PARTNERSHIPS, CORPORATIONS AND THE VARIANTS LECTURE 3, PGS. 108-160 Business Organizations

PARTNERSHIPS,CORPORATIONS

AND THE VARIANTS

LECTURE 3, PGS. 108-160

Business Organizations

Aggregation vs Entity Theories

Commonlaw (Aggregation)

Partners held undivided but separate interests in property

Partnership was not an entity distinct from its partners

Withdrawing partner entitled to piece of each asset (as is her estate)

Unanimous consent to admit new partner

Partnership meant one exact constellation of partners. Any change resulted in dissolution.

Lec. 3, pp.108-160 Corporations Prof. McCann

Aggregation or Entity Theories


Under Uniform Partnership Act, 1997

Partnership is an entity distinct from the partners

Withdrawing partner has no interest in partnership assets but only right to receive pro rata share of the value of assets

Entity may continue on despite withdrawal or death of partner

Under UPA, Modern P/S a Hybrid

Still an aggregation of partners in sense that:

Each partner individually (jointly and severally) liable for debts

Pass through entity, invisible to taxing authorities – each partner pays on her own income from the partnership


Under Entity Theory


CAL. CORP. CODE § 16502 : California Code - Section 16502

The only transferable interest of a partner in the partnership is the partner's share of the profits and losses of the partnership and the partner's right to receive distributions. The interest is personal property.

Types of Partnerships


GeneralLimitedLimited Liability Partnership

General – One for all and all for one.


Limited Partnership


Limited Liability Partnership


Response to problem that an attorney cannot shield herself from liability for her own negligence (so cannot be a limited partner in a limited partnership)

BUT doesn’t want to incur liability for negligence of other attorneys (as would be true in general partnership).

(NOTE: For similar reasons, LLC form is not available to professionals in California and other states.)

Formation


UPA (1997) § 202; CAL. CORP. CODE § 16202

(a)Except as otherwise provided in subdivision (b), the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership. (Emphasis added.)

* * *

Meinhard v Salmon


The punctilio of an honor the most sensitive

RECAP OF PARTNER LIABILITY

Restatement of Agency A Principal is liable for torts of employee if they are

committed within the course and scope of employment “Course and scope” requires that there be some intent

in the mind of the agent to serve the purposes of the principal

NO REQUIREMENT of actual or apparent authority.Uniform Partnership Act

Partnership is liable if partner is carrying on in the usual way the business of the partnership and has actual or apparent authority (UPA § 305)

NO REQUIREMENT that the partner is motivated to benefit the partnership


Dissociating Partner

Lec. 3, pp. 75-119 Corporations Prof. McCann

Within Rights Under Agreement Share as per agreement or per UPA

Price if all assets sold as of date of dissociation at greater of liquidation value or going concern value, with interest

In Violation of Agreement or Wrongful Same less

Value of Goodwill (discretionary) Offsets for damage caused by wrongful dissociation Any other amounts owed by departing partner

Goodwill


Defined as “the expectation of continued public patronage”

The End Game of a Partnership


Dissolution (or Dissociation) An event triggers the end of the partnership

Winding Up The affairs of the partnership are concluded

Assets liquidated or earmarked for distribution Taxes paid Creditors paid Partners are paid

Termination All affairs are wound up

Services are Not Property


401 (a) Each partner is deemed to have an account that is:

(1) credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner contributes to the partnership and the partner's share of the partnership profits; and

(2) charged with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner's share of the partnership losses.

Documents

PARTNERSHIPS, CORPORATIONS AND THE VARIANTS LECTURE 3, PGS. 108-160 Business Organizations