Partnerships and LLCs

Partnership Formation and Contributions

• A partnership can be formed with equal shares of profit among partners (e.g., A, B, and C are each entitled to equal shares of profit).
• Partners can contribute cash, property, or a promise to contribute cash or property to the partnership.

Dissolution of Partnerships

• A partner can dissociate from the partnership, but may still be liable for existing debts (e.g., A dissociates from the partnership, but may still be liable for debts incurred prior to dissociation).
• A partner may file a statement of dissociation to be released from existing obligations, but may still be liable if the creditor knows of the dissociation and materially alters the nature of the obligation without the partner's consent.

Partnership Liability

• Partners are personally liable for partnership debts (e.g., Puff and Blow are personally liable for judgments against the partnership).
• A limited partner may not be personally liable for partnership debts, but may be liable if they participate in the control of the business.
• A partner who dissociates from the partnership may still be liable for debts incurred prior to dissociation.

Partnership Agreements

• Partners can waive certain rights, such as access to books and records, but may not waive duties of loyalty and care.
• Partners can agree to modify or waive certain provisions of the partnership agreement.

Partnership Property

• Partnership property is owned by the partnership, and not by individual partners.
• Partners have a right to use partnership property for partnership purposes.

Limited Partnerships

• A limited partner is not personally liable for partnership debts.
• A limited partner may not participate in the control of the business.

Partnership Obligations

• Partners are liable for obligations incurred by the partnership, including debts and liabilities.
• Partners may be liable for obligations incurred prior to their joining the partnership.

Accounting and Financial Matters

• Partners are entitled to an accounting of partnership assets and profits.
• Partners may be liable for partnership debts and liabilities, even if they have not received a distribution of profits.

Misrepresentation and Estoppel

• A person who is held out to be a partner may be liable as a partner, even if they are not actually a partner.
• A person who represents themselves as a partner may be estopped from denying their partnership status.

Dissolution and Winding Up

• Partners may dissolve the partnership and wind up its affairs.
• Partners may be entitled to a distribution of partnership assets after paying off debts and liabilities.

Partnership Authority

• Partners have authority to bind the partnership, but may not have authority to bind individual partners.
• Partners may be liable for unauthorized acts of other partners.

Terminating a Partnership

• Partners may terminate a partnership by agreement, or by dissociation of a partner.
• Partners may be liable for partnership debts and liabilities after termination of the partnership.### Partnership Dissolution
• In the event of a dissolution of the partnership, Fenton may receive Joe's share of the assets that remain after all creditors have been paid.
• Fenton has the right to participate in the winding up of the partnership.
• Fenton has the right to require an accounting spanning the period from the date of the last accounting to the dissolution.

Partnership Property

• A telescope bought by Frank for the detective agency to use on surveillance is considered partnership property.
• Factors that determine whether the telescope is partnership property include:
  • The close relationship between the telescope and the surveillance activities of the detective agency.
  • The detective agency has used the telescope on numerous occasions in the course of its business.
  • The telescope was titled in the partnership name.
  • The telescope has been improved by acquisition of the tripod.

Limited Partnerships

• Huey, Dewey, and Lewey are all limited partners in a limited partnership formed for the purpose of investing in real estate.
• Huey's contribution to the limited partnership was $5,000.