Quiz 37: All Forms of Partnerships
A partnership occurs when there are one or more individuals sharing profits and losses, joint ownership of a business and an equal control in management issues. In this case, R is a manager, has the apparent authority as a manager to bind D in a contract with C. In addition, R has a share of the profits (20 percent) and has management control of the day-to-day business. However, there are not enough facts to prove that R has enough management control or enough of a stake in the company to be considered a partner in a situation where D could be held liable. Regardless, C can hold D liable to the contract as R had the apparent authority at a representative of the company to make this agreement.
This is a general partnership, and the facts in the problem indicate that it is a partnership at will. A partnership agreement can limit the duration of a partnership to a certain date or a particular project, in which case it would be considered to be a partnership for a term. If no fixed duration is specified, as in this problem, a partnership is a partnership at will.
a) A limited partner can assign his interest. The person who receives the interest can become a limited partner with the permission of the other partners. The interest assignment does not dissolve the partnership. b) If the limited partnership files for bankruptcy, then this causes the dissolution of the partnership. The bankruptcy of an individual partner does not automatically trigger dissolution, UNLESS the the individual's bankruptcy causes the partnership to go bankrupt as well. c) A partnership will dissolve under three circumstances, including the death, retirement or insanity of a partner. However, the remaining partners can choose to carry on the partnership if they so desire. In this case, since D was the only general partner, her death triggers the dissolution of the limited partnership.