In Lecture Two of the Business Associations series, we explored the core principles governing partnerships, one of the oldest and most flexible forms of business association.

We began by defining a general partnership as an association of two or more persons who carry on as co-owners a business for profit. Importantly, no formal agreement or state filing is required — courts look to the conduct of the parties, especially profit sharing, joint control, and mutual intention.

We discussed the different types of partnerships:

General partnerships, where all partners share control and liability.

Limited partnerships, which include general and limited partners (the latter with limited liability if they refrain from management).

Limited liability partnerships (LLPs), often used by professional firms, where partners are shielded from personal liability for the acts of others.

We examined fiduciary duties among partners, including the duties of loyalty, care, and good faith. Partners owe these duties to each other and the partnership, preventing conflicts of interest, self-dealing, or negligent conduct.

Each partner has the authority to bind the partnership in the ordinary course of business, and all partners are jointly and severally liable for partnership debts and obligations. We explored how partnership property belongs to the entity, not the individuals, and how dissociation and dissolution are handled when a partner exits or the business winds down.

Key cases like Meinhard v. Salmon emphasized the high fiduciary standards between partners, while National Biscuit Co. v. Stroud highlighted the authority of individual partners.

We also explored doctrinal debates on modifying fiduciary duties by agreement, the rise of limited liability entities, and the balance between creditor protection and partner autonomy.

Key Takeaways

Partnerships arise from conduct, not necessarily formal agreements.

Sharing profits creates a presumption of partnership.

Fiduciary duties govern partner conduct and protect the enterprise.

Each partner can bind the firm in ordinary matters.

Partners are personally liable for partnership obligations.

Limited partnerships and LLPs provide liability protections.

Partnership property belongs to the entity, not individuals.

Dissociation does not always dissolve the partnership.

Courts protect reasonable expectations and fairness among partners.

Partnership law remains vital despite the rise of modern entities.