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advantages of partnerships

1) they do not pay taxes
2) they are easy to form

default rules

rules that govern a partnership unless the partners agree otherwise

partnership under the UPA

the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership


means a voluntary relationship

factors in determining whether a partnership exists

1) the partners must share profits
2) partners share in the management of the business
3) an agreement to share in losses is strong evidence of a partnership
4) referring to yourselves as partners is not enough to create a partnership, but in a close case, it may help sway a court
5) charitable businesses are not partnerships

partnership by estoppel

a person does not want to be considered a partner because he wishes to avoid liability of the partnership
applies if:
1) participants tell other people that they are partners (even though they are not), or they allow other people to say, without contradiction, that they are partners
2) a third party relies on this assertion
3) the third party suffers harm

under the UPA...

the rules governing the liability of partners to outsiders are mandatory; most of the rules governing the relationship among partners are default provisions, meaning that the partners can change these rules if they desire. every partner is an agent of the partnership for the purpose of its business

actual authority

a partnership is liable for any act of a partner that it authorized

implied authority

a partnership is liable for any act of a partner that is reasonably necessary to carry out an authorized transaction

apparent authority

a partnership is liable for an unauthorized act of a partner if the partner appears to be carrying on the business of the partnership or even business of the same type


if the partnership accepts the benefit of the unauthorized transaction or fails to repudiate it, the partnership has ratified it


as agent, a partner has a duty to pass on all relevant information to the partnership; under the UPA, whatever one partner knows, the partnership is deemed to know

tort liability

a partnership is responsible for the intentional and negiligent torts of a partner that occur in the ordinary course of the partnership's business or with the actual authority of the partners

basic rule of partnership liability

all partners are personally liable for all debts of the partnership

joint and several liability

means that a creditor can sue the partnership and the partners together or in separate lawsuits or in any combination

charging order

is simply a court order granting a third party the right to receive a share of partnership profits

duties of care

partners are liable to the partnership for gross negligence, reckless conduct, intentional misconduct, or a knowing violation of the law; partners are not liable for ordinary negligence

partnership at will

a partnership with no fixed duration; any of the partners may leave at any time, for any reason

term partnership

a partnership in which the partners agree in advance how long it will last


when a partner leaves the partnership

rightful dissociation occurs if...

1) a partner in a partnership at will serves notice that he intends to withdraw
2) the partners agree in advance on an event that causes dissociation
3) a partner dies or becomes incompetent
4) a partner is expelled by the other partners

the UPA permits the expulsion of a partner only if:

1) it is illegal to carry on the business with her
2) she has transferred her partnership interest

wrongful dissociation occurs if...

1) a partner violates the partnership agreement
2) a partner in a term partnership withdraws before the end of the term
3) a court expels a partner in a term partnership because her behavior is harmful
4) a partner in a term partnership becomes bankrupt

winding up process

all debts of the partnership are paid, and the remaining proceeds are distributed to the partners

how are partnerships distributed

1) to creditors of the partnership, icluding creditors who are partners
2) any leftover funds (or obligations) are distibuted to the partners

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