Under Colorado law, partnerships are controlled by the Revised Uniform Partnership Act of 1997 (“R.U.P.A.”). R.U.P.A. defines a partnership as “the association of several persons to keep as co-proprietors a company to make money.” R.U.P.A. § 101(6) (emphasis added). During its most simplistic sense, the word person describes a person, R.U.P.A. expands that term to mean a “corporation, business trust, estate, trust, partnership, association, partnership, government, governmental subdivision, agency, or instrumentality, or other legal or commercial entity.” Id. at § 101(10).
Thus, the guidelines governing partnerships in Colorado are very relaxed regarding who and/or so what can form a partnership. In addition, R.U.P.A doesn’t need the parties subjectively intend to create a partnership or draft a partnership agreement the only real requirement regarding partnership formation would be that the parties intend to keep as co-proprietors a company to make money.
That being stated, like a entrepreneur or entrepreneur, it is crucial that you are taking safeguards when developing business relationships along with other parties, especially thinking about the responsibilities, legal rights and potential liabilities that the partnership entails. Getting a company partnership attorney craft a seem partnership agreement is essential.
Although no formal agreement is needed to create a partnership, generally, the parties to some partnership govern the actual nature of the relationship though an itemized partnership agreement. A partnership agreement enables the parties to prescribe different rules (i.e. rules that vary from individuals defined under R.U.P.A.) that govern their business model. However, R.U.P.A. § 103 enumerates certain statutory provisions which are non waivable, and therefore despite the presence of a partnership agreement, certain rules must be stuck to. For instance, your contract might not:
– unreasonably restrict the best of use of books and records…
– get rid of the duty of loyalty…
– unreasonably lessen the duty of care…
– get rid of the obligation of excellent belief and fair dealing…
– vary the ability to dissociate like a partner… except to want the notice… to stay in writing…
– vary the best of the court to expel someone…
– vary the necessity to find yourself their bond business in [certain] cases… or
– restrict [the] legal rights of organizations under [R.U.P.A.]. Id.
So, so why do partnership contracts exist? How about we partners just shake hands and permit their business model to become controlled by the statutory provisions of R.U.P.A? The reply is two-fold. First of all, a partnership agreement supplies a business with structure and therefore helps you to avoid uncertainty. Second, by defining the legal rights, responsibilities and liabilities from the partners, a partnership agreement precludes the automated use of potentially unseemly statutory law. For instance, regarding business profits, absent a provision within the partnership agreement on the contrary, profits is going to be divided equally one of the partners, no matter every individual partner’s capital contribution or effort. Id.
Similarly, unless of course mentioned otherwise within the partnership agreement, losses suffered by the company is going to be allotted one of the partners very much the same as profits. With regards to the liabilities of the organization, absent a provision within the partnership agreement on the contrary, all partners is going to be held jointly and severally liable, meaning if a person partner incurs a personal debt which she or he does not pay, the creditor may choose to collect the whole debt from the partner. Id.
Finally, regarding business decisions, absent a provision within the partnership agreement on the contrary, each partner comes with an equal say in the industry. Id. While allowing each partner with an equal say in reaching business decisions appears fair and equitable, it frequently results in disputes and may potentially result in the dissolution from the business.
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