Formation, Relationship Of Partners To Each Other, Relationship Of Partners To Third Persons, Liability
An association of two or more persons engaged in a business enterprise in which the profits and losses are shared proportionally. The legal definition of a partnership is generally stated as "an association of two or more persons to carry on as co-owners a business for profit" (Revised Uniform Partnership Act § 101 ).
Early English mercantile courts recognized a business form known as the societas. The societas provided for an accounting between its business partners, an agency relationship between partners in which individual partners could legally bind the partnership, and individual partner liability for the partnership's debts and obligations. As the regular English courts gradually recognized the societas, the business form eventually developed into the common-law partnership. England enacted its Partner-ship Act in 1890, and legal experts in the United States drafted a Uniform Partnership Act (UPA) in 1914. Every state has adopted some form of the UPA as its partnership statute; some states, however, have made revisions to the UPA or have adopted the Revised Uniform Partnership Act (RUPA), which legal scholars issued in 1994.
The authors of the initial UPA debated whether in theory a partnership should be treated as an aggregate of individual partners or as a corporate-like entity separate from its partners. The UPA generally opted for the aggregate theory in which individual partners ("an association") comprised the partnership. Under an aggregate theory, partners are co-owners of the business; the partnership is not a distinct legal entity. This led to the creation of a new property interest known as a "tenancy in partnership," a legal construct by which each partner co-owned partnership property. An aggregate approach nevertheless led to confusion as to whether a partnership could be sued or whether it could sue on its own behalf. Some courts took a technical approach to the aggregate theory and did not allow a partnership to sue on its own behalf. In addition, some courts would not allow a suit to go forward against a partnership unless the claimant named each partner in the complaint or added each partner as an "indispensable party."
The RUPA generally adopted the entity approach, which treats the partnership as a separate legal entity that may own property and sue on its own behalf. The RUPA nevertheless treats the partnership in some instances as an aggregate of co-owners; for example, it retains the joint liability of partners for partnership obligations. As a practical matter, therefore, the present-day partnership has both aggregate and entity attributes. The partnership, for instance, is considered an association of co-owners for tax purposes, and each co-owner is taxed on his or her proportional share of the partnership profits.
- Partnership - Formation
- Partnership - Relationship Of Partners To Each Other
- Partnership - Relationship Of Partners To Third Persons
- Partnership - Liability
- Partnership - Partnership Property
- Partnership - Partnership Interests
- Partnership - Partnership Books
- Partnership - Partnership Accounting
- Partnership - Taxation
- Partnership - Dissolution
- Partnership - Dissociation
- Partnership - Winding Up
- Partnership - Limited Partnerships
- Partnership - Further Readings
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