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Partnerships

  1. A general partnership is an association of two or more persons to carry on as co-owners a business for profit, whether or not the persons intend to create a partnership. All partners are personally liable for the obligations of the partnership and have authority to enter into contracts on behalf of the partnership. ORS Chapter 67 governs general partnerships. A general partnership does not have to be registered with the Secretary of State, Corporation Division unless it uses an assumed business name. However, if the name of each general partner is not conspicuously disclosed to the public, the business name must be registered with Business Registry as an assumed business name. In addition, city and county codes and ordinances may require businesses (including individual partners or the partnership) to obtain a business license before starting to do business in a locality.

  2. As a starting point, unless the partnership agreement provides for a particular issue, ORS Chapter 67 provides a default rule. However, the partnership agreement may not:

    • unreasonably restrict the right of a partner’s access to books and records;
    • eliminate a partner’s duty of loyalty;
    • unreasonably reduce a partner’s duty of care;
    • eliminate a partner’s obligation of good faith and fair dealing;
    • vary the power to dissociate (withdraw) as a partner;
    • vary the right of a court to expel a partner;
    • vary the requirement to wind up the partnership business under specified circumstances;
    • choose a governing law not permitted by ORS Chapter 67; or restrict the rights of third parties.

    The partnership agreement must carefully spell out the arrangement between the partners for the allocation of profits and losses, and specify the nature and degree of control to be exercised by each partner. The "default" provisions under the Oregon statutes provide for equal sharing among the partners of partnership profits and losses, reimbursements of partners for payments made in the ordinary course of the partnership’s business or for the preservation of partnership business or property, equal rights of partners with respect to the management and conduct of the partnership business, and the admission of new partners only with the consent of all partners. However, these default provisions can be modified by the partnership agreement. Other provisions to be included in the partnership agreement include accounting provisions; provisions governing compensation for working partners; provisions for distributing profits, including, any drawing accounts and procedures; buy-sell provisions applicable on the withdrawal, disability, or death of a partner; provisions restricting the transfer of partnership interests; dissolution provisions and covenants not to compete triggered by withdrawal by a partner.

  3. Potentially, yes. As a general rule, each partner is an agent of the partnership for the purpose of the partnership’s business. A partner has the authority to act on behalf of his or her partners with respect to partnership matters. With respect to "actual" authority, a third party is bound by a limitation of a partner’s authority when the person has actual knowledge or ahs received notification that the partner lacks authority. In the absence of express authority, a partner’s acts may bind the partnership if the partner has implied or apparent authority to act. Thus a partner may be found liable for the negligent acts of another partner when a third person relies on the other partner and reasonably believes that the other partner is acting within the normal scope of the partnership’s business.

  4. Oregon law provides that a partnership will be liable for loss or injury caused to a person, including any partner, as a result of a wrongful act or omission of a partner acting in the ordinary course of business of the partnership or with the authority of the partnership. Moreover, the partners will be jointly and severally liable for all partnership obligations. However, judgment creditors will be required to exhaust partnership assets before enforcing a judgment against a partner’s separate assets. Further, an incoming partner is not personally liable for partnership obligations incurred before such partner’s admission as a partner.

  5. A partner owes the duties of loyalty and care to the partnership and other partners. The duty of loyalty includes the following:

    • accounting to the partnership and holding for it of any property, profits, or benefits derived by the partner in the conduct and winding up of the partnership’s business or derived from a use by the partner of partnership property (including the appropriation of a partnership opportunity);
    • refraining from dealing with the partnership in a manner that is adverse to the partnership; and
    • refraining from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.

  6. Oregon law provides for the buyout of a dissociated partner’s interest in the partnership when the partner’s dissociation does not result in a dissolution and winding up of the partnership business. Thus, the remaining partners have a right to continue the business, and the dissociated partner will have the right to be paid the "fair value" of his or her partnership interest. The buyout price of the dissociated partner’s interest is an amount equal to the fair value of the dissociated partner’s interest in the partnership on the date of the dissociation, without any discount for minority interest. However, any damages for wrongful dissociation, as well as other amounts owned by the dissociated partner to the partnership, must be offset against the buyout price.


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