University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

238

Pages:

2
Author:

bratrochanter

This text explores aspects of liability, indemnification, and partner obligations in limited liability partnerships (LLPs) and general partnerships, including illustrative cases. Key points include: 1. Indemnification and Contribution: o Partners in a general partnership are jointly and severally liable for partnership obligations, meaning that a creditor can seek compensation from both partnership assets and individual partners’ assets if partnership resources are insufficient. If one partner covers a debt, they can seek reimbursement (indemnification) from other partners for their proportional shares of liability. 2. LLP Liability Structure: o In LLPs, the LLP itself, rather than individual partners, is liable for contractual obligations. For torts, the LLP and the partner who committed the tort are liable, but other partners who were uninvolved are not held personally liable. This structure shields partners from personal liability for business obligations. 3. Case Study: Ederer v. Gursky: o This New York case clarified that while LLP statutes protect partners from liability to third-party creditors, they do not shield partners from liability to each other for breaches of the partnership agreement or fiduciary duties. This means partners remain accountable to one another, particularly in financial matters within the partnership. 4. Liability for Torts and Crimes: o Under partnership law, partnerships and partners are liable for torts committed within the ordinary course of business. While intentional torts are typically outside a partner's implied authority, exceptions exist if the tort is related to the business. LLPs, however, protect innocent partners from the malpractice liabilities of other partners. 5. Ethical and Legal Considerations in LLPs: o The text raises ethical issues surrounding LLP structures, particularly in limiting partners' liability to third parties, which could potentially leave creditors uncompensated if LLP assets are insufficient. It explores various perspectives on the ethical implications of limited liability, especially concerning partners’ duties to clients and creditors. 6. Real-World Partnership Scenarios: o The scenarios presented involve issues such as conflicts over personal and partnership assets, improper use of partnership resources, unauthorized business decisions, and ethical dilemmas in financial dealings. These cases highlight the need for well-drafted partnership agreements that define responsibilities, authority, and processes for managing liabilities and resolving conflicts among partners. Overall, the text underscores the importance of partnership agreements in clarifying partner rights and obligations, while also addressing how LLP statutes interact with these agreements to protect or hold partners accountable, depending on the circumstances.