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Partnership Judgment Owners

By Mark Shapiro

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Published: 19Feb2012
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I'm not an attorney, I am a Judgment Broker. This article is my opinion, from my California experiences. Laws are different in every state. If you ever want a strategy to use or legal advice, please contact an attorney.

What if you're a judgment recovery specialist, and a judgment owner is a dissolved general partnership? Could you recover their judgment when you locate a former general partner?

A larger issue to examine, would be does their debtor have some available assets to satisfy the judgment? Verify that first, because that's the a vital factor in every judgment enforcement.

Anyone who remains authorized with a previous partnership agreement, could assign the partnership's judgment.

A partnership's partnership agreement, is much like the bylaws in a corporation. The partnership agreement describes who manages the affairs of the partnership, and who has the authority to get things done.

A very reliable way to learn if someone possesses the authority to assign a partnership's judgment, would be to find a the partnership agreement to read, and tell them what they should do.

A trouble with doing this, is that could get too close to offering legal advice, which could be UPL (the Unauthorized Practice of Law).

Reviewing another person's contract, and giving them an opinion about what it legally means, and which actions they could take, might be reasoned to be UPL.

Anyone that remains authorized with the power to assign any document, (e.g., leases, insurance policies, authority to to subrogation) may assign judgments the partnership owns.

Preferably, their partnership will remain running, so they could easily assign the judgment to you.

When they aren't active, a safe way to go, would be to get the member that asserts they are authorized to assign the judgment on behalf of their partnership, to document that, and sign and notarize it, and provide you a copy.

If you can recover the judgment, who should be paid? One way is to write a check to the partnership.

Another way to go, is to ask the creditor partnership prepare a document where the member that assigned their judgment to you, provides exact instructions as to whom the partnership's portion of a judgment collection is to get paid, and how much for each person.

When one owes a partnership money, and there is no instructions, one could pay every partner a pro-rata amount as per their percentage share of ownership specified in their partnership agreement (or the latest amendments to it).

Business partnerships are an association of 2 or more individuals running a business with a goal of making profits.

Business partnerships are considered to be the same as their owners. There might be little to no formality involved in starting valid partnerships.

Partnership existence is defined by the rules listed in Part 2 of the UPA (Uniform Partnership Act).

All profits are passed onto the owners, and are split according to what is listed in their partnership agreement.

Just like sole proprietorships, partnerships have just a single level of taxation. Partnerships are a tax-reporting entity, not a tax-paying entity.

Although passthrough taxation is great, partnership owners are saddled with unlimited personal liability. Generally, everypartner in the partnership is jointly liable for a obligations of the partnership.

Joint liability means that the partners can be sued as a group. Several liability means that the partners are individually liable.

In many states, every partner is both severally and jointly liable for any damages resulting from certain misdeeds of other partners, and for all obligations and debts of a partnership.

3 rules for partnership liability are:

1. Each partner is liable for their own actions.

2. Each partner is liable for most actions of any other partners.

3. Each partner is liable for most actions of any employees in a business.

Unless there are agreements to the contrary, the UPA states that partners have the same rights to vote, even when they invested different amounts of money in the partnership.

Just like when there is a sole proprietorship, when the partnership uses a fictitious name (different from the partner names), it's required to have a fictitious business name filing in the county where it does business.

Partnerships need to also register either locally, or with the Secretary Of State, sometimes at the superior court in their county.

Partners owe both a fiduciary duty and a contractual duty to each another. As described in Black's Law Dictionary, a "fiduciary duty" is a "duty to act for the benefit of another person while subordinating their personal interests to those of another person".

Occasionally partnership operating agreements waive a fiduciary duty, so the partners may pursue other future opportunities.

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