A partnership, a form of business, is different from a coporation.
Types of partnerships
Formalities (pg 70)
- Certain types of business enterprises can only be organized - that is - legally formed - by complying with statutory (and sometimes administrative) formatilies and filing with the state. This is true, for example, of corporations, limited parnterships, limited liability partnerships, limited liability limited partnerships, and limited liability companies. Hoewver, some types of business enterprises, most notably sole proprieotrhsips and general partnerships, can be fored without any formatilies or filings..
Four part test to determine if there is a partnership (pg 70-71)
- It is said sometimes that where there is no express partnership agreement, a relationships will be considered a partnerships only if four eleents are present:
- 1) an agreement to share profits
- 2) an agreement to share losses
- 3) a mutual right of control or management of the business
- 4) a community of interest in the venture...
Not on liability for partnerships obligations (92-94)
- UPA - the provisions of the Uniform Partnership Act governing liability for partnership obligations reflect an amalgam of the entity and aggregate theories.
- On the one hand, UPA section 9, 13, and 14 make "the partnership" liable for defined acts of the partners. While it seems to follow that this liability could be enforrced by a suit against the partnership; the UPA does not authroize such as suit because it does not recognzie a partenerships as an entity, and unless authorzied by statute, suit normally cannot be brough against an assocation that is not an entity.
- Suit against the individual patners on a partnership obligation is also difficult udner the UPA. At common law, if an "obligation is "joint and several," the obligors can be useud either jointly or separately. If, however, an obligation is only "joint," all the joint obligors must be joined in the suit, subject to a few exceptions where jurisdiction over all the obligors cannot be obtained.
- RUPA - unlike the UPA, RUPA section 307(a) specifically provides that a partnership may both sue adn be used in its own name. Furthermore, RUPA section 306 provides that partners are jointly and severally liable for all obligations fo the partnership.
- However, RUPA adds a new barrier to collecting against an individual parter - under RUPA 307, a judgment aagianst a partner based on a claim against the partnership cannot be satisfeid against the partern's individual assets unless adn until a judgment on the same claim has been rendered against hte partnership and a writ of execution on that judgment has been returend unsatisfied.
Limited Liability Partnership (180-181) - essentially, LLPs are general partnerships, with one core difference and on ancillary difference.
- The core difference is that, as the name indicates, the liabilty of the general partners of a limtied laiblity partnerships is less extensive than the liablity of a general partnership
- The ancillary difference is that LLPs must be reigstered with the appropriate state office. Every state has no adopted LLP provision
- A variant on the LLP is the limited liability limite partnership, LLLP, in which liability of the general partners in a limited partnership is limited.
limited liabilty partnership
|subchapter S corporation||corporation|
|restrictions||Certain restrictions may preclude electino as a subchapter S corporation, such a requirement that there be a maximum of 75 shareholders, or the preclusion of non-resdient alien or corporate shareholders, or the use of only one class of shares|
|view||viewed as an aggregate that is composed of its owners||the corporation is viewed as a separate legal entity distinct from its owners|
|liability||each owner is personally liable for the debt of the partnership||limited liability for some of the owners as limited partners. A limited partnership must have at least one general partner with unlimited liability; the other owners may be limited partners with limited liability (like shareholders). Unlike corporate shareholders who can serve as officers and directors and still have limited liability, if a limited partner gets involved in the control of the limited partnership, she may lose limited liability.||like corporation||it is able to incur its own liabilities, shielding the shareholders as owners from personal liability. thus, the corporation's creditors cannot usually go after the personal assets of the shareholders and the creditors of the shareholders have no right to directly go after the assets fo the corporation. The limtied liabiltiy means that in most cases the shareholders will only lose their investment in the corporation. In addition the assets of the corporation are also shielded from the personal creditors fo the shareholders who cannot go directly after those corporate assets. The shielding advantages are the primary reason why the corporate form is chosen for many businesses.|
|transferrability||not freely transferrable since any change in the identity of the partners will alter the aggregate.||Freely transferrable - since shareholders are separate from the corporation, they can freely transfer shares; different owners have no effect on the separate corporate entity.|
partners, as co-owners of the business, have the right to participate in the management of the partnership. In addition, each partner has the power to bind the partnership as agent in the usual course of business.
|In the corporate context, the corporation as a legal entity from its owners has a board of directors that manages the business. The board is elected by the shareholders. The use of a board of directors allows for a group other than owners to manage and thus a centralization of management separate from the owners. S|
|taxation||single||single||Are generally treated like partnerships for tax purposes. All corporate income is taxed to the shareholders,whether or not such income is actually distributed thereto.||double taxation|