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Wiley CPAexcel Exam Review 2014 Focus Notes: Regulation by Wiley

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Module 25: Business Structure

PARTNERSHIP

Partnership Characteristics

Partners' Rights

  1. 1)  Participation in management
  2. 2)  Sharing of profits and losses
    • Percentages may be specified in partnership agreement
    • Equal sharing of profits and losses when not specified
    • If profits are allocated, but losses are not, then losses will be allocated the same as profits
  3. 3)  Property rights

Partners' Property Rights

Partner's interest; this is only a partner's right to profits

  • Right to share of profits and capital upon termination
  • May be sold or assigned
  • Buyer or assignee does not have same rights as partner

Right to specific property

  • Partnership purposes only
  • Individual partners may not sell or assign

Partners' Authority

Authority to bind partnership and other partners

  • Actual authority—express or implied
  • Apparent authority—reasonable third party would believe partner has authority

Individual partner does not have apparent authority to

  • Admit a new partner
  • Guarantee debts of a third party
  • Admit a claim in court or submit a legal claim to binding arbitration
  • Sell or pledge partnership property (other than ordinary sales of inventory)

Partner has apparent authority for any other action that appears to be in the course of partnership business unless both of the following occur:

  • Partners mutually agree on a limit to the authority
  • Third parties are notified of this limit

Partners' Liability

Jointly and severally liable

  • Liable for debts of partnership and torts committed by other partners ...

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