Academic journal article Fordham Journal of Corporate & Financial Law

PARTNERS WITHOUT PARTNERS: THE LEGAL STATUS OF SINGLE PERSON PARTNERSHIPS[dagger]

Academic journal article Fordham Journal of Corporate & Financial Law

PARTNERS WITHOUT PARTNERS: THE LEGAL STATUS OF SINGLE PERSON PARTNERSHIPS[dagger]

Article excerpt

ABSTRACT

Is it possible to have a partnership consisting of one person, a partner without a partner? The question will arise when all but one of the members leaves a partnership. The Revised Uniform Partnership Act attempts to give greater stability to partnerships by narrowing the circumstances under which dissolutions occur, but it also fails to address the fundamental and important question of whether a partnership may be continued by a sole surviving partner.

In this Article, we explore the issues raised by a single person partnership. In particular, we address the central issue of whether the departure of the penultimate partner from a term partnership triggers a winding up of the business or whether the statutory buyout is called into play. We have structured much of the discussion as a dialog between the authors. This allows us both to focus on the precise issues under RUPA presented by a single person partnership and to probe the competing arguments on whether such a partnership may exist. Although we have differing views on whether a single person partnership is possible under RUPA, we conclude on common ground that the buyout is appropriate. We also unite in a call for statutory clarification.

Introduction

The labels "partner" and "partnership" enjoy a special place in our culture and in our law.1 Literature is replete with usages of the terms, almost always in a positive light.2 In recent years, the terminology of partnerships has been used in a wide variety of settings to describe relationships of equality, including domestic partnerships, community partnerships, government-industry partnerships, and virtually any relationship in which goals are shared and at least some measure of mutual participation is the norm. As Webster's puts it, "partner" is "one who shares in the possession or enjoyment of something with another," or, more broadly, "one of two or more persons who play together in a game against an opposing side."3

In law, although "partnership" is a specific term defined in the partnership statutes, the appeal of "partner" and "partnership" classifications are sufficiently strong that individuals associated in firms that clearly are not partnerships nevertheless describe their firms as partnerships and their colleagues as partners.4 Members of professional associations such as law firms commonly refer to colleagues as "partners" even though "shareholders" or "members" would be more accurate terminology for the large number of firms organized as professional corporations or limited liability companies, organizational forms quite distinct from partnerships. Moreover, a simple Google search will reveal that countless corporations use the term "partners" in their names5 even though the presentation of a corporate entity as "XYZ Partners, Inc.," for example, signals a certain confusion of identity. LLCs are no less attracted than corporations to the appeal of partnership terminology.6

Indeed, considering the years of experience the law has had to refine concepts underlying partnerships, it is somewhat surprising to encounter a rather straightforward question on which the contemporary law provides no clear answer: Is it possible to have a partnership consisting of one person - a partner without a partner? The question will arise for any two person partnership when one of the partners leaves the partnership. It will also arise whenever a number of partners leave with only one partner remaining. When only one partner remains, can the resulting business or firm be described as an "association" or a "partnership?" On the most fundamental level, is it not the case that a partnership is a relationship between or among individuals?

Traditional partnership law rendered the partnership a very fragile relationship, with the consequence that any change in the membership dissolved the partnership.7 Whether the partnership consisted of two or two hundred partners, the departure of a single partner caused the dissolution of the partnership. …

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