The Kansas Revised Uniform Partnership Act
| Publication year | 1999 |
| Pages | 16 |
68 J. Kan. Bar Assn. October, 16 (1999). THE KANSAS REVISED UNIFORM PARTNERSHIP ACT
October, 1999
Copyright (c) 1999 by the Kansas Bar Association; Edwin W. Hecker, Jr.
The original Uniform Partnership Act (UPA) was promulgated in 1914 by the National Conference of Commissioners on Uniform State Laws (NCCUSL). At its pinnacle, it was the law in every state except Louisiana. Kansas adopted the UPA in 1972. [FN1]
In 1992, in response to a recommendation from an American Bar Association subcommittee, [FN2] the NCCUSL promulgated a revised version of the UPA. Although entitled Uniform Partnership Act, the revised act is almost universally referred to as the Revised Uniform Partnership Act (RUPA), and that terminology is used in this article. RUPA itself was revised in 1993 and again in 1994. In 1996 the NCCUSL amended RUPA to integrate provisions governing limited liability partnerships (LLPs).
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The 1994 version of RUPA was introduced during the 1996 session of the Kansas Legislature, but it died in committee. The 1996 version was introduced in 1997, passed the Senate unanimously, but failed to be considered by the House. It was carried over to the 1998 session, when it passed the House and was signed into law by the governor. [FN3] The Kansas version of RUPA is codified as new Chapter 56a in Kansas Statutes Annotated. [FN4]
RUPA modernizes the UPA to reflect the changes in law and business that have occurred during the past eight decades. It carries over many of the concepts and rules that have withstood the test of time. [FN5] It also repairs or replaces concepts and rules that have not worked well. [FN6] Finally, it adds totally new concepts and provisions. [FN7] The purpose of this article is both to describe RUPA's innovations and to note the many respects in which it carries forward familiar principles from the UPA.
I. Nature and definition of partnership
A. Entity status
The most fundamental philosophical difference between the UPA and RUPA relates to their respective conceptions of the nature of a partnership. Under the UPA, as at common law, a partnership, unlike a corporation, is not considered to be a legal entity separate and distinct from its owners. Rather, under the so-called aggregate theory, a partnership is merely a group of persons. [FN8] Because it has no separate legal personality, the group, as such, cannot own property and cannot sue or be sued. [FN9] Moreover, the particular group necessarily ceases to exist every time there is a change in membership. If these precepts were taken to their logical extreme, partnership would be a completely unworkable form of business organization. The UPA did not do this, of course, but in order to create a regime in which partnerships could function in the real world, and yet pay lip service to the aggregate theory, it often was forced to adopt rules that were unnecessarily indirect and complex. [FN10]
The conception of a partnership under RUPA is exactly the opposite - it is affirmatively declared to be an entity, separate and distinct from the partners. [FN11] The result is a statute that is generally more directly functional than its predecessor. While RUPA may be more complex than the UPA, its complexity is due to its modernization and greater specificity, not its theoretical conception of the nature of a partnership. [FN12]
B. Definition
RUPA continues, almost verbatim, the UPA's definition of a partnership as an association of two or more persons to carry on as co-owners a business for profit. [FN13] Both include limited liability partnerships within the definition, [FN14] and both exclude business associations, such as corporations and limited liability companies, formed under the authority of other statutes. [FN15]
However, while the UPA provided that it "shall apply to limited partnerships except in so far as the statutes relating to such partnerships are inconsistent," RUPA eliminates this express linkage and makes it clear that a limited partnership is not included within its definition of "partnership." [FN16] Nevertheless, RUPA will apply to limited partnerships in cases not covered by the Kansas Revised Uniform Limited Partnership Act (KRULPA) by reason of the express linkage contained in that statute. [FN17] Put differently, it is unnecessary
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that the linkage appear in both statutes, and it is more appropriate that it appear in the limited partnership statute. [FN18] The important point, however, is that RUPA is doubly important, because it will apply directly to general partnerships and indirectly to limited partnerships as to issues not covered by KRULPA.
The RUPA definition of "partnership" also differs superficially from the UPA definition by providing that persons who associate to carry on a business as co-owners are partners "whether or not the persons intend to form a partnership." [FN19] This additional language, however, merely codifies the prevailing case law and makes it clear that the intent to form a partnership is determined objectively rather than subjectively. [FN20]
RUPA also carries forward, with little change in wording, the UPA's litigation-oriented rules for determining the existence of a partnership in a disputed case. Thus, mere co-ownership of property, even if the co-owners share profits from the property, is not of itself sufficient to establish a partnership. [FN21] Similarly, sharing of gross receipts is not of itself sufficient to establish partnership, even if the persons sharing the gross receipts are co-owners of property. [FN22] On the other hand, receipt of a share of the profits of a business will be sufficient to raise a rebuttable presumption that the recipient is a partner in the business. [FN23] This presumption is not raised, however, if the profits were received in a capacity other than that of co-owner of a business, such as creditor, employee or independent contractor, landlord, annuitant or vendor. [FN24]
Finally, the UPA's proposition that, with the exception of estoppel situations, persons who are not partners as to each other will not be liable as partners to third parties has been retained but moved to a more appropriate location in RUPA. [FN25]
II. Partnership property
As a practical matter, for any business enterprise to remain viable, it is necessary that property committed to the business be used only for business purposes. No business could long survive if its operations were subject to the disruption caused by use of its assets for the personal purposes of its owners, or attachment of its assets by creditors of its owners on the basis of personal, nonbusiness obligations. For similar reasons, it is vital to distinguish property the owners have committed to the business from property they have retained in their individual capacities. In both respects, RUPA makes significant advances over the situation prevailing under the UPA.
A. Ownership of partnership property
Having opted for the aggregate theory of partnership, the UPA's drafters were confronted by the problem of ownership of partnership property. If a partnership did not exist as a legal person, it could not own property. On the other hand, if the partners were deemed to own partnership property as tenants in common or as joint tenants with right of survivorship, chaos could result because of the incidents normally attaching to those forms of ownership.
Faced by this dilemma, the drafters adopted an uneasy compromise that reached an entity-like result while paying obeisance to the aggregate theory. This compromise was codified in K.S.A. 56-325, which provided that partners owned partnership property in a unique form of concurrent ownership known as tenancy in partnership. [FN26] The statute then stripped this co-tenancy of all individual incidents of ownership, leaving only group incidents intact. [FN27] Thus, without the consent of the other partners, a partner could possess partnership property for partnership purposes but not for individual purposes; a partner's interest in partnership property was not separately alienable, apart from the rights of the group; a partner's interest in partnership property was not subject to attachment or execution on the basis of a separate obligation, but it was subject to the claims of partnership creditors; when a partner died, the partner's interest in partnership property did not pass to his or her estate, heirs or devisees, but rather, vested in his or her co-partners by right of survivorship; and, correspondingly, a partner's interest in partnership property was not subject to dower, curtesy or similar interests. [FN28]
To make matters more confusing, the UPA then took the theoretically inconsistent position that record title to real estate could be acquired and held in the partnership name. [FN29] The purpose was to permit record title to correspond
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to practical reality by disclosing the partnership's interest in the property, thereby putting purchasers and creditors on notice that the property was not the individual property of one or more of the partners. [FN30]
Accordingly, the UPA reached a functional, entity result but did so only by complicated indirection. In keeping with its entity theory, [FN31] RUPA reaches the same result in a simple, direct and straightforward manner. It provides that "[p]roperty acquired by a partnership is property of the partnership and not of the partners individually." [FN32] Lest there be any lingering doubt, it reiterates, "[a] partner is not a co-owner of partnership property and has no interest in partnership property which can be transferred, either voluntarily or involuntarily." [FN33]
B. Distinguishing partnership property from individual property
Ideally, partners'...
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