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CHAPTER 34 - PowerPoint PPT Presentation


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Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide or previous slide . CHAPTER 34 Partnership In Operation Quote of the Day “He who has a partner has a master.”

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Click your mouse anywhere on the screen to advance the text in each slide. After the starburst appears, click a blue triangle to move to the next slide or previous slide.

CHAPTER 34

Partnership

In Operation

quote of the day
Quote of the Day

“He who has a partner has a master.”

Italian proverb, quoted in “The Count of Monte Cristo”

partners and outsiders
Partners and Outsiders
  • Each partner is an agent of the partner-ship for the purpose of its business.
    • Actual Authority – a partnership is liable for any authorized act of a partner.
    • Implied Authority – a partnership is liable for any act of a partner that is reasonably necessary to carry out an authorized act.
    • Apparent Authority– a partnership is liable for any unauthorized act of a partner, if the partner appears to be carrying on partnership business.
other issues
Other Issues
  • Ratification
    • If the partnership accepts the benefit of the unauthorized transaction or fails to repudiate it, the partnership has ratified it.
  • Information
    • Whatever one partner knows, the partnership is deemed to know.
  • Tort Liability
    • A partnership is responsible for the intentional and negligent torts of a partner in the ordinary course of the partnership’s business or with the actual authority of the partners.
paying the debts of the partnership
Paying the Debts of the Partnership
  • All partners are personally liable for all debts of the partnership.
  • Partners have joint and several liability for partnership obligations.
    • Also note that, even if creditors have a judgment against an individual partner, they cannot go after that partner’s assets until all the partnership’s assets are exhausted.
liability for previous debts
Liability for Previous Debts
  • The RUPA provides that a partner is personally liable only for obligations the partnership incurred while he was a partner.
  • His liability for debts incurred before he became a partner is limited to his investment in the partnership.
financial rights
Financial Rights
  • Partners share profits equally, unless they agree otherwise.
  • Partners share losses according to their share of profits, unless they agree otherwise.
  • Any agreement among partners to share losses is binding only on them, not on outsiders.
financial rights cont d
Financial Rights (cont’d)
  • Partners are not entitled to any payment beyond their share of profits, unless they agree otherwise.
  • All partnership property belongs to the partnership as a whole, not to the individual partners.
right to transfer interest
Right to Transfer Interest
  • Without the approval of the other partners, a partner cannot sell her share; she can only transfer her right to receive profits and losses.
  • A new partner can only be admitted to a partnership by unanimous consent of the other partners.
  • Creditors can attach partnership profits through a changing order issued from the courts.
management rights
Management Rights
  • Each and every partner has equal rights in the management and conduct of the business, unless the partners agree otherwise.
  • Large partnerships usually designate managing partners (sometimes called members of the executive committee).
  • Sometimes, managing is done almost dictatorially by the partner who brings in the most business (the “rainmaker.”)
other rights
Other Rights
  • Right to Vote
    • Unless the partners agree otherwise, all partners have an equal vote, regardless of their contributions to the partnership.
  • Right to Know
    • Partners have the right to examine all partnership books and records for any reason.
    • Partners have the duty to volunteer any information which may be relevant to the other partners.
duty of care
Duty of Care
  • Partners are liable for:
    • gross negligence,
    • reckless conduct,
    • intentional misconduct, or
    • a knowing violation of the law.
  • Partners are not liable for ordinary negligence.
duty of loyalty
Duty of Loyalty
  • Partners have a fiduciary duty to their partnership.
  • Some actions which may violate this fiduciary duty include:
    • Competing with the partnership
    • Taking a business opportunity away from the partnership
    • Using partnership property for private profit
    • Conflicts of interest
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“A partnership is as complex a form of organization as humans have ever invented. It has all the intensity and subtlety of a marriage, but often with more participants.”