Section 27.2
The Partnership
Section 27.2 The Partnership
• TODAY’S AGENDA
BELLWORK: Take Bus Quiz
• Discuss types of Business
• What are the advantages and disadvantages of
each?
– List ones you are already aware of
– Divide the business up amongst the class. Find all
advantages & disadvantages
– Share with the class
Survey:
Are
you ready
to be an entrepreneur
Understanding
Business
and Personal
Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• Come up with a business idea
• Name the business
• Write goals & objectives for your company
– What do you want to achieve?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
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SOLE PROP
YOU ARE THE BOSS (total control)
Disadvantages –you lose all of the money
PARTNERSHIP
2 MINDSDis – fights or diff
CORPORATION
Board of directors
Dis- gov regulations
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
SOLE PROPRIETOR
ADVANTAGES
• You are the boss
• Easily formed
• Retention of profits
• Freedom from government
control
• One time taxation
Understanding Business and Personal Law
DISADVANTAGES
• Most potential to loose
• Limited capital
• Unlimited liability
• Limited human resources
• Limited lifetime
• ZONING ORDINANCES
Sole Proprietorship and Partnership
Section 27.2 The Partnership
ADVANTAGES
DISADVANTAGES
• SELLING SHARES
• INCOME MAY BE
TAXED MORE THAN
• A LEGAL ENTITY, OR
ONCE
LEGAL PERSON,
2. Practice Timing Create Timers
CREATED BY THE
• ORIGINAL FOUNDERS
STATE
CAN LOSE NOT ONLY
THE CONTROL, BUT
• CONTINUITY OF
ALSO THE ACTUAL
EXISTENCE
OWNERSHIP OF THE
CORPORRATION.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• TODAY’S AGENDA
• HOMEWOR: FINISH FTC ASSIGNMENT – due
THURSDAY (No Exceptions)
• GET OUT PAPER FOR NOTES
• Notes over partnerships ch27 pg588
• Draft an articles of partnership as a class
• HOMEWORK: FINISH BUSINESS PLAN. DUE
TOMORROW. Late work will not be accepted.
• Read pg 588 when would a partnership agreement need to be
in writing?
• What is the most important part of a partnership? Explain your
answer in detail
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Pre-Learning Question
What is a partnership?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
The Nature of Partnership
“two or more persons that carry on a
business for profit.”
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Advantages
More capital and
credit available.
Burden of work
is shared.
Responsibility
for losses
shared.
Understanding Business and Personal Law
Disadvantages
share the liabilities.
responsible for the
others’ actions.
share profits.
Disagreements
Death of a partner
dissolves the
partnership.
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Forming a General Partnership
3 ways to form a partnership
1. By agreement
2. By proof of existence
3. By estoppel
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• Come up with an example of how to start a
partnership in each of the following ways
1. By agreement
2. By proof of
existence
3. By estoppel
Understanding Business and Personal Law
Sole Proprietorship and Partnership
27.2 27.2 The Partnership
Section
Partnership Formation
Partnership
by contract
Articles of partnership
Partnership
by proof of
existence
Formed because of method of doing
business.
Sharing of profits is prima facie evidence
Partnership
by estoppel
Third party led to believe a partnership exists
No true partnership created
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
By Agreement
Articles of Partnership
•Valid
assent
•Express and may be written or oral.
•If over a 1yr or buy sell or lease
Put in Writing
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Important Points Covered
in an Agreement
Parties
Specific nature
Scope
Limits of the
business
Planned duration
Understanding Business and Personal Law
Amount of
investments
Salaries
Profits
Withdraw of funds
Withdraw as partner
Sole Proprietorship and Partnership
Section 27.2 The Partnership
v
• Make a list of items you would want to put in
your partnership agreement based on the
suggested items on the previous slide.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
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CREATE AN ARTICLE OF PARTNERSHIP
TYPE OF BUSINESS
PARTNERS
ETC..
Divide class up. Each student should come up
and type their clause on the screen.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• TODAY’S AGENDA
• TURN IN FTC ASSIGNMENT – due NOW NO
EXCEPTIONS. http://ianscatering.yolasite.com/
• GET OUT PAPER FOR NOTES
• Notes over partnerships ch27 pg588
• Draft an articles of partnership as a class
• HOMEWORK: FINISH BUSINESS PLAN. DUE
TOMORROW. Late work will not be accepted.
• Read pg 588 when would a partnership agreement need to be
in writing?
• What is the most important part of a partnership? Explain your
answer in detail
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• TODAY’S AGENDA
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Turn in business plan
I am not accepting any FTC projects today.
Review types of partnerships
Learn about types of partners.
– Create a chart to display their differences
• REVIEW – PARTNERSHIP RACES
• Read pg 588 when would a partnership agreement need to be
in writing?
• What is the most important part of a partnership? Explain your
answer in detail
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• Finish Articles of Partnership
• Read pg 588 when would a partnership
agreement need to be in writing?
• What is the most important part of a
partnership? Explain your answer in detail
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
By Proof of Existence
partnership by proof of existence.
Forms regardless of the
•label
•intent
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
How do you prove existence?
Prima Facie Evidence
Evidence that is sufficient to raise a presumption
of fact or to establish the fact in question
unless rebutted.
• Proof like..
A belief
– SHARING PROFITS
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
By Estoppel
Partnership by estoppel.
Doing or saying something that leads
the court to believe a partnership
exists.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
By Estoppel
not a real partnership
Then why are we learning about it?
a way for the court to prevent injustice
because someone has relied on the
words or actions of another party and
has acted accordingly.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• Create a chart of the types of partners & their
participation, relationship, & liability. Pg 591
– Use Visuals instead of words to help you
remember.
– Learn about Partnership property & MGMT
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Types of Partners
There are five types of partners:
1. General
2. Secret
3. Silent
4. Dormant
5. Limited
Understanding Business and Personal Law
Sole Proprietorship and Partnership
27.2 27.2 The Partnership
Section
Types of Partners
Type of Partner
Participation in
the Business
Relationship to
the Public
Degree of
Liability
General
Active
Known
Unlimited
Secret
Active
Unknown
Unlimited
Silent
Not active
Known
Unlimited
Dormant
Not active
Unknown
Unlimited
Limited
Not active
Known
Limited
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• Complete Partnership Races
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• TODAY’S AGENDA
• Finish Bus. Org Cases & turn in
• People who were here on Friday, complete
cases 18-23 pg 602 (HW for the others)
• Absent on Friday= Notes over ch27-2
• Open note quiz today over ch 27-2
• REVIEW – bingo over ch 27
• HOMEWORK: study for ch 27 test.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Which of the following are partnership property?
• A Truck that you own, used for
business purposes, that has been
repeatedly fixed by the business
• A bulldozer that you let the
company use, that they list on their
account books
• A laptop that the company uses on a
daily basis & fixes regularly.
• A camera that you let your partner
use
to Law
take pictures of
job site.
Understanding Business and
Personal
Sole a
Proprietorship
and Partnership
Section 27.2 The Partnership
Partnership Property
Does this laptop belong to me or the
company?
Find out now! But how?
Has the partnership:
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Consistently used property
Listed on account books
Paid expenses for
Repaired it
Paid taxes on it
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Property Rights of the Partners
The right to use the property
Co-Owners: tenancy in partnership
The right to manage the firm
Equal voice (unless otherwise stated)
The right to share in the profits
Share Equally regardless of time
or money invested.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• Tenancy in partnership
– What happens with the property if one partner
dies?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
The right to manage the firm
– Equal voice (unless otherwise stated)
What if there is a disagreement?
-majority decision WINS!
-if there is an even # -no decision is made
Unanimous Vote on (pg594)
-changes in articles
-nature of business
-disposal of partnership
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• John invests more time & money in the firm.
What does this mean in regards to his salary?
– Share Equally regardless of time or money
invested.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Duties to the Partners
1. act in good faith & in the best interests
of the firm.
2. use their best skill and judgment in
looking after the firm’s affairs.
3. To be loyal to the firm and put the firm’s
interests first.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• PARTNER LIABILITY
• A partner loses control of a delivery truck and
severely injured Sam Patterson.
• Can Sam can sue all of the partners even
though they were not involved in the accident?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Liability of the Partners
Unlimited Liability of debts incurred
Even to the extent of their personal
assets.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Liability of the Partners
Share Losses
Jointly liable
•
all the partners must be sued together.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Pre-Learning Question
How do partnerships come to an end?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Dissolving a Partnership
A dissolution - legal detachment.
a change in the relationship any
-partner stops being associated with the
business.
-DOES NOT HAVE TO BRING AN END
TO BUS.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Effects of Dissolution
If so,
New financial arrangements
Create new agreement
Public notice given to relieve retiring
partners of new debt.
Determine how assets will be
distributed.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Distribution of Assets
Liabilities are paid in this order:
1. creditors
2. $ lent by partners.
3. original $ paid into the partnership
by each partner.
4. The surplus, (what is left over)
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
• You had a $100,000. You each paid $20,000
into the business. Your partner loaned the
business an additional $10,000 to bail you out
this year. You owe the bank $30,000.
• What position will this put each partner in after
dissolving the partnership?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Distribution of Assets
If the business is insolvent:
Assets are sold to pay the creditors.
Partners are individually liable for
any unpaid balance that the sale of
the assets will not cover.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
When Jess and Joe’s Café closed,
they had $38,000 and owed $25,000
to creditors. Neither Jess nor Joe had
any outstanding loans to the business,
but each had paid $5,000 into the
business to start it.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Will Jess and Joe get their money
back? Will there be any additional
money left over?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
ANSWER
Yes, Jess and Joe will get their money
back. There will $3,000 left over.
$38,000 – 25,000 = 13,000 –10,000 =
$3,000.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Pre-Learning Question
What is the Revised Uniform
Partnership Act?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
The Revised
Uniform Partnership Act
Since the UPA was written in 1914, it
has undergone extensive revision.
This new variation of the act is
referred to as the Revised Uniform
Partnership Act (RUPA).
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Pre-Learning Question
What is a registered limited liability
partnership?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Registered Limited
Liability Partnerships
A registered limited liability
partnership (RLLP) is a new type of
partnership designed to eliminate a
major disadvantage of the general
partnership—joint and several liability.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Registered Limited
Liability Partnerships
Partners of an RLLP can escape joint
and several liability for the torts,
wrongful acts, negligence, or
misconduct of other partners by
registering with the appropriate state
office.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Pre-Learning Question
What is a limited partnership?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Limited Partnership
According to RUPA, a limited
partnership is “a partnership formed
by two or more persons. . . having one
or more general partners and one or
more limited partners.”
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Limited Partnership
Limited partnerships are often used in
real estate ventures and tax shelter
investments.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
1. What is a general partnership?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
Answer
An association of two or more persons to
carry on a business for profit.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
2. How can a partnership be created?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
Answer
By agreement, by proof of existence, and
by estoppel.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
3. What are the partner’s rights in
relation to property?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
Answer
The right to use partnership property, the
right to manage the firm, and the right to
share profits.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
4. What are the effects of the
dissolution of a partnership?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
Answer
Dissolution need not end a partnership.
Other partners may wish to continue the
business.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
Answer
New financial arrangements must be made
in regard to the new firm. A new agreement
must be drawn up regarding the conduct of
the new firm.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Reviewing What You Learned
Answer
Public notice must usually be given in order
to relieve the retiring partners from liability
for any new debts created by the new firm.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Critical Thinking Activity
Limited Liability Partnership
Why did some state legislatures decide to
create registered limited liability
partnerships?
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Critical Thinking Activity Answer
Limited Liability Partnership
To eliminate the problems associated with
joint and several liability.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Legal Skills in Action
Partnership Liability
Clay, who is a general partner in Harrington
Enterprises, believes he will not be liable
for a tort committed by Ian, another partner
in the firm.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Legal Skills in Action
Partnership Liability
Write a letter to Clay explaining whether he
will be liable for Ian’s tort.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
Section 27.2 The Partnership
Section 27.2 Assessment
Legal Skills in Action Answer
Partnership Liability
Letters will vary, but should include that
Clay needs to be told that, because he and
Ian are partners, they are jointly and
severally (separately) liable for torts
committed by each other within the scope
of the firm’s business.
Understanding Business and Personal Law
Sole Proprietorship and Partnership
End of Section 27.2
The Partnership