Default rules on partnerships

Question 1

Default rules on partnerships

Answer 1

• default rules on partnerships
• all default rules can be contracted around in a partnership agreement, unless otherwise indicated (fiduciary duties, duties to third parties,

Question 2

Voting

Answer 2

1. all partners have equal management rights and equal votes (i.e., one partner, one vote)
2. majority vote required for matters in the ordinary course business
3. unanimous vote required for matters outside ordinary course of business

Question 3

Salary and other compensation

Answer 3

1. partners get no compensation
   i. unless modified by agreement, partners do not get a salary, only profit sharing
2. exception: right to reasonable compensation for services rendered in winding up the partnership business

Question 4

Financial rights and obligations

Answer 4

1. profits are shared equally among partners (by number of partners)
2. losses are shared in the same manner as profits (follow the profits rule)
3. note: losses follow profits, but profits do not follow losses (i.e. agreement that stipulates how losses will be shared but is silent on profit sharing)