Partnership Law

Partnership Law is not a common Federal law in the United States. The District of Columbia and the 50 states of the country have their own set of laws governing partnerships. Even though there is no federal law, there are definite taxation rules for partnership set up by the federal government. Since there is no federal law governing partnerships, the states have the option of following model laws, which are non-binding. The model laws in this case are the Uniform Limited Partnership Act and Uniform Partnership Act set up by Uniform Law Commissioners. The most recent version, widely adopted by most states, is the Revised Uniform Partnership Act – RUPA set up in 1997.

Partnerships in business are the major sources of lawsuits in the country. Hence, any partnership law tries to address all the aspects to avoid or resolve issues without many damages to the parties or the business. When the partners in business enter an agreement, they are allowed to write up their own set of rules, overruling or adding to those set up by default under the partnerships act. In the absence of a formal agreement, the default rules apply. Generally, the parties are recommended to form an agreement as the default rules may not always be agreeable to them or meet their business needs. This also helps to start, run and dissolve a partnership smoothly.

The general partnership law, Uniform Partnership Act, followed by many of the US states governs the following aspects of a partnership agreement.

  • Characteristics of the Partnership
  • Consent and Agreement
  • Profit Sharing
  • Loss Sharing
  • Management and Ownership
  • Partners as Agents of the Partnership
  • Tort Liabilities to Third Parties
  • Contract Liabilities to Third Parties
  • Tax Liabilities of the Partnership and the Partners
  • Property Ownership
  • Loyalty
  • Care
  • Dissolution and Dissociation

Partnership Law is one of the subcategories of the Commercial Law.  Hence, it mandates that partnerships be made to make profits. Partnership could be between 2 or more than 2 persons. The person can be an individual, corporation, another partnership, government entity or other such entities.

While most states follow the RUPA, some follow the original Uniform Partnership Act and some modified versions of the UPA. Louisiana does not follow any of these models. It is essential that those who want to set up a partnership firm seek and understand all the aspects covered by the partnership law of their state.


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