1. General Partnerships Chapter 4

2. Introduction General partners can pool their resources and share profits and losses.

3. Because the law considers a partnership to be, first and foremost, a contract, the basic principles of contract law apply.

4. For a partnership agreement to be binding on all parties, there must be a meeting of the minds, or mutual assent as to the details of the arrangement.

5. The Nature of a Partnership At its core, a partnership is a contractual agreement between two or more persons to conduct a business.

6. Contractual Elements of General Partnerships In addition to basic contract requirements, a general partnership must also be set up to make a profit.

7. Advantages of General Partnerships Partners can contribute more financial resources than a single individual.

8. Disadvantages of General Partnerships Like sole proprietorships, general partners also suffer from one major disadvantage: unlimited liability.

9. There are many different types of partnerships. The different forms give partners different rights and obligations.

10. Types of Partnerships The two most popular forms of partnerships: General Limited

11. General Partnerships A general partnership is an agreement between two or more persons to run a business for profit.

12. Limited Partnerships A limited partnership is a creature of statute and provides the business owners with limited liability. Partners in limited partnerships can protect their personal assets and are generally not subject to creditors and business judgments.

13. Partnership Associations Like a limited partnership, a partnership association attempts to shield the partners from some or all liability for business debts and judgments.

14. Mining Partnerships A mining partnership, like limited partnerships and partnership associations, gives the partners some protection and was created as a way of encouraging individuals to take on particularly risky ventures such as mining.

15. Sub-partnerships A sub-partnership comes into existence when a partnership engages in an agreement with a non- partner to split profits.

16. The Nature of a Partner Because a partnership is based, at least in part, on contract law, all partners must have the legal ability to enter into a contract.

17. Silent Partners A silent partner is someone who contributes money or something else of value, while the other partner contributes labor to the enterprise.

18. Classifications of Partners Whether labeled “senior,” “managing,” or “contributing,” the law imposes the same duties and obligations on each.

19. Laws That Apply to Partnerships Under the old common law rules, unless there was some provision in the partnership agreement that provided for a different result, the general partnership would be bound by the laws of the state where it was created.

20. The Uniform Partnership Act It creates a framework that seeks to minimize state law differences in partnership law. The UPA takes the position that a partnership is a form of business entity and not merely a creature of contact law.

21. Creation of a Partnership under the UPA In most situations, forming a general partnership is a simple matter. The partners simply agree to be bound to one another in a business and to pledge their financial assets for the business.

22. Although many partners write out a General Partnership Agreement, in most situations, it is not required.

23. The Partnership Agreement The agreement between the parties about how the partnership will be run. Partners are free to create provisions contrary to the Uniform Partnership Agreement and common law theories.

24. No Requirement for Written Agreement In most situations, there is no requirement that the partnership agreement must be in writing.

25. Transfer of Partnership Property Interests Partners may wish to buy out other partners, dwindling the size of the partnership, and some partners may wish to retire from the partnership entirely.

26. Involuntary Partnership When a person enters a contract, he or she does so of his or her own free will. Courts will not impose partnership agreements on individuals; they enter the agreement voluntarily or not at all.

27. Naming of the Partnership The partnership name is important because the business builds its reputation with the public on the name, and if the partners wish to sell the business, the name is part of the goodwill that makes up the sale price.

28. Partnership Liability Concerns Another feature of partnership is that each partner is jointly and severally liable for the debts incurred by any of the other partners. Partners are liable for the actions of the other partners.

29. Suing a Partnership Because partners share in profits, losses, and the day-to-day management of the business, each partner is liable for the actions of the other partners, at least for the actions carried out within the scope of the business.

30. Terminating the Partnership A partnership can be terminated by number of means. They include: –By agreement –By contractual terms –By bankruptcy –By death of a partner

31. Dissolving the Partnership When the partners decide to dissolve the business, the partnership does not terminate immediately. Instead, the law requires a period of “winding up” that allows the partnership to pay off its outstanding debts and to make disbursements of profits.