Key Takeaways

  • The Uniform Partnership Act (UPA) standardizes rules for general partnerships across many U.S. states.
  • RUPA (Revised UPA) clarifies partnership as a separate legal entity and modernizes rules around partner duties and dissociation.
  • The UPA covers essential partnership issues like fiduciary duties, liability, and property ownership.
  • Differences between UPA and RUPA include how dissolution is triggered and the primacy of partnership agreements under RUPA.
  • Understanding default rules vs. customizable partnership terms is critical for compliance.
  • Some states still use older versions of the UPA, impacting how disputes or dissolutions are handled.

The Uniform Partnership Act (UPA) governs business relationships in various U.S. states. It also affords parameters in the governance of partnership dissolutions if a partner decides to leave a business. It’s also called a uniform act, and it functions in the same manner as a statute (a rule passed via a legislative body instead of a government agency or court).

The act has undergone various amendments since it was introduced in 1914 via the National Conference of Commissions on Uniform State laws. It was adopted by all states except for Louisiana, a state which has a history of establishing its own laws. The Uniform Partnership Act of 1997 is a modern form and was later adopted by all states except Louisiana.

Moreover, it creates a partnership as a distinct legal entity, and not simply as a collection of partners. The most recent amendments were introduced in 2011 and 2013 via the Harmonization of Business Entity Acts. Such amendments clarify the language of the UPA (1997) with the language of other provisions in other uniform acts while making additional updates to conform to modern times. The primary aim of the UPA is informal and small partnerships.

  • Note: Large partnerships usually have agreements in place that address and modify many provisions of a contract.

Under certain state laws, a partnership can be dissolved if a member decides to leave. The basic goal of the UPA is to afford partnerships stability in cases where continuous agreements are in place. The UPA also stipulates that there are dissociations or departures that do not end up in dissolution. Certain issues pertaining to the UPA include the following:

  • Title regarding partnership property
  • Partners’ joint and several liabilities
  • Fiduciary duties of all partners

Benefits of UPA

The UPA permits that the majority interests of remaining partners could agree to maintain a partnership within 90 days of the dissociation date. The UPA also saves partnerships from dissolution following partner dissociations. Also, it governs partnership creation, including partnership assets and fiduciary duties.

UPA History

The UPA was first drafted in 1914, but it has undergone multiple revisions. It has also been amended and revised. Most notably, the 1994 revision was known as the Revised Uniform Partnership Act (RUPA), which has often caused some confusion with additional amendments in 1996 and 1997. Therefore, all changes are indicated by the years of its enactment. Around 37 states in the United States have adopted some version of the Act.

RUPA Basics

RUPA is a statute dictating how the partnerships should be organized and created, including the duties and rights of all partners involved. It has also been adopted by nearly all states. RUPA also gives partners more discretion in assessing how a partnership operates than the UPA by giving the partnership agreement in question to be the primary authority over all the partners.

RUPA allows default rules regarding provisions not included in a partnership agreement. RUPA also pertains to general partnerships and Limited Liability Partnerships (LLPs), but it does not include limited partnerships (LPs). LPs are not considered genuine partnerships under the RUPA, which is why they do not fall under the guidelines of RUPA. RUPA also made various changes to old rules that govern partnerships.

It also established what’s called partner dissociation, allowing partners to withdraw from a partnership without causing the dissolution of the partnership itself. RUPA states that a partnership agreement (unlike partnership law) establishes the duties and rights of partners.

UPA Essentials

The UPA was combined with the Limited Liability Partnership Amendments Act in 1996. One of the most notable changes occurred in the 1997 amendments pertaining to partnership disassociation that does not trigger a dissolution unless the person with a majority stake agrees to the dissolvement of the partnership.

The partnership will continue unless a partner acts to get rid of the partnership within 90 days of the dissociation date. The revised act also has the following attributes:

  • It establishes partnerships as entities between partner assets and partners and not aggregates. A partnership can sue or be sued under the name of a partnership and may obtain property in the partnership’s name.
  • A partnership interest designated as separate liabilities and rights associated with the participation in a new partnership. This means that partners cannot have interests in certain properties of the partnership. The creditors of a partner may only go after the partner and not the property that the partnership owns.
  • RUPA details the care and loyalties of the partners, including information about obligations and rights in regard to fair deals and good faith.

Key Differences Between UPA and RUPA

The UPA and RUPA differ in significant ways that affect how partnerships are formed, operated, and dissolved:

  • Entity vs. Aggregate Theory: The UPA initially treated partnerships as an aggregate of individuals, while RUPA views partnerships as a separate legal entity.
  • Continuity of the Partnership: Under UPA, the withdrawal of a partner typically dissolved the partnership unless otherwise agreed. RUPA allows a partnership to continue after dissociation, minimizing disruption.
  • Fiduciary Duties and Good Faith: RUPA codifies partner duties such as loyalty, care, and good faith, and permits modification of some duties by agreement, unlike the more rigid UPA structure.
  • Primacy of Agreement: RUPA gives the partnership agreement precedence over statutory defaults, whereas UPA relies more heavily on default statutory rules.

States That Use the Uniform Partnership Act

While RUPA has become the prevailing model in most jurisdictions, some states continue to use the original or a modified version of the 1914 UPA. Louisiana, for example, has not adopted either version due to its civil law tradition. Businesses should verify which act their state follows, as differences in fiduciary obligations, dissolution procedures, and partner authority can significantly affect legal outcomes.

Default Rules vs. Partnership Agreements

The Uniform Partnership Act provides default rules that apply when a written partnership agreement is absent or incomplete. These rules address:

  • Profit Sharing: Equal division among partners unless agreed otherwise.
  • Loss Allocation: Typically follows profit-sharing ratios.
  • Decision-Making: Most decisions require majority approval; extraordinary decisions may require unanimous consent.
  • Duties and Authority: Prescribed by the UPA unless overridden in an agreement.

Drafting a comprehensive partnership agreement allows partners to customize these provisions to fit their business model and reduce future disputes.

Limitations and Criticisms of the UPA

Despite its utility, the UPA has faced several criticisms:

  • Inflexibility: The default rules may not suit modern or complex partnerships.
  • Dissolution Issues: Under the original UPA, any partner’s withdrawal typically triggered dissolution, which was disruptive to businesses.
  • Ambiguity in Duties: Earlier versions lacked clarity regarding fiduciary responsibilities, leaving room for legal disputes.
  • Delayed Modernization: Some states took decades to adopt RUPA, resulting in inconsistency and confusion among multi-state partnerships.

These issues contributed to the development of RUPA, which offers more flexible and business-friendly regulations.

When to Consult an Attorney About UPA

Legal advice is especially important if:

  • You're drafting or modifying a partnership agreement.
  • A partner wants to leave or dissolve the business.
  • Your business operates in multiple states that may follow different versions of the Act.
  • You're unsure about liability exposure or fiduciary obligations.

An experienced business attorney can help ensure compliance and tailor your partnership structure to your specific needs. You can find a qualified attorney through UpCounsel’s marketplace.

Frequently Asked Questions

  1. What is the purpose of the Uniform Partnership Act?
    The UPA standardizes laws governing general partnerships, addressing formation, partner duties, liability, and dissolution.
  2. What’s the difference between UPA and RUPA?
    RUPA treats partnerships as legal entities and allows them to continue after a partner dissociates, unlike the original UPA which often triggered dissolution.
  3. Can a partnership agreement override the UPA?
    Yes. Both UPA and especially RUPA allow partners to customize many default rules through written agreements.
  4. Which states have adopted RUPA?
    Most states have adopted some version of RUPA. Louisiana remains the only state that has not adopted the UPA or RUPA due to its civil law system.
  5. Does the UPA apply to Limited Partnerships (LPs)?
    No. LPs are governed by the Uniform Limited Partnership Act (ULPA), not the UPA or RUPA. The UPA applies to general partnerships and LLPs.

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