
account to each partner for the value of his interest in the
partnership).
When a partnership terminates, creditors of the partnership, as
distribution of profits to the partners, in proportion to
their pre-termination share of profits, unless otherwise
agreed.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 13
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
PARTNERSHIP BUY-SELL AGREEMENTS
To prepare for the smooth dissolution of the partnership
should circumstances change, the partners should make
express arrangements during the formation of the partnership
to provide for one or more partners to buy out the others.
A “buy-sell agreement”, sometimes called a buy-out
agreement, sets forth the terms of the buy-out transaction.
Ch. 2: Partnerships and Limited Liability Partnerships – No. 14
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
LIMITED LIABILITY PARTNERSHIPS
Formation: Each state has a statute governing, inter
alia, forming an LLP and maintaining LLP status.
Liability: The LLP shields the limited partners from
personal liability for another partner’s or the LLP’s
which the majority of the partners, all of whom must be
natural persons, are persons related by blood or marriage or
fiduciaries of persons so related.
Limited Liability Limited Partnership (LLLP): An LP in
Ch. 2: Partnerships and Limited Liability Partnerships – No. 15
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
LIMITED PARTNERSHIPS
Limited Partnership (LP): An entity composed of one or
more general partners, who manage the business and are
personally liable for its debts, and one or more limited
Liability: A limited partner’s liability is limited to the
amount of his capital contribution as long as he does not
participate in management. If he does, the limited partner is
subject to the same liability as a general partner.
Duties: The general partner and each limited partner owe one
another a fiduciary duty to exercise good faith.
Dissolution: An LP will dissolve for most of the same
reasons as a general partnership, but only in the event that a
general partner dissociates or withdraws.