Partnerships Flashcards
Florida Definition of “Partnership”
Florida has adopted the Revised Uniform Partnership Act (“R.U.P.A.”), which defines partnership as an association of two or more persons to carry on as co-owners a business for profit. (R.U.P.A. 101)
- The R.U.P.A. is based on the law of contracts and agency.
Right to Participate in Management
- Absent an agreement to the contrary, all partners have equal rights in the management of the partnership business. [R.U.P.A. 401(f)]
- Decisions regarding matters within the ordinary course of business of the partnership may be controlled by a majority vote, but matters, outside the ordinary course of business require the consent of all partners. [R.U.P.A 4010)]
Rights of Partners in Partnership Property
A partner is not a co-owner of partnership property and has no transferable interest in partnership property.
- The only transferable interest of a partner in the partnership is the partner’s share of partnership profits and losses and the right to receive distributions.
- A partner’s creditors may not reach partnership property to satisfy the personal obligations of a partner.
Charge of the Transferable Interest (Attachment)
On application to a court with jurisdiction, the creditor of a partner may charge (attach) the transferable interest of the debtor partner to satisfy the judgment.
- The charging order becomes a lien on the interest.
- The court may also appoint a receiver of the debtor’s share of the distribution due to or to become due from the partnership.
Partners’ Accounts
Each partner is deemed to have an account that is credited with the net amount equal to the partner’s contribution, plus or minus the partner’s share of any profits or losses, less any partnership liabilities.
Partnerships Profits
Absent an agreement to the contrary, profits are shared equally; Losses are shared in the same way as profits.
Remuneration
Absent agreement to the contrary, a partner is not entitled to remuneration except for reasonable compensation for services rendered in winding up the partnership business.
Indemnification and Other Payment
- The partnership must indemnify partners for payments reasonably made and obligations reasonably incurred by a partner in carrying on the business of the partnership. - Similarly, if a partner makes any payment or advance on behalf of the partnership beyond the amount the partner agreed to contribute, the partnership must repay the partner. In any case, such payment, obligations, and advances constitute loans to the partnership, which must be repaid with interest.
Partner Who Pays More than His Share of Debt Entitled to Contribution
- If a partner fails to contribute to the partnership’s debt, all of the other partners must contribute the additional amount necessary in the proportion in which the partners share losses. [R.U.P.A. 807] - Where a partner is forced to pay more than his share of the partnership’s debt, he is entitled to contribution from the others to equalize it.
Apparent Authority
The act or contract of any individual partner will bind the partnership if the action was in the ordinary course of the partnership business (or was a type of action that the business ordinarily conducts) unless— 1) the partner had no authority to act for the partnership in the particular manner; and 2) the person with whom the partner was dealing knew or had received notification that the partner lacked authority.
Liability of Incoming Partner
A person admitted as a partner into an existing partnership is not personally liable for any partnership obligation incurred before the person’s admission as a partner (of course, any property or capital the incoming partner contributes to the partnership is at risk for satisfying existing partnership debts.) [R.U.P.A. 306].
Liability of Outgoing (Dissociated) Partner
- In general, the partner also is liable for acts done not only until he has withdrawn from the partnership, but also until 90 days after he has filed a notice of dissociation with the department of state. - A dissociated partner may be liable for certain debts arising within one year after the date of dissociation if the other party to the transaction— 1) reasonably believed when entering the transaction that the dissociated partner was still a partner; and 2) did not have notice of the partner’s dissociation.
Liability of Limited Partner
- Generally, the sole duty of limited partners to the partnership is the obligation of good faith and fair dealing.
- A limited partner is not personally liable for an obligation of the limited partnership solely by reason of being a limited partner, even if the limited partner participates in the management and control of the limited partnership. [Fla. Stat. 620.1303]
- A limited partner does not have any fiduciary duty to the limited partnership or to any other partner solely by reason of being a limited partner, unless the limited partner is vested with or is delegated management powers or duties under the partnership agreement—in such cases, owing only the fiduciary duties of loyalty and care with respect to the exercise of such power or duties.
Right to Distributions in a Limited Partnership
- Unless otherwise provided in the partnership agreement, distributions in a Limited Partnership are made on the basis of the partners’ contributions (in proportion to the value of each partner’s contributions). (Fla. Stat. 620. 1503) - Note this is different from the rule for General Partnerships, which provides that profits and losses are to be shared equally.
Derivative Action
A partner may maintain a derivative action to enforce the right of a limited partnership if— 1) the partner first makes a demand on the general partnership bring an action to enforce the right and the general partners do not bring the action within a reasonable time; or— 2) making such a demand would be futile. (Fla. Stat. 620.2002)
