Partnership and Purported Partnership

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Introduction

Read the overview below and complete the activities that follow.

Partnership and Purported Partnership

In this activity, we explore partnership, including its definition and creation, as well as purported partnership and partnership property.

CONCEPT REVIEW:

The American common law of partnership has been largely replaced by statutory law, which is dominated by the Revised Uniform Partnership Act (RUPA) of 1994.Although easy to create, partnerships can have complex dynamics.Particularly important is the doctrine of purported partners, as well as the laws governing partnership property.In fact, a determination of what is partnership property becomes essential when the partnership is dissolved and the assets are being distributed - a scenario that becomes even more complicated when third persons are claiming that partnership property has been sold to them.

Comprehension Case

Partnership and PraxPlus LLP

Read the text below and answer the questions.

Five friends complete the creation of a new business and name it PraxPlus LLP.After three years, the LLP hires an office manager who is responsible for managing the day-to-day office duties, such as managing human resources, dealing with suppliers, and paying creditors.The office manager has no professional responsibilities or authority to make contracts with PraxPlus's clients or to perform contracts with clients.She is an office manager only.She receives a salary of $75,000.That is below market salary for an office manager.To compensate further the office manager and motivate her to keep office expenses low, she will also receive 2% of the PraxPlus profits, even though she has made no capital investment in PraxPlus.Her total compensation package is reviewed yearly by the five LLP partners, who set her salary and profit share by majority agreement.

SA Qu. 01 After two years, the office manager resigns...

After two years, the office manager resigns from her position and claims that she is a partner of PraxPlus LLP and is entitled to 2% of the value of PraxPlus.Provide analysis of the most important factors for determining whether this office manager is a co-owner, and therefore a partner, or merely a managerial employee.

SA Qu. 02 During the start-up phase of PraxPlus LLP, you...

During the start-up phase of PraxPlus LLP, you - an employee of the X Factor Consulting Firm - were hired to work full time on behalf of PraxPlus LLP.PraxPlus gives you a cubicle, inside their office suite, from which you conduct most of your work. You are concerned that some of PraxPlus's employees and clients will think you or your firm (X Factor Consulting Firm) is a partner with PraxPlus LLP, even though in fact neither you nor your firm is a partner with PraxPlus.What is the name of the legal concept that applies when others believe you are another person's partner, and what two things should you do to disabuse PraxPlus's employees, staff, and clients of the belief that you or your firm are partners with PraxPlus?

SA Qu. 03 If PraxPlus decides to purchase a new office building...

If PraxPlus decides to purchase a new office building, the partners will want to use an expert property inspector to assess the real property before making the purchase.The inspector will not be a partner nor an employee, but will instead be an independent business person whose business is property inspection.This inspector, however, will be in close contact with the seller of the property and may make representations to the property's seller.Even though this inspector is neither an employee nor a partner, what risk arises because of the inspector's close contact with the property's seller? How should the PraxPlus partners manage that risk?