General partnerships
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Finding the Partnership: The Floor and the Formation Trigger
The floor: Spot facts showing two or more persons jointly operating a profit-making business: shared profits, shared control, joint contributions, a business agreement, or statements calling the parties partners. Then ask whether an agreement changes the statutory defaults.
The formation checklist is:
- Association: Are at least two persons carrying on the enterprise together?
- Business for profit: Is there an ongoing commercial activity rather than a single private transaction?
- Co-ownership: Do the persons share control, profits, losses, property, or the economic upside?
- Intent to operate jointly: The facts must show an objective plan to carry on the business together. A label such as “joint venture” or “partnership” helps, but the parties’ private denial does not prevent formation if the statutory facts exist.
- Agreement: Is there an express written or oral agreement, or do conduct and circumstances imply one?
No filing, certificate, or special form is ordinarily required. A partnership can arise accidentally when people begin operating together. Sharing profits is strong evidence of co-ownership, but it is not conclusive. Payments labeled wages, rent, interest, debt repayment, or compensation for services may not be partnership profits.
The partnership agreement governs relations among partners and the firm’s business when it speaks. If silent, RUPA defaults fill the gap. Read the agreement before reaching for the default rule: it may allocate votes, appoint a managing partner, require unanimity for specified transactions, or establish a different economic arrangement. The important distinction is between formation, which can occur without formalities, and terms, which are supplied first by agreement and then by statute.
Running the Firm: Ordinary Business and Unanimous Change
Start with the partnership agreement. It may create management procedures different from RUPA’s defaults, including weighted voting, a manager, approval thresholds, or special consent rights.
If the agreement is silent, each partner has equal rights in management. Differences in capital contribution do not automatically create extra votes. A decision in the ordinary course of the partnership’s business is ordinarily decided by a majority of the partners. Routine purchases, sales, hiring, scheduling, and ordinary contracts usually fit this category.
A matter outside the ordinary course requires consent of all partners under the default rule. Selling substantially all partnership assets, changing the business fundamentally, or entering an unusual transaction typically qualifies. Amendment of the partnership agreement also requires the consent specified by the governing law, ordinarily all partners under the default rule.
Run the question in this order:
- What does the agreement say?
- If it is silent, is the decision ordinary or extraordinary?
- If ordinary, was the required majority obtained?
- If extraordinary, was the required unanimous consent obtained?
- Did the agreement validly change the voting rule?
Do not treat a partner’s unilateral action as automatically effective merely because that partner managed the firm day to day. Management authority and the required internal vote are separate questions. A routine decision may be approved by majority vote, while a fundamental change may require everyone’s consent.
Binding the Firm: Ordinary Authority and Public Notice
A partner ordinarily has power to bind the partnership by an act apparently carrying on the partnership’s business in the ordinary course. The partnership is not bound by an ordinary-course act if the partner lacked authority and the third party knew or had received notification of that limitation.
For an act outside the ordinary course, the partnership is bound only if the required partner authorization was obtained. Thus, ask first whether the transaction is ordinary for this particular business, not whether it is common in the abstract.
A private restriction in the partnership agreement does not necessarily defeat an outsider who has no notice of it. Direct notice to the outsider matters. So does a filed statement of partnership authority. Such a statement can grant or limit a partner’s authority in public records; a person who gives value without knowledge may be able to rely on a filed grant, while a filed limitation or denial can change the result. Use the supplied statute for any special filing effect, timing rule, or real-property provision.
The authority sequence is therefore:
- Identify the partnership’s business.
- Classify the transaction as ordinary or outside the ordinary course.
- Check the agreement and required internal approval.
- Ask whether the outsider knew or received notice of a limitation.
- Check for a filed statement of authority, limitation, or denial.
Partnership by estoppel applies even when no actual partnership exists. The key facts are a representation that a person is a partner, or consent to another person’s representation; reasonable reliance by the third party; and a transaction or resulting obligation caused by that reliance.
A representation may be spoken, written, or conduct-based. Silence can matter when the person knows another is presenting them as a partner and permits the impression to continue. The third party must actually and reasonably rely on the representation, and the reliance must induce the credit, purchase, or other transaction. Mere acquaintance with the business or a bare title without reliance is insufficient.
For this item, use the following supplied provision:
A person who, by words or conduct, represents that the person is a partner, or consents to another person’s representation that the person is a partner, is liable to a person who reasonably relies on the representation and, because of that reliance, enters into a transaction with the purported partnership or with the purported partners.
Lena and Omar operate Harbor Design without filing a partnership certificate. At a meeting with First Bank, Lena says, “Priya is my partner in Harbor Design.” Priya hears the statement, nods, and gives the banker a business card identifying her as a partner. Relying on that representation, First Bank lends Harbor Design $50,000. Priya never signs the loan agreement and never receives any loan proceeds.
Practice
Under the supplied provision, is Priya liable on the bank’s transaction with Harbor Design?
Dissociation: The Partner Leaves Without Ending the Firm
Dissociation is a partner’s exit from the relationship. Triggers include express notice of withdrawal from an at-will partnership, an agreed event, expulsion under the agreement or applicable law, bankruptcy, death, incapacity, or another statutory event. Withdrawal before the end of an agreed term or undertaking is generally wrongful dissociation.
If the partnership continues, the dissociated partner ordinarily receives a buyout of the interest’s value as of the dissociation date, subject to the statutory valuation process, applicable interest, and offsets for damages caused by wrongful dissociation. Dissociation ends the partner’s management role, but transition authority can continue: the partnership may remain bound by a transaction with an outsider who reasonably believes the former partner is still a partner and lacks notice of dissociation. A filed statement of dissociation can provide public notice under the applicable filing rule.
Dissolution and Winding Up: Settling the Firm’s Final Affairs
Dissociation does not automatically dissolve the partnership. Dissolution occurs when a statutory or agreed event requires the business to wind up, such as withdrawal from an at-will partnership, expiration of an agreed term, an agreed dissolution event, judicial dissolution, or another specified event. After dissolution, the partnership’s business is generally limited to winding up unless the partners properly continue it.
Run the exit questions in this order:
- Did a statutory or agreed dissociation event occur?
- Was the dissociation wrongful because it breached a term or undertaking?
- Does the dissociation require dissolution, or does the partnership continue?
- If it continues, what buyout and transition-authority rules apply?
- If dissolved, what assets must be collected or liquidated?
- Which creditors and partner claims are paid first?
- After liabilities are paid, how are remaining amounts distributed?
- When is winding up complete and the partnership terminated?
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Winding up means collecting receivables, completing or ending transactions, selling or distributing assets, and paying obligations. Partnership creditors, including partners who are creditors, are paid before distributions to partners. Remaining assets are then applied according to the partners’ settlement accounts, including return of contributions and distribution of any surplus under the agreement or statutory defaults. Termination follows completion of winding up.
| Stage | Trigger or question | Firm status | Main consequence |
|---|---|---|---|
| Formation | Association, co-ownership, profit business | Partnership begins | Agreement governs, then statutory defaults |
| Dissociation | Partner exits through a triggering event | Partnership may continue | Buyout, loss of management role, transition authority |
| Dissolution | Statutory or agreed winding-up event | Business enters winding up | Limited continuation authority for winding-up acts |
| Winding up | Assets and obligations are settled | Operations conclude | Creditors paid, surplus distributed, partnership terminates |
Two-line check:
A partnership agreement requires unanimous approval before selling all firm assets, but one partner signs alone.
Answer: The partnership is not bound under the default result because the sale is extraordinary and the agreement requires unanimous consent.
High-Yield Points - ⚡ Biggest Takeaways
A general partnership can arise without filing when persons co-own a profit-making business. Agreement terms precede RUPA defaults for management, voting, and authority. Ordinary-course acts usually bind the firm unless the outsider knew of the limitation. Dissociation removes a partner while dissolution begins the firm’s winding up. Partnership creditors are paid before partners receive final distributions.
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Practice Questions: General partnerships
1. Two architects formed a general partnership without filing any organizational document. Acting within the partnership's ordinary business, both partners signed a five-year lease for studio space. One year later, the partners unanimously admitted a third architect as a partner. The third architect contributed cash, began voting on partnership matters, and received an equal share of profits. The third architect did not sign the lease or agree to assume existing partnership debts. Six months after the admission, the partnership stopped paying rent because it lost a major client. The landlord obtained a judgment against the partnership and now seeks to collect the unpaid rent directly from the third architect's personal assets. The jurisdiction follows the generally accepted rule governing an incoming general partner's liability for obligations incurred before admission. Is the landlord likely to succeed against the third architect personally?
- A. The new partner is personally liable because every partner is personally liable for all partnership obligations whenever enforcement occurs.
- B. The new partner is personally liable because admission as a partner constitutes an implied assumption of the partnership's existing debts.
- C. The new partner is personally liable because participating in management eliminates the liability protection otherwise available to incoming partners.
- D. The new partner is not personally liable because the lease obligation arose before that partner's admission to the partnership.
Show answer
Answer: D. The new partner is not personally liable because the lease obligation arose before that partner's admission to the partnership.
The new partner is not personally liable because the lease obligation arose before that partner's admission to the partnership. - The original partners signed the five-year lease before admission, so the lease obligation was incurred before the third architect became a partner, even though rent went unpaid later. - Under the rule for incoming general partners, the landlord cannot collect that prior obligation from the third architect’s personal assets without a separate assumption of liability. The new partner is personally liable because every partner is personally liable for all partnership obligations whenever enforcement occurs. - General partners ordinarily face personal liability for partnership obligations, but the rule for an incoming partner excludes obligations incurred before admission. - The landlord’s later judgment and the timing of enforcement do not change when the lease obligation arose. The new partner is personally liable because admission as a partner constitutes an implied assumption of the partnership's existing debts. - Admission, a cash contribution, and an equal profit share establish the architect’s partner status, not an assumption of existing debts. - The third architect neither signed the lease nor agreed to assume it. The new partner is personally liable because participating in management eliminates the liability protection otherwise available to incoming partners. - Voting on partnership matters confirms the architect participated as a partner, but management participation does not remove the protection for pre-admission obligations. - The controlling fact is that the lease was signed before the third architect joined.
2. Before a corporation was formed, its promoter signed a six-month equipment lease that expressly stated, “Landlord agrees to look solely to the corporation, once formed, for performance of this lease, and Jordan Lee shall have no personal liability.” After articles of incorporation were filed, the board learned all material terms of the lease, approved use of the equipment, and authorized corporate payments of rent. The corporation used the equipment and paid rent for three months before becoming insolvent. The landlord now seeks the remaining rent from both the corporation and the promoter. No later agreement altered the lease's disclaimer language. Under generally accepted rules governing preformation contracts, which of the following best states the parties' liability?
- A. The promoter remains liable despite the disclaimer because filing the articles does not automatically release him from a preformation contract.
- B. Only the corporation is liable because the lease's express disclaimer of personal liability relieved the promoter once the corporation adopted the contract.
- C. Neither party is liable because a clause disclaiming the promoter's personal liability voids the entire preformation contract.
- D. Only the promoter is liable because a corporation cannot be bound by a contract that predates its existence, even with adoption.
Show answer
Answer: B. Only the corporation is liable because the lease's express disclaimer of personal liability relieved the promoter once the corporation adopted the contract.
Only the corporation is liable because the lease's express disclaimer of personal liability relieved the promoter once the corporation adopted the contract. - The corporation adopted the lease when its board, knowing the material terms, approved use of the equipment and authorized rent payments; the corporation then used the equipment and paid rent. - The lease expressly directs the landlord to look solely to the corporation and states that Jordan Lee has no personal liability, so the landlord cannot recover the remaining rent from him. The promoter remains liable despite the disclaimer because filing the articles does not automatically release him from a preformation contract. - Filing articles alone does not release a promoter from the usual personal liability on a preformation contract. - Here, however, the lease’s express disclaimer removes Jordan Lee’s personal liability; the conclusion does not rest on incorporation alone. Neither party is liable because a clause disclaiming the promoter's personal liability voids the entire preformation contract. - The disclaimer addresses who is liable, not whether the lease is valid. - The corporation became liable by adopting the lease through informed board approval, equipment use, and rent payments. Only the promoter is liable because a corporation cannot be bound by a contract that predates its existence, even with adoption. - A corporation can become bound by adopting a preformation contract after it is formed. - The board’s approval and the corporation’s performance established adoption, while the lease expressly excluded Jordan Lee’s personal liability.
3. Two architects operated a design business as equal general partners under a written agreement. The agreement required both partners' approval before the firm borrowed more than $50,000. Without the other partner's approval, one partner obtained a $70,000 loan in the partnership's name from a bank to purchase ordinary design equipment. The bank had previously made smaller equipment loans to that partner on the firm's behalf, but it had received a copy of the partnership agreement before making this loan. The partnership used the equipment but defaulted on the loan. The bank sued the partnership and both partners. Which of the following is the strongest conclusion?
- A. The partnership and both partners are liable because every partner can bind the partnership despite a third party's knowledge of an authority restriction.
- B. The partnership is not bound because the bank knew that the partner lacked authority for this loan, although adoption could create liability.
- C. Only the borrowing partner is liable because general partners have limited liability for obligations incurred in the partnership's name.
- D. Only the partnership is liable because partners are not personally liable for contractual debts arising from ordinary partnership business.
Show answer
Answer: B. The partnership is not bound because the bank knew that the partner lacked authority for this loan, although adoption could create liability.
The partnership is not bound because the bank knew that the partner lacked authority for this loan, although adoption could create liability. - The $70,000 loan exceeded the agreement’s $50,000 limit, and the bank had received the agreement before lending, so the partner’s ordinary-course authority does not bind the partnership on these facts. - The partnership’s use of the equipment does not by itself establish that it knowingly adopted the unauthorized loan, though adoption could make it liable. The partnership and both partners are liable because every partner can bind the partnership despite a third party's knowledge of an authority restriction. - A partner generally can bind the firm in ordinary business, but that rule does not override the bank’s knowledge of the agreement’s approval requirement. - The bank’s earlier, smaller equipment loans do not supply authority for this loan above $50,000. Only the borrowing partner is liable because general partners have limited liability for obligations incurred in the partnership's name. - General partners do not have limited liability merely because an obligation was incurred in the partnership’s name. - Whether the non-borrowing partner owes this contractual debt depends first on whether the partnership became bound. Only the partnership is liable because partners are not personally liable for contractual debts arising from ordinary partnership business. - General partners can be personally liable for partnership contractual obligations, including debts incurred in ordinary business. - Here, the threshold issue is the bank’s knowledge of the restriction on a loan exceeding $50,000, not an exemption for the partners.
4. Two architects orally agreed to operate a design studio as co-owners, share profits equally, and participate equally in management. They did not form a limited-liability entity. One architect, acting without consulting the other, signed a three-year office lease in the studio's name. Leasing suitable office space was ordinary for an architectural practice, and the landlord had no notice of any restriction on the architect's authority. The studio occupied the space for eight months but then stopped paying rent. The landlord sued the studio and both architects for the unpaid rent. The nonsigning architect argues that she cannot be personally liable because she neither signed nor approved the lease. Under generally accepted partnership principles, which of the following is the strongest conclusion?
- A. Only the partner who signed the lease is liable because the other partner did not participate in the transaction.
- B. Neither partner is liable because the partnership, rather than its partners, is exclusively responsible for partnership obligations.
- C. Both partners are liable only if the landlord first obtains and unsuccessfully executes a judgment against the partnership.
- D. Both partners are personally liable because the lease is a partnership obligation incurred in the ordinary course of its business.
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Answer: D. Both partners are personally liable because the lease is a partnership obligation incurred in the ordinary course of its business.
Both partners are personally liable because the lease is a partnership obligation incurred in the ordinary course of its business. - Operating the studio as co-owners for profit created a general partnership, even though the architects made only an oral agreement. - Leasing suitable office space was ordinary for the practice, so the signing partner bound the partnership; both partners are personally liable for its unpaid rent. Only the partner who signed the lease is liable because the other partner did not participate in the transaction. - A partner’s personal liability for a partnership obligation does not depend on signing or approving the contract. - The landlord had no notice of an authority restriction, and the office lease was an ordinary-course transaction that bound the partnership. Neither partner is liable because the partnership, rather than its partners, is exclusively responsible for partnership obligations. - A general partnership does not give its partners the liability shield associated with a limited-liability entity. - Because the studio incurred the rent obligation, both architects are personally liable for it. Both partners are liable only if the landlord first obtains and unsuccessfully executes a judgment against the partnership. - Prior unsuccessful execution is not a condition of personal liability: both partners are liable for the partnership’s lease obligation. - Rules governing when a creditor may collect from a partner’s assets are distinct from whether that partner owes the debt.
5. Two architects formed a general partnership to operate a design practice, sharing profits and losses equally. Their partnership agreement was silent on outside business activities. While working on a joint project, one architect was approached by a wealthy client seeking a lucrative commission for a museum expansion, a matter closely related to the partnership's ongoing work. Without disclosing the opportunity to her partner, she accepted the commission for herself and completed it using her own time and resources, keeping all the fees. When her partner discovered this, he demanded that she turn over the profits from the museum project to the partnership. She refused, arguing that she completed the project on her own time and that the partnership agreement did not restrict outside business activities. Is the partner likely to prevail in requiring her to account for the profits?
- A. Yes, because a partner owes a duty of loyalty to account to the partnership for any property, profit, or benefit derived from an opportunity related to the partnership's business, even without an express agreement.
- B. No, because a partner may pursue any business opportunity that arises outside partnership office hours.
- C. No, because the partnership agreement did not expressly prohibit outside business activities.
- D. Yes, but only if the partner can show that partnership funds or resources were used to secure the commission.
Show answer
Answer: A. Yes, because a partner owes a duty of loyalty to account to the partnership for any property, profit, or benefit derived from an opportunity related to the partnership's business, even without an express agreement.
Yes, because a partner owes a duty of loyalty to account to the partnership for any property, profit, or benefit derived from an opportunity related to the partnership's business, even without an express agreement. - The museum expansion was closely related to the architects’ ongoing partnership work, so taking the commission without disclosure implicated the partner’s duty of loyalty. - That duty applies even though the agreement is silent on outside work, and she must account to the partnership for the fees from this opportunity. No, because a partner may pursue any business opportunity that arises outside partnership office hours. - Completing the museum project on her own time does not make a partnership-related opportunity hers to keep. - The relevant facts are how the commission arose and its connection to the practice, not the hours she spent completing it. No, because the partnership agreement did not expressly prohibit outside business activities. - A partner’s duty of loyalty applies by default; the agreement need not expressly forbid outside commissions. - Silence about outside work did not authorize her to take this closely related commission without disclosing it to her partner. Yes, but only if the partner can show that partnership funds or resources were used to secure the commission. - Using partnership funds or resources is not required when a partner appropriates an opportunity connected to the partnership’s business. - Her use of personal resources to complete the museum project therefore does not defeat the demand that she account for its profits.
6. Two architects agreed orally to operate a design business as co-owners, divide profits equally, and share project decisions. They did not form another entity or address authority in their agreement. One architect, without consulting the other, signed a contract in the firm's name to purchase standard drafting software used in its projects. The vendor knew the signer was one of the firm's two co-owners but did not know of any disagreement between them. When the other architect learned of the purchase, she objected and told the vendor that the firm would not pay. The vendor seeks payment from the business and both architects. Which of the following is the vendor's strongest argument?
- A. The purchase binds the partnership because a partner ordinarily may bind it through an apparently ordinary-course transaction.
- B. The purchase binds only the signing architect because every partnership decision requires advance approval from all partners.
- C. The purchase binds the partnership only if the objecting architect later ratifies the contract with full knowledge of its terms.
- D. The purchase binds neither architect because an oral agreement cannot create a partnership with authority to contract.
Show answer
Answer: A. The purchase binds the partnership because a partner ordinarily may bind it through an apparently ordinary-course transaction.
The purchase binds the partnership because a partner ordinarily may bind it through an apparently ordinary-course transaction. - Operating the design business as co-owners for profit created a general partnership, and each architect is ordinarily its agent for business transactions. - Standard drafting software used in the firm’s projects is an ordinary-course purchase; the vendor had no notice of a restriction on the signer’s authority, so the partnership and its partners are liable. The purchase binds only the signing architect because every partnership decision requires advance approval from all partners. - Sharing project decisions does not mean every contract needs both architects’ advance approval. - Even if the architects disagreed internally, the vendor had no notice of a restriction when the partner signed an ordinary-course purchase contract. The purchase binds the partnership only if the objecting architect later ratifies the contract with full knowledge of its terms. - Ratification is unnecessary when a partner’s ordinary-course authority already binds the partnership at signing. - The other architect’s later objection does not undo the contract with a vendor that lacked notice of any authority dispute. The purchase binds neither architect because an oral agreement cannot create a partnership with authority to contract. - A written agreement is ordinarily unnecessary to form a general partnership; the architects’ co-ownership and profit sharing support one here. - Because the oral agreement formed a partnership, its partner could bind it by purchasing standard software for its projects.
7. An architect owned a design studio as a sole proprietor. She hired a marketing consultant under a one-year agreement stating, “Consultant is an independent contractor and receives 8% of the studio’s monthly gross revenue.” The consultant could recommend advertising strategies but could not sign contracts, hire workers, set project prices, access bank accounts, or bind the studio. The architect retained all final decision-making authority and bore all business losses. After the studio failed to pay a supplier, the supplier argued that the consultant was a general partner and therefore personally liable for the studio’s debt. No partnership filing had been made. The supplier has no evidence that the consultant represented himself as a partner. Which of the following is the consultant’s strongest argument that no general partnership existed?
- A. The consultant was not a partner because the parties never filed a partnership certificate.
- B. The consultant was a partner because participating in management necessarily creates a partnership.
- C. The consultant was not a partner because receiving gross-revenue compensation alone does not establish co-ownership.
- D. The consultant was a partner because any compensation tied to business revenue is treated as profit sharing.
Show answer
Answer: C. The consultant was not a partner because receiving gross-revenue compensation alone does not establish co-ownership.
The consultant was not a partner because receiving gross-revenue compensation alone does not establish co-ownership. - A general partnership requires carrying on a business as co-owners, and the consultant’s 8% of monthly gross revenue was compensation for marketing services. - The architect retained final decisions and bore all losses, while the consultant could only recommend strategies and could not bind the studio. The consultant was not a partner because the parties never filed a partnership certificate. - A general partnership can arise without a filing, so the absence of a certificate does not resolve whether the parties were co-owners. - The consultant’s limited authority and gross-revenue compensation, rather than the lack of paperwork, support his argument. The consultant was a partner because participating in management necessarily creates a partnership. - Recommending advertising strategies is advisory, not necessarily participation as a co-owner in managing the studio. - The architect kept final authority, and the consultant could not set prices, hire workers, or bind the studio. The consultant was a partner because any compensation tied to business revenue is treated as profit sharing. - A percentage of gross revenue is not a share of profits, which account for expenses. - Even profit sharing is not conclusive of partnership, and this consultant received revenue-based compensation without bearing business losses.
Flashcards: General partnerships
1. What is a general partnership, and how is it formed under the majority rule?
Show answer
A general partnership is an association of two or more persons to carry on a business as co-owners for profit. Under the majority RUPA rule, it is formed by agreement or conduct and requires no filing or written agreement.
2. What facts create a presumption that a partnership exists?
Show answer
A person’s receipt of a share of business profits creates a presumption of partnership, subject to exceptions such as payment of a debt, wages, rent, interest, or a sale-related payment. Profit sharing alone is not conclusive if the parties did not intend to co-own the business.
3. When is a partner’s dissociation wrongful?
Show answer
A dissociation is wrongful if it breaches an express term of the partnership agreement or, in a partnership at will, occurs before the expiration of the partnership term or completion of the undertaking after a partner has wrongfully withdrawn. A wrongful dissociating partner may owe damages to the partnership.
4. When is a partnership bound by a partner’s apparent authority?
Show answer
Under RUPA, an act apparently carrying on the partnership’s ordinary business binds the partnership unless the partner had no authority and the third party knew or had notice of that lack of authority. An act outside the ordinary course generally requires actual authority, such as authorization by all partners.
5. When does a partner have actual authority to bind the partnership?
Show answer
A partner has actual authority when the partnership agreement or the partners’ vote authorizes the act, or when the act is apparently authorized as part of the ordinary course of partnership business. The partnership is bound if the partner acts with actual authority, subject to limits in the agreement.
6. What are partners’ default rights to participate in management and vote?
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Each partner has equal rights in the management and conduct of the partnership business, regardless of capital contribution. Ordinary-course matters are decided by a majority of partners; acts outside the ordinary course require unanimous consent under RUPA.
7. How are partnership assets distributed during winding up?
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After partnership assets are collected and creditors are paid, remaining assets are distributed first to repay partner loans, then capital contributions, and then according to the partners’ profit-sharing percentages. Partners share losses in the same proportion as profits unless the agreement provides otherwise.
8. What events cause a partner’s dissociation under RUPA?
Show answer
Dissociation occurs when a partner gives express notice of withdrawal, an agreed event occurs, the partner’s death or bankruptcy occurs, or another statutory or court-ordered event applies. Dissociation ends the partner’s right to participate in management but does not necessarily dissolve the partnership.
9. What is partnership by estoppel?
Show answer
A person who represents, or consents to another representing, that the person is a partner may be liable to a third party who reasonably relies on the representation and extends credit or otherwise changes position. The person is liable as though a partner for that transaction, but does not thereby become an actual partner.
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