Post on 12-Jan-2016
transcript
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
Lec. 3, pp.108-160 Corporations Prof. McCann
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
Lec. 3, pp.108-160 Corporations Prof. McCann
Under Entity Theory
Lec. 3, pp.108-160 Corporations Prof. McCann
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
Lec. 3, pp.108-160 Corporations Prof. McCann
GeneralLimitedLimited Liability Partnership
General – One for all and all for one.
Lec. 3, pp.108-160 Corporations Prof. McCann
Limited Partnership
Lec. 3, pp.108-160 Corporations Prof. McCann
Limited Liability Partnership
Lec. 3, pp.108-160 Corporations Prof. McCann
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
Lec. 3, pp.108-160 Corporations Prof. McCann
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
Lec. 3, pp.108-160 Corporations Prof. McCann
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
Lec. 4, pp.108-160 Corporations Prof. McCann
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
Lec. 3, pp. 75-119 Corporations Prof. McCann
Defined as “the expectation of continued public patronage”
The End Game of a Partnership
Lec. 4, pp. 119-154 Corporations Prof. McCann
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
Lec. 4, pp. 119-154 Corporations Prof. McCann
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.