Covenant mutual liquidating trust

Posted by / 01-Feb-2018 08:15

Covenant mutual liquidating trust

Certain conduct may lead to the creation of an implied partnership.

Generally, if a person receives a portion of the profits from a business enterprise, the receipt of the profits is evidence of a partnership.

Some courts took a technical approach to the aggregate theory and did not allow a partnership to sue on its own behalf.

In addition, some courts would not allow a suit to go forward against a partnership unless the claimant named each partner in the complaint or added each partner as an "indispensable party." The RUPA generally adopted the entity approach, which treats the partnership as a separate legal entity that may own property and sue on its own behalf.

An association of two or more persons engaged in a business enterprise in which the profits and losses are shared proportionally.

The legal definition of a partnership is generally stated as "an association of two or more persons to carry on as co-owners a business for profit" (Revised Uniform Partnership Act § 101 [1994]).

Accordingly, some partner-ships may contain individuals as well as large corporations.

Unless copartners consent, a partner's duty of loyalty restricts the partner from using partnership property for personal benefit and restricts the partner from competing with the partnership, engaging in self-dealing, or usurping partnership opportunities. When a partner has the apparent or actual authority and acts on behalf of the business, the partner binds the partnership and each of the partners for the resulting obligations. This led to the creation of a new property interest known as a "tenancy in partnership," a legal construct by which each partner co-owned partnership property. An aggregate approach nevertheless led to confusion as to whether a partnership could be sued or whether it could sue on its own behalf. Early English mercantile courts recognized a business form known as the societas. The societas provided for an accounting between its business partners, an agency relationship between partners in which individual partners could legally bind the partnership, and individual partner liability for the partnership's debts and obligations.

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The partnership, for instance, is considered an association of co-owners for tax purposes, and each co-owner is taxed on his or her proportional share of the partnership profits.