Bài giảng Business Law - Chapter 38: Operation of Partnerships and Related Forms

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin9Introduction to Forms of Business and Formation of PartnershipsOperation of Partnerships and Related FormsPartners’ Dissociation and Partnerships’ Dissolution and Winding UpLimited Liability Companies, Limited Partnerships, and Limited Liability Limited PartnershipsPartnershipsPARTOperation of Partnerships and Related FormsPAETRHC38It is not the individual but the team that is the instrument of sustained and enduring success in management.Anthony Jay, quoted in Management Teams – Why They Succeed (R. Meredith Belbin, 1984)Learning ObjectivesList and explain duties partners owe to the partnership and each otherExplain why partnership agreements can resolve issues about partners’ management and compensation rightsDescribe the liability of partners for torts and contractsRevised Uniform Partnership Act (RUPA) states that partners owe to the partnership and each other the highest degree of loyalty and must act consistently with the obligation of good faith and fair dealing (a fiduciary relationship)Same duty applies to all forms of partnershipDuties of Partners to Partnership and Each OtherPartners have duties to serve, account for use or disposal of partnership funds, act within actual authority, avoid interests adverse to the partnership, disclose material information, and maintain the confidentiality of partnership informationException: “silent” partners do not servePartners may compete with the partnership only upon the consent of other partnersGeneral DutiesEach partner owes a duty of care in doing partnership businessA partner isn’t liable to the partnership for honest errors in judgment (negligence), but is liable for losses resulting from gross negligence, reckless conduct, intentional misconduct, or a knowing violation of lawDuty of CareRUPA states that a partner is not entitled to salary or wages, even if disproportionate time spent conducting partnership business A monthly draw is allowableInstead, partner compensation is a share of business profits, offset by shared lossesShared equally unless agreement to the contraryCompensation of PartnersEvery partner in a partnership or LLP is a general manager of the businessThus, by implied authority, a partner binds the partnership and partners for acts within the ordinary course of business Agreement among partners may expand, restrict, or eliminate a partner’s implied authority Management PowersA partner’s implied authority may not contradict a partner’s express authority created by agreement of the partnersA partner’s express and implied authority together constitute actual authorityManagement PowersIn general, management decisions in the ordinary course of partnership business are by majority rule, one vote per partner Unless otherwise expressed by agreementSome decisions not in the ordinary course of business require unanimous consentExample: a decision to expand or bring in another partnerManagement DecisionsUnder RUPA, a partnership may sue or be sued in its own namePartners also may be sued since they are jointly and severally liable for partnership obligations (contract or tort)If partnership and individual partners sued, any judgment must first be satisfied from partnership assets, then from personal assets of the partners suedGeneral Partnership as EntityPartners and the partnership are liable:When a partner commits a breach of trustFor a partner’s negligence (generally)Generally not for a partner’s intentional tortsWhen a partnership and partners are held liable for a partner’s tort, they may recover the amount of their vicarious liability from the wrongdoing partner. General Partnership Liability for Torts & CrimesThe limited liability partnership (LLP) was created to reduce personal liability of professional partnersAn innocent partner of an LLP has no liability for malpractice of partners LLP partners also have no personal liability for debts of the business, such as an invoice, leases, or loansThe LLP & Tort LiabilityFor contract obligations, only LLP is liableFor tort obligations, LLP is liable as well as the partner who committed the tortInnocent LLP partners bear no liabilityEderer v. Gursky: New York’s LLP law, while mostly shielding LLP partners from liability to LLP creditors, did not shield LLP partners from liability to each other for breaches of contract or partner duties LLP as EntityThought QuestionsWhen drafting the partnership agreement, should duties and compensation be allocated evenly or according to each partner’s contribution and skill? Should partners be shielded from personal liability?