17: Partnerships
- Page ID
- 41877
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- Learn when a partnership exists.
- Understand the rights and duties of partners.
- Comprehend how a partnership is terminated and the priority of distributing assets.
Partnerships are the most common business form in the United States. Partnerships may be express or implied, and they are the default business organization when two or more people work together who are not legally married. People do not need to call themselves partners for a partnership to exist, so it is important for business professionals to understand what constitutes a partnership so they do not inadvertently form a business entity that they do not intend. And, if they do intend to form a partnership, partners should understand their rights and duties towards each other.
- 17.2: Types of Partnerships
- This page discusses partnerships as voluntary associations of individuals for profit, detailing types such as general, limited, silent, and secret partnerships. It highlights the shared responsibilities and liabilities among partners, including the partnership by estoppel concept. The summary emphasizes the importance of seeking early legal counsel to address potential legal challenges in business operations.
- 17.3: Partnership Agreements
- This page discusses the importance of having a written partnership agreement, even though partnerships can be formed informally. It outlines essential provisions to include, such as partnership name, purpose, duration, capital contributions, profit-sharing, compensation, accounting practices, property rights, dispute resolution, modification processes, and dissolution rights. These agreements clarify the business relationship between partners and enhance operational structure.
- 17.4: Rights and Duties of Partners
- This page outlines the key aspects of general partnerships, emphasizing equal management rights for partners, compensation agreements, access to business records, and shared fiduciary duties. Partners are entitled to indemnification and must prioritize the partnership's interests while fulfilling obligations to provide information. Breaches of duty, such as self-dealing and withholding profits, are highlighted as violations of their responsibilities.
- 17.5: Termination of a Partnership
- This page explains the dissolution of a partnership, which can happen through mutual agreement, partner withdrawal, or the addition of a new partner. Such changes necessitate a new partnership agreement. During winding up, assets are liquidated, debts settled, and remaining profits distributed, prioritizing creditors, partnership advances, capital, and profits. Insufficient assets may result in bankruptcy, with state laws dictating creditor payment priorities via asset marshaling.
- 17.6: Concluding Thoughts
- This page discusses partnerships as a popular business structure in the U.S., highlighting their flexibility and ease of formation. It emphasizes the importance of a partnership agreement to define partners' rights and responsibilities while noting that fiduciary relationships exist even without such agreements, carrying specific legal obligations.