7.2 Partnerships and Joint Ventures

7.2 Partnerships and Joint Ventures

1. General Partnerships (GPs) and the Florida Uniform Partnership Act

In Florida, general partnerships are governed by the Florida Uniform Partnership Act (FRUPA), codified in Chapter 620 of the Florida Statutes. FRUPA defines a partnership as an association of two or more persons to carry on as co-owners a business for profit.

Unlike corporations or LLCs, a general partnership does not require any formal filing with the state to exist; it can be formed by a written agreement, an oral agreement, or simply implied by the parties' conduct.

• Determining Existence: Under FRUPA, the sharing of gross returns does not of itself establish a partnership. However, a person's receipt of a share of the profits of a business creates a rebuttable presumption that the person is a partner, unless the profits were received in payment of a debt, wages, rent, interest on a loan, or the sale of goodwill.
• Intent: The subjective intent of the parties is irrelevant. If their objective conduct fits the statutory definition of carrying on as co-owners a business for profit, a partnership is formed in the eyes of the law.
• Management and Voting: By default, all partners have equal rights in the management and conduct of the partnership business. Ordinary business decisions require the approval of a majority of the partners. Decisions outside the ordinary course of business (e.g., admitting a new partner, amending the partnership agreement) require unanimous consent.
• Fiduciary Duties: Partners owe the duties of loyalty and care to the partnership and the other partners. They must also discharge their duties consistently with the obligation of good faith and fair dealing. Under FRUPA, these duties cannot be completely eliminated in a partnership agreement, though the agreement may identify specific types of activities that do not violate the duties, if not manifestly unreasonable.

2. General Partner Liability and the Exhaustion Rule

A defining feature of a general partnership is the personal liability of its partners:

• Joint and Several Liability: Under FRUPA, all partners are jointly and severally liable for all obligations of the partnership, whether arising in contract or tort, that occur in the ordinary course of partnership business. This means a creditor can sue any individual partner for the entire amount of the partnership's debt.
• The Exhaustion Rule: Although partners are jointly and severally liable, a judgment creditor of a partner cannot immediately levy on the partner's personal assets. A creditor must first obtain a judgment against the partnership and generally must exhaust partnership assets before executing the judgment against the individual partner's personal assets. Exceptions exist if the partnership is in bankruptcy, if the partner agrees to waive the rule, or if the court grants permission based on independent liability.

3. Joint Ventures in Florida

A joint venture is a special form of partnership under Florida law. It is formed when two or more parties combine their property, money, efforts, or skill in a joint business enterprise for a single transaction or a specific, limited project.

• Legal Treatment: Florida courts treat joint ventures under the same principles of partnership law. The members of a joint venture owe each other the same fiduciary duties of loyalty and care, and they are jointly and severally liable for the torts and contracts arising out of the joint venture.
• Distinction in Apparent Authority: The primary distinction between a general partnership and a joint venture lies in the scope of apparent authority. A general partner has broad apparent authority to bind the partnership in any transaction that is within the ordinary course of the partnership's business. In contrast, because a joint venture is limited to a specific transaction or project, a joint venturer's apparent authority is much narrower. A joint venturer can only bind the venture on matters that are within the specific scope of the joint venture's designated project or transaction.

4. Limited Partnerships (LPs) and LLLPs Under Florida Law

A Limited Partnership (LP) is governed by the Florida Revised Uniform Limited Partnership Act (FRULPA). Unlike a general partnership, an LP is formed by filing a Certificate of Limited Partnership with the Florida Department of State.

• Structure: An LP must have at least one General Partner (GP) and at least one Limited Partner (LP). General partners manage the LP and have unlimited personal liability for the partnership's obligations. Limited partners contribute capital and do not manage the business.
• The Safe Harbor Rule (Crucial Florida Distinction): Traditionally under common law, if a limited partner participated in the control of the partnership business, they lost their limited liability status and became personally liable as a general partner. Florida has adopted the modern ULPA (2001) approach. Under Florida Statute § 620.1303, a limited partner is not personally liable for the obligations of the limited partnership, even if the limited partner participates in the management or control of the limited partnership. This statutory safe harbor completely shields limited partners from liability to third parties, regardless of their level of control.
• LLLP Election: Florida allows an LP to register as a Limited Liability Limited Partnership (LLLP). In an LLLP, the general partners are also protected by a statutory liability shield, meaning they are not personally liable for the debts of the LLLP solely by virtue of being general partners.

5. Limited Liability Partnerships (LLPs)

A general partnership can also protect its partners by registering as a Limited Liability Partnership (LLP) by filing a statement of qualification with the Florida Department of State. In an LLP, the partners are shielded from personal liability for the partnership's obligations, whether arising in contract, tort, or otherwise, that are incurred while the partnership is an LLP. A partner remains personally liable only for their own negligent or wrongful acts or those of individuals under their direct supervision.