partnership: can be created by contract of inadvertently. ownership and responsibilities, along...
TRANSCRIPT
Partnership
Partnership: Can be created by contract of inadvertently. Ownership and responsibilities, along with
profits and losses, are shared by two or more.
Unlimited Liability. Partners carry on a continuing business
together with the intention of making profit. Not a separate legal entity.
Definition
General: Unlimited Liability Partners are vicariously liable for the conduct of
their general partners and employees Partners are held responsible for the breach of
trust of their partners
Limited: Limited Liability Can lose their limited status Must have at least one general partner
Two Kinds of Partnership
Case
A partner may not
negotiate a
contract on behalf
of the partnership
in an amount
greater that
$10,000 without
the approval of
the two other
partners.
Partnership
Agreement
Partnership
And we get to see your partnership agreement too
We will provide you
this loan, but we decide how you spend it
OK…
What do you mean
you and your partners
have financial
difficulties and can’t
pay me back?!!
See you all in court!
Who should be liable for Foster’s loss?A. CummingsB. Anderson and BurtonC. Dilbert and EvansD. Anderson, Burton and CummingsE. Anderson, Burton, Cummings, Dilbert and
BurtonF. Nobody is liable for Foster’s loss, since Foster is
unaware of the limitation on Cummings’ authority
Question
Signs a contract exceed the amount of his authority stated in the partnership agreement.
Cummings is liable for the defaults in payment to Foster.
Cummings (C)
Unfortunately are liable for the payment With partners, however, they are liable not only
for their wrongful acts but also for the conduct of their partners.
Anderson (A) and Burton (B)
A. If Dilbert and Evans interfere in Anderson, Burton and Cummings’ agreement and management decision, then Dilbert and Evans are considered as partners of Anderson, Burton and Cummings
B. If Dilbert and Evans just view Anderson, Burton and Cummings’ agreement without interfering, then Dilbert and Evans do not belong to this partnership
PS: Dilbert and Evans have control over how their contributed capital be used, and this is not considered as participation in the management decisions, thus it will not make them join the partnership
Dilbert (D) and Evans (E)
Laws of agency apply to partnership◦ Liability still applies to Anderson and Burton
If Dilbert and Evans are not identified as general partners...
If Dilbert and Evans are identified as general partners...
What can Anderson and Burton do to recover the loss?
What we conclude from above:
Unanimous consent protection Less costly to form and operate
Advantagesof Partnership
Insurance coverage Limited Liability Partnerships
◦ Only professionals belonging to professional organizations
◦ Minimum amount of professional liability insurance coverage required
◦ Must include “LLP”, or “L.L.P.” or “Limited Liability Partnership” (or the French equivalent) in their name
◦ Must be registered as LLP
How to overcome unlimited liability?
