The law in California governing partnerships is based on the Revised Uniform Partnership Act of 1994 (“RUPA”), codified in California Corporations Code §§ 16100–16951. For example, California Corporations Code § 16201 defines a partnership as “an entity distinct from its partners.” A partnership exists when two or more persons associate as co-owners of a for-profit business, regardless of whether or not the individual partners had an express intent to form a partnership. While RUPA proposes the default rules that will apply to partnerships that register in California, these partnerships reserve the right to write different rules into the terms of their agreement. Accordingly, RUPA applies most to those partnerships that do not have detailed agreements outlining the terms of the partnership.
Partnerships operating under a fictitious business name must also follow additional requirements under California Corporations Code and California Business and Professions Code. For instance, under California Business and Professions Code §§ 17910 and 17915, for-profit partnerships operating in California under a fictitious name must maintain an accurate fictitious business name statement that contains their principal place of business. Generally, the name of a partnership is fictitious if it does not include each general partner’s surname. The name of a partnership may also be fictitious if it contains the surnames of each general partner, but also suggests that there may additional owners.
A partnership may sue and face a lawsuit, as an entity, since RUPA defines partnerships as separate and distinct from the individuals that form the partnership. However, a plaintiff reserves the right to bring suit against the individuals that form the partnership in conjecture with the lawsuit against the partnership, either in the same or a separate lawsuit. Furthermore, a partnership may sue third parties without naming its individual members as plaintiffs and the partnership may sue third parties while joining its individual members as plaintiffs. However, the partners will bear the liability for the partnership’s losses based on their individual share in the partnership’s profits.
The partners that comprise the partnership hold a fiduciary duty to the partnership. As such, partners may not take advantage of the partnership for their personal gain. In the event that partners violate this fiduciary duty, they may face legal consequences. Furthermore, each partners is responsible for acting in good faith when dealing with the other partners, and in all dealings related to the partnership. Once again, a partner may face legal consequences for failing to reasonably act in the best interest of the other partners or the partnership as a whole. The extent and specifics of the partners’ fiduciary duties towards each other, and the partnership, may be defined by statute, or by the express agreement that forms the partnership. Accordingly, partners maintain the capacity to legally and wholly define the terms of their partnership in a manner that is most conducive to their specific business interests and operations.