Book Opener

Independence DayAs a citizen of theUnited States, you area partner to millions ofother American citizensthat live in this country.The Fourth of July is theday America celebratesits independence. Howmuch do you knowabout the historicalevents that are associatedwith IndependenceDay? The resultsof a national telephonesurvey show that morethan five million teensdon’t know from whatcountry Americadeclared its independence.Do you?Get InvolvedIn teams, create a quizfrom the Declarationof Independence andswap quizzes withother teams. On theFourth of July, takesome time to considerwhat it truly means tobe an American.Every partnership must have at least one general partner. In mostfirms, the partners are general partners. A general partner plays an activerole in the management of the partnership and is publicly known as apartner. A general partner has unlimited liability for the firm’s debts.A secret partner is a general partner who has an active role in themanagement of the partnership, but whose connection with the partnershipis kept a secret. A secret partner also has unlimited liability forthe firm’s debts.A silent partner is a general partner who takes no active role in themanagement of the partnership. A silent partner is known publicly as apartner and has unlimited liability for the firm’s debts.Example 4. In The Opening Scene, Aaron describes Cecilia as asilent partner in JAC Industries and tells her that she has no rolein managing the business. However, Aaron has incorrectly labeledCecilia’s role. Cecilia will be a secret partner because she willtake part in the management of the partnership while her identityremains a secret to the public.A dormant partner is a general partner who takes no active part inthe management of the firm and whose connection with the firm is keptsecret. A dormant partner, however, has unlimited liability for the firm’sdebts. In contrast, a limited partner is one whose liability does not extendbeyond his or her investment. This liability arrangement is known as alimited partnership.Partnership PropertyCertain rights and limitations arise regarding partnership property.For this reason, it is important to distinguish between property thatbelongs to the partnership and property that belongs to individual partners.Property contributed directly to the partnership when the partnershipis created is partnership property. The UPA also states thatpartnership property includes property that is bought with partnershipfunds. In other circumstances, the question of ownership of a piece ofproperty is difficult to answer. Other indicators can help a court makethe determination. For example, a court may ask the following questions:l Has the partnership consistently used the property?l Has the partnership listed the property on its account books?l Has the partnership paid expenses involving the property?l Has the partnership improved or repaired the property?l Has the partnership paid taxes on the property?Each “yes” answer makes it more likely the court will decide that theproperty belongs to the partnership.592 Unit 6: Starting a Business