For this project you will be writing a Partnership agreement for Mrs. White, Mr. Plum, and Dr. Peacock. They want to start a biotech research business in the form of a General Partnership. All three are to be general partners and there are no limited partners.
As with any partnership, each of the partners has different strengths and weaknesses and needs.
As with any business, the tasks that need to be performed will differ from one business to another, e.g., this partnership business might have the need to dispose of hazardous biological waste.
Now as I hope your text tells you, a Partnership can be formed with or without a formal partnership agreement. If there I no agreement, or if the partners do not attend to all details, the Uniform Partnership Act will, by law, fill in the details.
So, before you construct your agreement, you should look through the excerpts from the UPA (attached under Project 2 description) , to know what happens if no mention is made in a partnership agreement. For example,
As a general partnership is owned by several parties engaging in business–
No one is entitled to compensation for the work they do in the business.
Everyone is entitled to an equal share of the profits, and liable for an equal share of the losses
Everyone has equal right to manage the business in all particulars, and each partner is an agent for the partnership in all matters,
And so on.
These are the rules — Unless the partnership agreement provides otherwise. This is very important, since it is just these sorts of things that might have to be altered–and others as well–to take into account the strengths and weaknesses of the partners, and the nature of the business as a Biotech research firm.
Use your imagination!
You may include some boilerplate from internet examples of partnership agreements, but most of your grade will be based on how you construct your agreement to be useful to the three partners, and to foresee, ahead of the problem, what problems they might face down the road.
UNIFORM PARTNERSHIP ACT (1997)
The National Conference of Commissioners on Uniform State Laws first considered a uniform law of partnership in 1902. Although early drafts had proceeded along the mercantile or “entity” theory of partnerships, later drafts were based on the common-law “aggregate” theory. The resulting Uniform Partnership Act (“UPA”), which embodied certain aspects of each theory, was finally approved by the Conference in 1914. The UPA governs general partnerships, and also governs limited partnerships except where the limited partnership statute is inconsistent. The UPA has been adopted in every State other than Louisiana and has been the subject of remarkably few amendments in those States over the past 80 years.
[ARTICLE] 1: GENERAL PROVISIONS
SECTION 101. DEFINITIONS. In this [Act]:
(1) “Business” includes every trade, occupation, and profession….
(3) “Distribution” means a transfer of money or other property from a partnership to a partner in the partner’s capacity as a partner or to the partner’s transferee….
(5) “Limited liability partnership” means a partnership that has filed a statement of qualification under Section 1001 and does not have a similar statement in effect in any other jurisdiction.
(6) “Partnership” means an association of two or more persons to carry on as co-owners a business for profit formed under Section 202, predecessor law, or comparable law of another jurisdiction.
(7) “Partnership agreement” means the agreement, whether written, oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement.
(8) “Partnership at will” means a partnership in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.
(9) “Partnership interest” or “partner’s interest in the partnership” means all of a partner’s interests in the partnership, including the partner’s transferable interest and all management and other rights.
(10) “Person” means an individual, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
(11) “Property” means all property, real, personal, or mixed, tangible or intangible, or any interest therein….
SECTION 102. KNOWLEDGE AND NOTICE…
(a) A person knows a fact if the person has actual knowledge of it.
(b) A person has notice of a fact if the person:
(1) knows of it;
(2) has received a notification of it; or
(3) has reason to know it exists from all of the facts known to the person at the time in question.
(c) A person notifies or gives a notification to another by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person learns of it.
(d) A person receives a notification when the notification:
(1) comes to the person’s attention; or
(2) is duly delivered at the person’s place of business or at any other place held out by the person as a place for receiving communications….
(f) A partner’s knowledge, notice, or receipt of a notification of a fact relating to the partnership is effective immediately as knowledge by, notice to, or receipt of a notification by the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.
SECTION 103. EFFECT OF PARTNERSHIP AGREEMENT; NONWAIVABLE PROVISIONS.
(a) Except as otherwise provided in subsection (b), relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this [Act] governs relations among the partners and between the partners and the partnership.
(b) The partnership agreement may not:
(1) vary the rights and duties under Section 105 except to eliminate the duty to provide copies of statements to all of the partners;
(2) unreasonably restrict the right of access to books and records under Section 403(b);
(3) eliminate the duty of loyalty under Section 404(b) or 603(b)(3), but:
(i) the partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable; or
(ii) all of the partners or a number or percentage specified in the partnership agreement may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;
(4) unreasonably reduce the duty of care under Section 404(c) or 603(b)(3);
(5) eliminate the obligation of good faith and fair dealing under Section 404(d), but the partnership agreement may prescribe the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;
(6) vary the power to dissociate as a partner under Section 602(a), except to require the notice under Section 601(1) to be in writing;
(7) vary the right of a court to expel a partner in the events specified in Section 601(5);
(8) vary the requirement to wind up the partnership business in cases specified in Section 801(4), (5), or (6);
(9) vary the law applicable to a limited liability partnership under Section 106(b); or
(10) restrict rights of third parties under this [Act].
1. The general rule under Section 103(a) is that relations among the partners and between the partners and the partnership are governed by the partnership agreement. See Section 101(5). To the extent that the partners fail to agree upon a contrary rule, RUPA provides the default rule. Only the rights and duties listed in Section 103(b), and implicitly the corresponding liabilities and remedies under Section 405, are mandatory and cannot be waived or varied by agreement beyond what is authorized. Those are the only exceptions to the general principle that the provisions of RUPA with respect to the rights of the partners inter se are merely default rules, subject to modification by the partners. All modifications must also, of course, satisfy the general standards of contract validity. See Section 104….
SECTION 105. EXECUTION, FILING, AND RECORDING OF STATEMENTS.
(a) A statement may be filed in the office of [the Secretary of State]. A certified copy of a statement that is filed in an office in another State may be filed in the office of [the Secretary of State]. Either filing has the effect provided in this [Act] with respect to partnership property located in or transactions that occur in this State.
(b) A certified copy of a statement that has been filed in the office of the [Secretary of State] and recorded in the office for recording transfers of real property has the effect provided for recorded statements in this [Act]. A recorded statement that is not a certified copy of a statement filed in the office of the [Secretary of State] does not have the effect provided for recorded statements in this [Act].
(c) A statement filed by a partnership must be executed by at least two partners. Other statements must be executed by a partner or other person authorized by this [Act]. An individual who executes a statement as, or on behalf of, a partner or other person named as a partner in a statement shall personally declare under penalty of perjury that the contents of the statement are accurate….
SECTION 106. GOVERNING LAW.
(a) Except as otherwise provided in subsection (b), the law of the jurisdiction in which a partnership has its chief executive office governs relations among the partners and between the partners and the partnership.
(b) The law of this State governs relations among the partners and between the partners and the partnership and the liability of partners for an obligation of a limited liability partnership.
NATURE OF PARTNERSHIP
SECTION 201. PARTNERSHIP AS ENTITY.
(a) A partnership is an entity distinct from its partners.
(b) A limited liability partnership continues to be the same entity that existed before the filing of a statement of qualification under Section 1001.
SECTION 202. FORMATION OF PARTNERSHIP.
(a) Except as otherwise provided in subsection (b), the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.
(b) An association formed under a statute other than this [Act], a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under this [Act].
(c) In determining whether a partnership is formed, the following rules apply:
(1) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.
(2) The sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.
(3) A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:
(i) of a debt by installments or otherwise;
(ii) for services as an independent contractor or of wages or other compensation to an employee;
(iii) of rent;
(iv) of an annuity or other retirement or health benefit to a beneficiary, representative, or designee of a deceased or retired partner;
(v) of interest or other charge on a loan, even if the amount of payment varies with the profits of the business, including a direct or indirect present or future ownership of the collateral, or rights to income, proceeds, or increase in value derived from the collateral; or
(vi) for the sale of the goodwill of a business or other property by installments or otherwise.
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