Chapter 44 Partnerships Limited Partnerships and Limited Liability

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Chapter 44 Partnerships, Limited Partnerships, and Limited Liability Companies Twomey, Business Law and the

Chapter 44 Partnerships, Limited Partnerships, and Limited Liability Companies Twomey, Business Law and the Regulatory Environment (14 th Ed. ) (c) 2000 West Legal Studies Chapter 44

Duties, Rights, and Liabilities of Partners [44 -1] (c) 2000 West Legal Studies Chapter

Duties, Rights, and Liabilities of Partners [44 -1] (c) 2000 West Legal Studies Chapter 44 2

Customary Authority of Individual Partners [44 -2] Contracts Sales Purchases Loans Insurance Employment Claims

Customary Authority of Individual Partners [44 -2] Contracts Sales Purchases Loans Insurance Employment Claims against Firm Claims of Firm Admissions Notice (c) 2000 West Legal Studies Chapter 44 3

Limitations on Authority of Individual Partner to Bind Partnership Law of Agency Individual partners,

Limitations on Authority of Individual Partner to Bind Partnership Law of Agency Individual partners, acting in an apparently proper way, have authority to bind the firm. Individual Partner Business Transactions Third Person Prohibited Transactions Cessation of business, suretyship, agreement to arbitrate, confession of judgment, assignment for creditors. (c) 2000 West Legal Studies Chapter 44 4

Chapter 44 Summary When there are more than two partners in a firm, the

Chapter 44 Summary When there are more than two partners in a firm, the decisions of the majority prevail on ordinary matters relating to the firm’s business unless the decisions are contrary to the partnership agreement. A partner’s authority to act for the firm is similar to that of an agent to act for a principal. (c) 2000 West Legal Studies Chapter 44 5

Chapter 44 Summary [2] A partner may have express authority to act as set

Chapter 44 Summary [2] A partner may have express authority to act as set forth in the partnership agreement or as agreed to by a sufficient number of partners. A partner has the customary or implied power to make contracts to transact the firm’s business, to sell the firm’s goods in the regular course of business, to make purchases within the scope of the business, and to borrow money for firm purposes. (c) 2000 West Legal Studies Chapter 44 6

Chapter 44 Summary [3] Further, a partner may purchase insurance, hire employees, and adjust

Chapter 44 Summary [3] Further, a partner may purchase insurance, hire employees, and adjust claims for and against the firm. A partner may not bind the firm by a contract that makes it impossible for the firm to conduct its business. In the absence of express authority from the firm, an individual partner cannot enter into a suretyship contract or an agreement to submit a partnership dispute to arbitration. (c) 2000 West Legal Studies Chapter 44 7

Chapter 44 Summary [4] Nor can a partner confess judgment against the firm, make

Chapter 44 Summary [4] Nor can a partner confess judgment against the firm, make an assignment of the firm’s assets for the benefit of its creditors, or discharge personal obligations of the partner by paying them with obligations of the firm. (c) 2000 West Legal Studies Chapter 44 8

Chapter 44 Summary [5] A partner’s duties are the same as those of an

Chapter 44 Summary [5] A partner’s duties are the same as those of an agent. These duties include loyalty and good faith, obedience, reasonable care, the provision of full information on all matters affecting the firm, and the keeping of proper and correct records. (c) 2000 West Legal Studies Chapter 44 9

Chapter 44 Summary [6] If there is no contrary agreement, each partner has the

Chapter 44 Summary [6] If there is no contrary agreement, each partner has the right to take an equal part in the management of the business, to inspect the books, to share in the profits, and, after payment of all of the firm’s debts and the return of capital, to share in the firm’s property or surplus upon dissolution. (c) 2000 West Legal Studies Chapter 44 10

Chapter 44 Summary [7] Partners have unlimited personal liability for partnership liabilities. Partners are

Chapter 44 Summary [7] Partners have unlimited personal liability for partnership liabilities. Partners are jointly liable on all firm contracts. They are jointly and severally liable for all torts committed by one of the partners or by a firm employee within the scope of the partnership’s business. (c) 2000 West Legal Studies Chapter 44 11

Chapter 44 Summary [8] A partner remains liable after dissolution unless expressly released by

Chapter 44 Summary [8] A partner remains liable after dissolution unless expressly released by creditors. An incoming partner is not liable for the existing debts of the partnership unless the new partner expressly assumes those debts. (c) 2000 West Legal Studies Chapter 44 12

Chapter 44 Summary [9] A limited partnership consists of one or more limited partners,

Chapter 44 Summary [9] A limited partnership consists of one or more limited partners, who contribute cash, property, or services without liability for losses beyond their investment, and one or more general partners, who manage the business and have unlimited personal liability. A certificate must be properly executed and filed when a limited partnership is formed. (c) 2000 West Legal Studies Chapter 44 13

Chapter 44 Summary [10] A limited liability company is a hybrid form of business

Chapter 44 Summary [10] A limited liability company is a hybrid form of business organization that combines the tax advantages of a partnership with the limited liability feature of the corporation. (c) 2000 West Legal Studies Chapter 44 14

Chapter 44 Summary [11] A limited liability partnership is a new form of business

Chapter 44 Summary [11] A limited liability partnership is a new form of business organization that allows existing partnerships to convert to this new form without major renegotiation of the underlying partnership agreement. Innocent partners in a limited liability partnership are not personally liable for the torts of other partners beyond their investment in the firm. (c) 2000 West Legal Studies Chapter 44 15