Quiz 42: Partnerships

Business

Facts to this case • R, L, and N formed a partnership. • R and L contributed their personal assets, N only contributed in services. Case Issue The issue is how the proceeds from dissolution of the partnership should be distributed. Relevant Terms, Laws, and Cases Partnership - is a business formed between two or more people to share profit and risk. Revised Uniform Partnership Act (RUPA) - is a law adopted by many states which govern partnerships. Analysis and Conclusion Under the RUPA the distribution of funds to partnership gives priority to creditors of the partnership; capital contributions; and lastly profits. Since, R and L contributed capital they will receive distribution of funds for the assets they contributed. Thus the funds will not be distributed equally. R and L will have a larger share for being capital contributors.

Facts to this case • A partner in the partnership assigned her interest in the partnership to her son. • The other partners limit the son's intervention in partnership affairs. Case Issue The issue is whether the son has the right to inspect the partnership accounting (the books) and/or intervene on management affairs. Relevant Terms, Laws, and Cases Partnership - is a business formed between two or more people to share profit and risk. Revised Uniform Partnership Act (RUPA) - is a law adopted by many states which govern partnerships. Analysis and Conclusion Only a partner has the right to inspect books and be in management. If partner A retires and assigned her interest to B , B is not a partner. In order to be a partner B must have the approval of other partners. The son of the former partner is refused participation; presumably the partners don't approve of him being a partner. Thus, the son is not a partner and has no rights to inspect books or contribute to management.

Facts to this case • A group of friends began a children clothing store as a partnership. • They incorporated their business. • They owed money to a supplier Case Issue The issue is whether the friends are personally liable for the debts even though they incorporated their business. Relevant Terms, Laws, and Cases Partnership - is a business formed between two or more people to share profit and risk. Partnership debt liability - partners are personally liable to the debts owed. Corporation debt liability - corporations are considered as a separate person and debts owed by the corporation may not be owed by the owner. Analysis and Conclusion Typically, incorporating the business means the partnership is dissolved. In a corporation the owners will not be personally liable for business debts. However, the partners have the responsibility to inform their suppliers and creditors that their business is now incorporated. Absent that information the supplier may hold the partners liable. Since, the friends did not inform that they have incorporated; they are still personally liable for the debts.

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