Partnerships

Question 1

Partnership General Rule

Answer 1

A partnership is an association of two or more persons to carry on as co-owners a business for profit. The parties’ subjective intent to form a partnership is irrelevant.

Question 2

Factors for Deciding Whether Partnership Exists

Answer 2

• Sharing of Profits Raises Rebuttable Presumption of Partnership: lookout for situations like share received as payment for a debt, as wages/compensation for services rendered, etc. which do not give rise to the presumption.

-Right to participate in control

• Other Factors: (1) title of property is held in joint tenancy or in common; (2) parties designate their relationship as a partnership; (3) venture undertaken by the parties requires extensive activity; (4) sharing of gross returns

Question 3

Partner Rights

Answer 3

Te default rules under the Revised Uniform Partnership Act (RUPA) are as follows. Most of these can be altered by partnership agreement:

• Management: all Ps have equal rights in the management of the business and equal votes (one P, one vote). A majority vote is required for matters in the ordinary course; for matters outside ordinary course, unanimous consent required.
• Salary/Compensation: a P has no right to compensation for services rendered to the partnership. If a P has impliedly or expressly promised to devote time to p’ship and fails to do so, they may be charged in accounting for damages to p’ship.
• Books & Inspection: Each P has a right to inspect and copy the p’ship books. Upon demand, each P must render true and full information of all things affecting the p’ship.

Question 4

Partner Financial Rights & Obligations