Rights and Duties of Partners

Question 1

Equal Rights to Manage and Control (General v. Limited)

Answer 1

Absent an agreement to the contrary, general partners have equal rights to manage and control the partnership’s business, while limited partners generally have no say in such matters. Disagreements relating to ordinary matters connected with the business of the partnership are decided by a majority of the partners.

Question 2

Use of Partnership Property

Answer 2

Absent an agreement to the contrary, a partner may ONLY use partnership property:(1) On behalf of the partnership; OR (2)To carry on the business of the partnership.

Any personal use of partnership property requires the consent of the other partners.

Question 3

Books and Records

Answer 3

Absent an agreement to the contrary, every partner MUST have access to the partnership’s books and records during normal business hours; and upon reasonable demand, the partnership MUST render true and full information of all things regarding the affairs of the partnership that is just and reasonable under the circumstances.

NOTE: A partner’s right to inspect the partnership’s records is NOT conditioned on the partner’s purpose or motive. However, an abuse of these rights may constitute a violation of the obligation of good faith and fair dealing.

Question 4

Equal Sharing of Profits and Losses

Answer 4

Absent an agreement to the contrary, each partner is generally:

(1) Entitled to an equal share of the partnership profits; AND
(2) Responsible for a share of the partnership losses in proportion to the partner’s share of the profits.

Question 5

Duty of Care

Answer 5

Each partner owes a limited fiduciary duty of care to the partnership and other partners, which requires that each partner REFRAIN from engaging in:

(1) Grossly negligent or reckless conduct;
(2) Intentional misconduct; OR
(3) A knowing violation of the law.

If a partner breaches the duty of care, he may be held personally liable for damages

Question 6

Duty of Loyalty

Answer 6

Each partner owes a fiduciary duty of loyalty to the partnership and other partners, which requires that each partner:

(1) Act in good faith and fairly toward the other partners;
(2) Account for any property, profit, or benefit derived by the partner from the partnership business or property; AND
(3) REFRAIN from:
(a) Competing with the partnership within the scope of the business (even during dissolution); AND
(b) Usurping a business opportunity that properly belongs to the partnership.

If a partner breaches the duty of loyalty, he may be held personally liable for damages (the duty of loyalty may be eliminated in the partnership agreement if reasonable).