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BUSINESS
LITIGATION PRIMER |
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Partnerships and Joint Ventures A ``partnership'' is an association of two or more
persons to carry on a business, as owners, for profit, regardless of whether
the persons intend to create a partnership or whether the association is
called a ``partnership,'' ``joint venture,'' or other name. A partnership may
be created only under the Texas partnership statutes or under similar
statutes of other jurisdictions. An association or entity created under
another set of statutes is not a partnership. Until January 1, 1999, the expired Texas Uniform
Partnership Act (TUPA), for partnerships formed before January 1, 1994,
recognized a non-partnership entity called an ``association.'' An entity was
an association if (1) the word ``associates'' or ``association'' was part of
and consistently used in the entity's name; (2) the entity's assumed name
certificate contained a statement to the effect that the association intended
not to be governed by TUPA; and (3) the business the entity transacted was
wholly or partly activity in which corporations may not engage The term ``partnership,'' applied broadly, encompasses
the general partnership, first recognized at common law, and the limited
partnership, a creation of statute. This chapter focuses on partner liability
for general partnerships. A special subcategory of both types of
partnerships, know as ``registered limited liability partnerships,'' or
``LLPs,'' was created by statutes enacted in 1991. The registered limited
liability partnership is not a separate category of entity, but rather a type
of general partnership. A registered limited liability partnership may be
created from either a general or limited partnership. Registration as a
limited liability partnership does not change a general partnership into a
limited partnership or vice versa. Registration of a partnership as a limited
liability partnership simply protects individual partners from tort liability
for certain acts or omissions of other partners. Any person may be a partner, provided that the person
does not otherwise lack legal capacity. The term ``person'' includes
individuals, corporations, business trusts, estates, trusts, custodians,
trustees, executors, administrators, nominees, other partnerships,
associations, limited liability companies, governments, governmental
subdivisions, agencies or instrumentalities, and any other legal or
commercial entities in their own or in their representative capacities There are statutory rules and factors for determining
whether an entity will be treated as a partnership. The first and most
important rule is that the existence of a partnership is measured by the
conduct of the purported partners among or between themselves. In other
words, a person who does not qualify as a partner in a partnership may not be
treated by a third person as if he or she actually were a partner. If a third
person has been misled by false representations of a partnership, or by false
representations as to some particular person's status as a member of an
established partnership, these representations to third parties do not create
an actual partnership or make the person an actual partner. The liability, if
any, for losses created by such representations is determined by general
principles of law, such as fraud, estoppel, and so forth. Partnership law,
per se, does not measure this liability. |
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