At-Will Partnerships - Explained
Partnerships with No Specific Time Period
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What does it mean to be At-Will Partners?
As previously noted, a general partnership may arise simply through an intent to undertake mutual activity for a profit. That is, parties who do not intend to be partners may, nonetheless, be deemed a general partnership at-will.
The at-will characteristic means that there is no formal agreement in place delineating the time during which the individuals will remain partners. Any partner may leave the partnership at any time. I
n determining whether the activity of individuals forms a partnership, a court will look at the totality of the circumstances. This means that the court will examine any evidence of the activity or relationship between the individuals to see if they meet the state law characteristics or requirements of a partnership.
The circumstances may obviously indicate that some other type of relationship exists, such as an employer-employee relationship exists. In this case the individuals will avoid the classification of partners and all of the default rules and obligations that accompany such designation.
Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP
What are the Characteristics of an At-Will Partnership?
Equal Ownership of Partnership The default rule is that partners of an at-will partnership share equally in the ownership of the business. It does not matter if the partners contribute at different levels to the partnership, either through assets of labor.
Equal Authority in Management Functions The default is that each partner has the authority to take part in the management of the firm. Likewise, the partner has the inherent authority to act on behalf and bind the firm in agreements.
Decision Making Authority The default rule allows partners to participate in management decisions. Generally, routine, operational decisions may be made by a majority of partners. Major decisions affecting the business must achieve unanimous support of the partners.
Unlimited Personal Liability As in any general partnership, partners in an at-will arrangement have unlimited personal liability in tort for the actions of other partners. Likewise, the partners are personally liable for the debts or obligations of the partnership. This may include situations where other partners bind the partnership without the actual authority to do so.
Fiduciary Duty Partners share a common fiduciary duty to act in the best interest of the partnership. At times, this duty has been construed as a duty to act in the best interest of other partners. The fiduciary duty is generally to avoid self-dealing and not appropriate business opportunity for ones personal benefit or to the exclusion of other partners.
- Business Entities (Intro)
- Why is studying business entities important?
- Considerations When Forming a Business Entity
- Holistic (Detailed) Overview of Setting Up a Business Entity
- What are Business Entities?
- What is a Closely-held vs Publicly-held Business?
What are the main types of business entity?
- What are the primary characteristics of business entities?
- What is Creation of a business entity?
- Where to Form a Business
- Incorporating in Delaware
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- Creating a Company Offshore
- Promoter Liability
- De Jure Corporation
- Ultra Vires
- Brassplate Company
- What is Maintenance of a business entity?
- What is Continuity of a business entity?
- Business Continuity Planning
- Buy Sell Agreements
- Shotgun Clause
- Winding Up
- Dissolving a Foreign Qualification
- What is the Ownership structure of a business entity?
- Joint Stock Company
- Parent Company
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- Wholly-Owned Subsidiary
- State-Owned Enterprise
- Mutual Company
- What is Control of a business entity?
- What is Personal liability of owners of a business entity?
- Entity Theory
- Piercing the Corporate Veil
- What is Compensation of business owners?
- What is Taxation of a business entity?
- What is Sales & Use tax?
- What are payroll and self-employment taxes?
- What are the major characteristics of a Sole proprietorship?
- Uniform Partnership Act
- Uniform Limited Partnership Act
- Partnership Agreement
- At-Will Partnerships
- Responsibilities of Partners to the Partnership
- Silent Partner
- Funding the Partnership
- How are Partners Compensated
- Splitting Equity in an Industrial Partnership
- Terminating the Partnership
- Types of Partnerships
- What are the main characteristics of a General partnership?
- Tort Liability of General Partner
- What are the main characteristics of a Joint venture?
- What are the main characteristics of a Limited partnership?
- Family Limited Partnership
- Master Limited Partnership
- What are the main characteristics of a Limited liability partnership?
- What are the main characteristics of a Limited liability company?
- Forming an LLC
- Articles of Organization
- Operating Agreement or LLC Agreement
- Why You Need an LLC Agreement
- LLC Compensation of Members
- LLC Taxation
- Converting to an LLC
- What are the main characteristics of a Corporation
- Articles of Incorporation
- What to include in the Articles of Incorporation
- Corporate Bylaws
- Exiting the Corporation
- Dissenter's Rights
- What are the requirements to be an S Corporation?
- Non-Profit Organization
- NonProfit Business Entities
- Private Foundation
- A Detailed Explanation of the Sole Proprietorship
- Taxation of Sole Proprietorship
- A Detailed Explanation of the General Partnership
- 50/50 Partnerships: Never a Good Idea
- Publicly-Traded Partnerships
- A Detailed Explanation of the Limited Liability Company
- A Detailed Explanation of the Corporation
- Keepwell Agreement (Letter of Comfort)
- Personal Service Corporation Definition
- A Detailed Explanation of the Non-Profit Entity
- Public Limited Company (UK)