79. Death of a Partner. The death of a partner terminates the partnership. The remaining partners may agree to continue the partnership, which amounts to the formation of a new partnership. In case of death of one partner, title to the partnership property is in the surviving partners. They must collect the assets and may sue on firm obligations. They cannot, as survivors, continue the business further than is necessary to wind up the affairs of the partnership. They must first pay all firm obligations, and distribute the proceeds among themselves and the representatives of the deceased partner.
80. Survivorship. Survivorship is the term applied to the relation to the partnership of the remaining partners, after a dissolution. The partners remaining after a dissolution are known as survivors. The title to the partnership property vests in the survivors, and they must collect the assets, pay the liabilities and distribute the proceeds among themselves and the representatives of the other partners. By statute, in some states, surviving partners are permitted to purchase firm assets at a fair appraised valuation. Surviving partners have the right to retain possession of the partnership property, and to do those things necessary to wind up the affairs of the partnership. They are not permitted to divide any firm assets among themselves, until all firm debts are paid. If A, B and C are partners in the grocery business, and C dies, the title to the property rests in A and B, who have the authority to sue for the debts owing, and may be sued for the debts owed by the firm. They have the right to draw checks on the firm checking account, but no right to incur further obligations. In the absence of special statute, they have no right to purchase the business for themselves, and if they choose to continue it, they do so at their own individual risk, and must account for all profits made.
81. Dissolution of Partnerships. A partnership may be dissolved by lapse of time. If a partnership is entered into under an express agreement that it is to subsist for a certain length of time, lapse of the stipulated period works a dissolution. A partnership may be dissolved by mutual agreement of the partners. A partnership may also be dissolved by any change of membership, whether it be the withdrawal of a member, admission of a new member, or death of a member. Bankruptcy of a member, or bankruptcy of the partnership itself, works a dissolution. If one party violates his duties as a partner, or if for any reason, the partnership ceases as a result of a decree of court, there is a dissolution.
82. Notice of Dissolution. Persons who deal with a partnership through one of the partners, or through an authorized agent, have the right to assume that the partnership will continue to exist. If a partnership is dissolved by lapse of time, by mutual agreement, or by withdrawal or entrance of another partner, notice must be given of such change, to protect the members of the former partnership against contracts of third persons, made subsequently to the dissolution. Business people, who have had former dealings with the partnership, must receive actual notice. These notices may be sent by mail, or delivered orally, or in writing. A public announcement in a newspaper is sufficient to protect former partners against contracts subsequently made by persons who have not previously dealt with the firm. In case of dissolution of a partnership by operation of law, such as by death of a member, bankruptcy, or decree of court, no notice is necessary. The act which causes the dissolution is deemed to be notice to everyone.
83. Distribution of Firm and Individual Assets after Dissolution. As a general rule, firm creditors are entitled to firm assets. The balance goes to individual partners. Individual creditors are entitled to individual assets. The balance goes to firm creditors. If, however, the partnership is insolvent as a firm, and there is no living solvent partner, in the distribution of firm assets, firm creditors are treated the same as individual creditors. Firm real estate may be subjected by firm creditors to the payment of their claims. After firm creditors are satisfied, firm real estate is treated as the real estate of the individual members, and descends to the heirs of the partners, and does not pass as personal property to their personal representatives.
84. Limited Partnership. Most states by statute permit limited partnerships to be formed. In general, a limited partnership differs from an ordinary partnership in that some of the members, called special partners, are not individually liable for the obligations of the partnership. The statutes of the different states differ somewhat as to the purposes for which a limited partnership may be formed. In general, however, a limited partnership may be formed to carry on any business except banking and insurance. A limited partnership must have at least one general partner who is individually liable for the obligations of the partnership. The special partners contribute certain fixed sums, which must be paid before the partnership starts business, and beyond which the special partners are not liable. Generally, special partners are not permitted to manage the business. A limited partnership is generally required to file with a public officer a certificate showing its membership, the purpose for which it is organized, the number of shares held by special partners, the assets, the total capital, and the names of the general partners. The purpose of a limited partnership is to enable persons to invest a certain amount of capital in an enterprise without being individually responsible beyond the amount actually invested. Limited partnerships are now largely supplanted by corporations.
85. Form of Partnership Agreement.
Articles of agreement entered into at Chicago, Ill., this ... day of ... 1909, by and between A, hereinafter designated as the first party, and B, hereinafter designated as the second party, both of Chicago, Ill. Witnesseth that: