Key Terms
Definition
An equitable doctrine for a fair distribution of a debtor's assets among multiple creditors.
Two required elements to form a partnership
1. A common interest to conduct business together 2.
Purpose of a limited partnership
Allow people to invest without managing the business and without risking more than they invested.
Result
The person deemed a partner by estoppel becomes liable for any credit extended to the partnership by that third party.
Right to compensation
Partners are only entitled to compensation beyond profit sharing if there is a specific agreement for it. Common in limi
Right to interest on advances
Partners are entitled to receive interest on cash advances made to the partnership. An advance is not automatically a ca
Right to inspect records
Every partner has full and complete access to all business records. Partners must also notify each other of material inf
Right to accounting
Partners are entitled to an accounting when another partner has withheld profits, when there are legal proceedings again
Right to indemnification
Partners have the right to indemnification from the partnership for actions of other partners. If a partner commits a to
Right to co-ownership of property
Unless the partnership agreement says otherwise, partners have an equal right to possess partnership property for busine
Partial winding up
Assets sold to cover debts when cash is insufficient.
Complete winding up
Full shutdown when the partnership is no longer viable.
Partnership
Voluntary association of two or more people jointly owning a business for profit.
General partnership
All partners manage fully; all share equally in profits and losses.
Limited partnership
General partners manage and bear full liability; limited partners invest and bear only contributed amount.