Uniform Partnership Act (UPA)
Candlefocus EditorThe UPA addresses important issues in partnerships such as who is liable and the extent to which a partner is liable, how to create a new partnership, setting up the fiduciary obligations of partners to each other, how to create and manage partnership assets, how assets and liabilities are distributed between partners, and how to dissolve a partnership.
Under the UPA, a partnership is formed when two or more persons join together to carry on as a co-owners of a business for profit, and share in both the profits and the losses. To create a partnership under the UPA, the parties must execute a written partnership agreement that outlines the governance of the partnership such as the name, purpose, powers and management of the partnerships, the percentage of interests each partner owns, and the rights and responsibilities of the partners.
Additionally, the UPA imposes various fiduciary duties upon each partner. These include the duty to act in good faith and in the best interest of the partnership, to provide full disclosure and promptness of any financial information to the other partners necessary to make management decisions, to refrain from engaging in conduct that may be detrimental to the partnership, and to refrain from competing with the partnership. Each partner is likewise obligated to account to the other partners for any benefit derived through the use of partnership property or information.
The UPA also outlines how a partnership is to be dissolved, which includes the right of the majority of partners to force a dissolution or require a buy-out of dissenting partners. This helps to ensure that partnership disputes are resolved fairly and efficiently.
The Uniform Partnership Act is a significant benefit to businesses, providing them with a coherent set of regulatory and legal standards. In addition, the UPA offers a greater degree of reliability when compared to judicially created common law principles. This is because the UPA provides more detailed guidance than common law. While the UPA does not meet the specific needs of all partnerships, it does provide a necessary minimum standard of operation that governs the day to day operations of most partnerships, regardless of the state in which the partnership is located.