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What Is the Uniform Partnership Act (UPA)?
Let me explain the Uniform Partnership Act (UPA) directly to you: it's a statute that governs business partnerships in several U.S. states, including rules for what happens when a partner leaves and the partnership dissolves. Over time, amendments have been made, and people sometimes call the revised versions the Revised Uniform Partnership Act (RUPA), but I'll stick to the facts here.
Key Takeaways
You should know that the UPA sets the rules for business partnerships in specific states, with about 44 states and districts following it. It covers only general partnerships and limited liability partnerships (LLPs), not limited partnerships. Importantly, it lets a partnership continue if the majority agrees within 90 days after a partner exits, avoiding instant dissolution. The act also handles how partnerships form, manage liabilities, assets, and fiduciary duties.
Understanding the Uniform Partnership Act (UPA)
The UPA functions as a law passed by legislators, not agencies, and was first created in 1914 by the National Conference of Commissioners on Uniform State Laws (NCCUSL). As of now, 44 states and districts, including D.C., Puerto Rico, and the U.S. Virgin Islands, use it. Remember, it applies strictly to general and limited liability partnerships, not LPs.
Its main purpose is to guide business relationships, especially in small or informal partnerships where detailed agreements might not exist. I want you to understand that it covers partnership creation, partners' fiduciary duties, and how assets and liabilities are defined.
Uniform Partnership Act Details
One critical part is that if a partner leaves, the remaining partners can vote to keep going within 90 days, which stops the partnership from dissolving right away. The act has been updated since 1914, with the last major revision in 1997 and clarifications in 2011 and 2013.
There are twelve articles in the act. The first covers general provisions, definitions, and the partnership agreement's scope. Article II deals with formation and status. Article III handles property transfers, statements, and partner liabilities for debts.
Article IV outlines partners' responsibilities to each other, including management, distributions, loyalty, care, and good faith. Article V enforces the 'pick your partner' principle. Article VI lists dissociation events, Article VII covers buying out a dissociated partner's interest, and Article VIII manages dissolution and winding up.
Article IX focuses on LLPs, Article X on mergers and conversions, Article XI on foreign LLPs, and Article XII on miscellaneous items.
Uniform Partnership Act 1997 Revision
In 1996, amendments for limited liability partnerships were added and folded into the UPA. Beyond the 90-day continuation rule, it allows assigning a partner's interests as separate liabilities, limiting creditors to claims against that partner, not the whole partnership.
It sets non-negotiable standards for good faith dealings among partners. The act also defines rules for conversions, mergers, and provides liability protection for general partners in LLPs.
Uniform Partnership Act (UPA) vs. Revised Uniform Partnership Act (RUPA)
The original UPA dates to 1914, revised in 1994 as RUPA, then again in 1996 and 1997. The 1997 version is the official one, amended in 2011 and 2013. RUPA is an informal term that can confuse things, so stick to UPA (1997) for clarity.
Special Considerations
The NCCUSL, or Uniform Law Commission, works to standardize state laws. It's a nonprofit with over 300 commissioners from states and territories, all bar members like lawyers, professors, or judges. They draft uniform laws, but states decide whether to adopt them. The UPA is one example, alongside others like the Uniform Trust Code or Uniform Probate Code.
Frequently Asked Questions
You might wonder about the difference between UPA and RUPA: UPA started in 1914, got revised in 1994 as RUPA, and finalized in 1997, which is the current version.
Under the UPA, a 'person' includes individuals, partnerships, LLCs, corporations, and other associations.
Partnerships can have a fixed duration or not; the agreement specifies it, and without one, it lasts until partners decide to dissolve.
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