The Virginia Uniform Partnership Act: What is it and How Will it Impact My Business?
Are you interested in starting a business with one or more business partners in Virginia? Or, have you already formed a partnership? Understanding the Virginia Uniform Partnership Act (VUPA) will help you as you run your business. Virginia is one of 37 states that has adopted the Revised Uniform Partnership Act. The VUPA governs business partnerships and regulates their formation, implementation, and dissolution. In Virginia, the VUPA covers general partnerships and limited liability partnerships (LLP), but not limited partnerships (LP). What is the Virginia Uniform Partnership Act, and how will it impact your business?
What is the Virginia Uniform Partnership Act?
The Virginia Uniform Partnership Act is a statute, or law, that defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.” The goal of passing the Uniform Partnership Act into law is to provide business owners with legal guidance when it comes to creating and managing partnerships in Virginia. The act governs how Virginia business owners can create a partnership, and it defines the fiduciary duties of the partners and the partnership. The law also clarifies partnership liabilities and assets.
How Will the VUPA Impact My Business?
Most large companies already have detailed and lengthy written agreements in place that govern any business changes. However, smaller businesses and larger businesses with loose partnership agreements may not have detailed partnership agreements. When business partners do not have a detailed agreement, the Uniform Partnership Act will govern future legal action.
Suppose you and your partner experience a conflict, and your partnership agreement fails to address that particular issue. In that case, courts will look to the Virginia Uniform Partnership Act to decide your case. Suppose you are part of a limited partnership. In that case, the Virginia Uniform Partnership Act will only govern when your conflict in your case is not regulated in the Virginia Revised Uniform Limited Partnership Act. The VUPA addresses all of the following partnership matters:
- The relationship between partners
- The duties and rights of the partners
- The retirement of a partner
- The death of a partner
- Admission of new partners
- Dissolution of the partnership
- Termination of the partnership
The VUPA and The Creation of Your Partnership
The VUPA governs the creation of your partnership agreement. Whether your partnership is general or limited, you should have a partnership agreement that governs your relationship between you and your partners and your partnership in general. When there is no partnership agreement, the VUPA will govern your relationship with your partner or partners. Specifically, the VUPA governs many different issues, including the name of your partnership.
The VUPA includes numerous requirements for the naming of partnerships. For example, your partnership’s name cannot include a limited partner’s name unless certain requirements have been met. The VUPA Also regulates your partnership agreement. When your partnership agreement does not address certain issues, the following VUPA provisions will govern. Your partnership agreement cannot do any of the following:
- Unreasonably restrict the right of one partner to access the accounting books and records of the partnership.
- Eliminate each partner’s obligation to act in good faith and engage in fair dealing, but your agreement can set forth performance standards by which to measure each partner.
- Change the power to dissociate as a partner, unless it simply requires that the partner who wishes to give notice
- Change the right of a Virginia court to expel a partner when the requirements are met.
Each Partner’s Rights and Duties
The VUPA sets forth each partner’s rights and duties. If you and your partner or partners dispute how much each partner is entitled to take from the company, the VUPA set forth a formula. Each partner is entitled to an amount equal to the “money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner’s share of the partnership losses.” Additionally, each partner is entitled to an equal share of the partnership’s profits. The partners can change this share if the partnership experiences losses, but each partner’s share must be reduced proportionally.
What if One Partner Invests Into the Partnership?
When one partner makes payments to indemnify another partner for liabilities incurred during the normal course of business or to preserve the partnership’s assets or property, the partnership needs to reimburse the partner. Likewise, when one partner provides an advance of capital for the partnership in addition to the amount each partner agreed to contribute, the partnership must reimburse him or her. In some cases, an advance payment made by one partner, which gives rise to a partnership obligation, should be treated as a loan with interest.
How Will the VUPA Impact Dissolution of My Partnership?
The VUPA is particularly important because it governs what happens when one business partner decides to leave. In many cases, the partners may not have a detailed written agreement in place, or their agreement may not address what will happen when one partner wishes to leave. In these scenarios, the provisions of the VUPA will govern the outcome of the case. When one partner decides to leave, a majority interest of the remaining partner or partners has the authority to agree to continue their partnership within 90 days of the dissociation. In other words, the VUPA allows partnerships to stay intact after one or more partners dissociate from the company.
Contact Our Experienced Business Lawyers Today
If you are a partner in a Virginia partnership, it is crucial that you create a thorough and legally valid partnership agreement. Your partnership agreement should address many of the potential conflicts and disputes that could arise. However, when your partnership agreement does not address a specific issue, the VUPA will govern the dispute. Whether you need to form a partnership agreement or have questions related to the VUPA, Fox & Moghul, Attorneys at Law are here to help. Contact us today to schedule your initial consultation.