Chapter 44 Partnerships, Limited Partnerships, and Limited Liability Companies Twomey, Business Law and the Regulatory Environment (14th Ed.)

(c) 2000 West Legal Studies Chapter 442 Duties, Rights, and Liabilities of Partners [44-1]

(c) 2000 West Legal Studies Chapter 443 Customary Authority of Individual Partners [44-2] Contracts Sales Purchases Loans Insurance Employment Claims against Firm Claims of Firm Admissions Notice

(c) 2000 West Legal Studies Chapter 444 Limitations on Authority of Individual Partner to Bind Partnership Law of Agency Individual partners, acting in an apparently proper way, have authority to bind the firm. Business Transactions Prohibited Transactions Cessation of business, suretyship, agreement to arbitrate, confession of judgment, assignment for creditors. Individual Partner Third Person

(c) 2000 West Legal Studies Chapter 445 Chapter 44 Summary When there are more than two partners in a firm, the decisions of the majority prevail on ordinary matters relating to the firm’s business unless the decisions are contrary to the partnership agreement. A partner’s authority to act for the firm is similar to that of an agent to act for a principal.

(c) 2000 West Legal Studies Chapter 446 A partner may have express authority to act as set forth in the partnership agreement or as agreed to by a sufficient number of partners. A partner has the customary or implied power to make contracts to transact the firm’s business, to sell the firm’s goods in the regular course of business, to make purchases within the scope of the business, and to borrow money for firm purposes. Chapter 44 Summary [2]

(c) 2000 West Legal Studies Chapter 447 Further, a partner may purchase insurance, hire employees, and adjust claims for and against the firm. A partner may not bind the firm by a contract that makes it impossible for the firm to conduct its business. In the absence of express authority from the firm, an individual partner cannot enter into a suretyship contract or an agreement to submit a partnership dispute to arbitration. Chapter 44 Summary [3]

(c) 2000 West Legal Studies Chapter 448 Nor can a partner confess judgment against the firm, make an assignment of the firm’s assets for the benefit of its creditors, or discharge personal obligations of the partner by paying them with obligations of the firm. Chapter 44 Summary [4]

(c) 2000 West Legal Studies Chapter 449 A partner’s duties are the same as those of an agent. These duties include loyalty and good faith, obedience, reasonable care, the provision of full information on all matters affecting the firm, and the keeping of proper and correct records. Chapter 44 Summary [5]

(c) 2000 West Legal Studies Chapter 4410 If there is no contrary agreement, each partner has the right to take an equal part in the management of the business, to inspect the books, to share in the profits, and, after payment of all of the firm’s debts and the return of capital, to share in the firm’s property or surplus upon dissolution. Chapter 44 Summary [6]

(c) 2000 West Legal Studies Chapter 4411 Partners have unlimited personal liability for partnership liabilities. Partners are jointly liable on all firm contracts. They are jointly and severally liable for all torts committed by one of the partners or by a firm employee within the scope of the partnership’s business. Chapter 44 Summary [7]

(c) 2000 West Legal Studies Chapter 4412 A partner remains liable after dissolution unless expressly released by creditors. An incoming partner is not liable for the existing debts of the partnership unless the new partner expressly assumes those debts. Chapter 44 Summary [8]

(c) 2000 West Legal Studies Chapter 4413 A limited partnership consists of one or more limited partners, who contribute cash, property, or services without liability for losses beyond their investment, and one or more general partners, who manage the business and have unlimited personal liability. A certificate must be properly executed and filed when a limited partnership is formed. Chapter 44 Summary [9]

(c) 2000 West Legal Studies Chapter 4414 A limited liability company is a hybrid form of business organization that combines the tax advantages of a partnership with the limited liability feature of the corporation. Chapter 44 Summary [10]

(c) 2000 West Legal Studies Chapter 4415 A limited liability partnership is a new form of business organization that allows existing partnerships to convert to this new form without major renegotiation of the underlying partnership agreement. Innocent partners in a limited liability partnership are not personally liable for the torts of other partners beyond their investment in the firm. Chapter 44 Summary [11]