What is the Uniform Partnership Act (UPA)
The Uniform Partnership Act (UPA) provides governance for business partnerships in several U.S. states. The UPA also offers regulations governing the dissolution of a partnership when a partner dissociates. It is what is known as a uniform act, which is similar in function to a model statute (a rule passed by legislators rather than courts or government agencies). The Uniform Partnership Act has undergone many amendments since it was first proposed in 1914 by the National Conference of Commissioners on Uniform State Laws (NCCUSL). At the time the act was adopted by every state but Louisiana, which has a history of setting its own rules.
Breaking Down Uniform Partnership Act (UPA)
The Uniform Partnership Act provides that a majority interest of the remaining partners can agree to continue the partnership within 90 days of the dissociation. The Uniform Partnership Act effectively saved partnerships from dissolution following a partner's dissociation. In addition, the UPA provides rules regarding partnership formation, fiduciary duties and the ownership of partnership assets.
The first Uniform Partnership Act was drafted in 1914. It has been revised and amended multiple times since, most recently in 1997. Its 1994 revision is often referred to as the Revised Uniform Partnership Act (RUPA), which has occasionally has caused confusion with further revisions in 1996 and 1997. As such, each change is referred to by its year of enactment. Some 37 U.S. states have adopted the most recent version of the act.
Uniform Partnership Act (UPA) 1997 Revision
In 1996, the Limited Liability Partnership Amendments to the Uniform Partnership Act were promulgated and combined into the Uniform Partnership Act. One of the most significant changes under the act's 1997 amendment is that a partner's disassociation does not trigger dissolution unless a majority interest agrees to dissolution. The partnership automatically continues unless partners take action to dissolve the partnership within 90 days of the dissociation. The revised act also includes the following features:
- It defines partnerships as an entity between partners and partner assets and not an aggregate. Accordingly, a partnership may sue and be sued in the partnership's name, and also may acquire property it its name.
- A partner's interest is considered as separate rights and liabilities associated with participation in a partnership. That means that no partner has an interest in specific property of a partnership. A partner's creditors may only go after a partner, not the property in a partnership.
- RUPA specifies the duties of care and loyalty of partners, as well as their information rights and their obligation to good faith and fair dealing. Such basic standards may not be abolished by any partner or partnership agreement.
- It outlines standards for conversions and mergers, such as changing from a partnership to a limited partnership, or merging to create a new entity.
- It provides limited liability protections for general partners in a limited liability partnership.