Provisions Which Would Apply in the Absence of a Partnership Agreement

When starting a partnership, it is always recommended to draft a partnership agreement that outlines the terms and conditions of the partnership. However, if a written agreement does not exist, there are provisions that would apply in the absence of a partnership agreement.

Default Provisions

Default provisions are the default rules that will apply in the absence of a partnership agreement. These provisions are outlined in the Uniform Partnership Act (UPA) and the Revised Uniform Partnership Act (RUPA), depending on the state in which the partnership operates.

Some of the default provisions that would apply include:

1. Profit and Loss Sharing

In the absence of a partnership agreement, profits and losses are shared equally among the partners.

2. Management and Control

Each partner is considered an agent of the partnership and has equal rights to participate in the management and control of the business.

3. Capital Contributions

Unless otherwise specified, partners have an equal obligation to contribute capital to the partnership.

4. Dissolution

Partnership can be dissolved voluntarily or involuntarily. In case of voluntary dissolution, all partners must agree to dissolve the partnership. In case of involuntary dissolution, it can occur due to the death, incapacity, or bankruptcy of a partner.

5. Partnership Property

In the absence of an agreement, partnership property belongs to the partnership as a whole, and no partner has the right to sell or assign it.

6. Partner Liability

In the absence of an agreement, partners have unlimited liability for the debts and liabilities of the partnership.

Conclusion

While it is always advisable to draft a partnership agreement, not having one does not mean that a partnership cannot function. Default provisions outlined in the UPA or RUPA will apply in the absence of an agreement, and partners can use these provisions to manage their partnership. However, it is always best to have a written agreement that outlines the specific terms and conditions of the partnership and protects the interests of all partners.