The Uniform Partnership Act (UPA) establishes the governing framework for business partnerships in various U.S. states. It also outlines the regulations for partnership dissolution when a partner dissociates. This act has been revised multiple times, evolving into what is sometimes known as the Revised Uniform Partnership Act (RUPA).
Key Highlights
- The Uniform Partnership Act (UPA) is the rule for business partnerships in multiple U.S. states.
- Around 44 states and districts adhere to the UPA guidelines.
- The UPA is relevant only to general partnerships and limited liability partnerships (LLPs).
- A partnership can choose to continue within 90 days after one partner leaves, preventing immediate dissolution.
- The UPA also regulates partnership creation, liabilities, assets, and fiduciary duties.
A Deep Dive into the Uniform Partnership Act (UPA)
Implemented as a statute, the Uniform Partnership Act was initially created in 1914 by the National Conference of Commissioners on Uniform State Laws (NCCUSL). Presently, the act is adhered to in 44 states and districts in the U.S., including the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The UPA focuses solely on general liabilities and limited liability partnerships (LLPs), excluding limited partnerships (LPs).
The major objective of the UPA is to provide structured governance for various business relationships, often for smaller setups lacking detailed agreements. The act governs the formation of partnerships, fiduciary duties among partners, and specifies the treatment of partnership assets and liabilities.
Detailed Overview of the Uniform Partnership Act
One essential aspect of the UPA states that if a partner leaves the business, the remaining partners can agree to continue the partnership within 90 days. This policy saves partnerships from dissolution following a partner’s exit.
Initially drafted in 1914, the UPA has undergone numerous revisions, the most recent being in 1997. Further amendments were added in 2011 and 2013 to offer better clarity. The NCCUSL, founded in 1892, has proposed more than 250 uniform acts addressing various legislative domains, from business and real estate to unfair trade practices.
The Act comprises twelve articles, each with a precise function:
- Article I: Provides definitions, general provisions, and the partnership agreement’s scope.
- Article II: Rules concerning the formation and status of the partnership.
- Article III: Guidelines for transferring partnership property, partner liabilities, and obligations.
- Article IV: Covers partners’ responsibilities, management, distribution rights, and good faith dealings.
- Article V: Implements the ‘pick your partner’ principle.
- Article VI: Outlines events causing dissociation of a partner.
- Article VII: Rules for buying a dissociated partner’s interest.
- Article VIII: Instructions for dissolving and winding up the partnership.
- Article IX: Principal provisions related to LLPs.
- Article X: Provisions for mergers, conversions, and domestication transactions.
- Article XI: Treats foreign LLPs.
- Article XII: Includes miscellaneous provisions.
Revisions and Features of the Uniform Partnership Act 1997
In 1996, Limited Liability Partnership Amendments were added to the UPA. In addition to the 90-day dissolution rule, the UPA includes:
- †Assigning separate liabilities for partners relative to the partnership property, preventing creditors from contesting the aggregate assets.
- Notable duties in good faith among partners that cannot be nullified by partnership agreement.
- Standards for conversions and mergers, like shifting from a partnership to a limited partnership.
- Offering limited liability protection for general partners in an LLP.
Distinguishing UPA from RUPA
Initiated in 1914, the UPA was significantly revised in 1994, leading to the Revised Uniform Partnership Act (RUPA). Subsequent updates in 1996 and 1997 established what is today known as the Uniform Partnership Act (1997).
Special Considerations of the UPA
The NCCUSL or Uniform Law Commission (ULC) plays a crucial role in promoting uniformity among state laws in the USA. Comprising over 300 commissioners—including lawyers, professors, and judges—the ULC drafts and proposes such uniform laws for state considerations. Examples include the Uniform Trust Code, Uniform Probate Code, and Uniform Transfers to Minors Act, among others.
Key Differences: UPA vs. RUPA
The Uniform Partnership Act was first established in 1914 and saw revisions known as the Revised UPA in 1994. Later amendments in 1996 culminated in the Uniform Partnership Act (1997).
Definition of a ‘Person’ Under UPA
Under the UPA, a ‘person’ may consist of individuals, partnerships, LLCs, corporations, and other associations.
Fixed Duration of Partnerships
Partnerships can be either for a fixed duration governed by a partnership agreement or continue until the partners agree on dissolution.
Related Terms: business law, entrepreneurship, fiduciary duties, limited partnerships, UNIFORM CONSUMER CREDIT CODE.
References
- Uniform Law Commission. “1997 Partnership Act”.
- Upcounsel. “Uniform Partnership Act: Everything You Need to Know”.
- Uniform Law Commission. “National Conference of Commissioners on Uniform State Laws”, Page 1.
- Justia U.S. Law. “Chapter 1. Uniform Partnership Act”.
