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Starting a partnership firm can be an exciting experience. If you are on the verge of forming a partnership firm or have already initiated the process, you must be aware of the Virginia Uniform Partnership Act or VUPA. In the U.S., 37 states, including Virginia, have implemented the Revised Uniform Partnership Act. The VUP Act regulates the formation, implementation, as well as dissolution of partnership firms. In Virginia, the act governs partnerships and limited liability partnerships. However, the VUP act doesn’t manage limited partnership firms. The VUPA can significantly impact your business; thus, you must consult a partnership dispute lawyer Virginia Beach to understand the act.

What is the Virginia Uniform Partnership Act?

The Virginia Uniform Partnership Act (VUPA) is a statute that describes a partnership as a collaboration of two or more individuals who agree to carry business operations as co-owners. The Uniform Partnership Act has been passed as law to provide legal guidance to business owners who wish to form a partnership firm. The act guides how business owners can begin their partnership firm and manage their business operations. The act also defines the fiduciary duties of the partnership firm and its partners in detail. The law further states what should be considered as liabilities and assets.

How can VUPA Impact Partnership Business?

Large corporations and companies have a robust plan of action and written agreements that allow them to navigate any business changes. However, most small businesses or partnership firms lack detailed contracts. The VUPA governs the legal action of such partnership firms.

Conflicts and disagreements can arise in a partnership business. When there are conflicts amongst the partners and the partnership agreement cannot resolve the issue, the court will refer to the Virginia Uniform Partnership Act.

For resolving partnership conflicts in a limited partnership, the VUPA will only be applied if the Virginia Revised Uniform Limited doesn’t regulate it. One must seek help from a qualified business dispute lawyer Virginia Beach to resolve legal business matters.

How VUPA regulates the Creation of Partnership?

Virginia Uniform Partnership Act governs how partnership agreements should be created and formed. Having a partnership agreement that defines and regulates the business partner’s relationship with the business and other partners is a must-have. In cases where partnership firms lack partnership deed, the VUPA governs the ties amongst the business partners.

The VUPA also governs how the partnership firm should be named. According to the act, no partnership firm can include the name of a limited partner. However, a provision allows the limited partner’s name to be included in the firm’s name.

Besides governing the partners’ relationship and firm’s name, the Virginia Uniform Partnership Act looks after partnership agreement. If a partnership agreement cannot address specific issues or disputes, the VUPA provisions will come into effect.

How VUPA governs Each Partner’s Rights and Duties?

The Virginia Uniform Partnership Act also governs the rights and duties of each of the partners. In case there is a partnership dispute over profit or loss percentage, the VUPA has a standardized formula.…

Limited Liability

A nonprofit corporation is a separate legal entity distinct from that of its directors, officers and employees. As such, liabilities and obligations incurred by the corporation, in the absence of unusual circumstances, must be satisfied out of the assets of the corporation and do not “pass-through” to its directors, officers or employees. Put another way, a corporation’s directors, officers and employees generally have “limited liability” with regard to the liabilities and obligations incurred by the corporation.

Personal Liability

In certain circumstances, however, a corporation’s officers, directors or members may become personally liable for the corporation’s liabilities and obligations. This “pass through” of liability occurs when a corporation’s officers, directors or members fail to maintain the corporation’s separate legal identity by confusing their individual identity with that of the corporation. This confusion of identities generally occurs when the directors, officers or members of the corporation mix their personal, individual business with the corporation’s business. In such cases, a court may choose to disregard the corporate entity created and hold the individuals acting on behalf of the corporation (i.e. the directors, officers or members) personally responsible for the corporation’s liabilities and obligations.

A court may choose to impose personal liability in this manner even though articles of incorporation creating a corporation have been filed, which, as stated above, generally limits an individual’s liability. Courts and the Internal Revenue Service (“IRS”) tend to give particular scrutiny to cases involving a small number of individuals who fill multiple roles within the corporation. In deciding whether to hold the individuals personally liable for the corporation’s obligations, courts and the IRS scrutinize the corporation and its operation to decide if the corporation meets certain minimum standards to be considered a separate entity. For instance, courts examine whether the corporation has adequate funds to pay its creditors, whether the individuals commingled corporate and personal funds on a regular basis, whether the individuals failed to keep proper corporate records and whether the corporation generally failed to act like a corporation.

The IRS may assess taxes and penalties personally against the corporation’s principals if it concludes the corporation is not a valid, separate entity. Therefore, nonprofit corporations should fastidiously hold regular meetings for both the board of directors and members (if it is a membership organization). It should also prepare and place written minutes of these meetings in the corporate record book. Nonprofit corporations should also be especially diligent in maintaining sufficient funds to pay their debts and in segregating corporate funds from the personal funds of the corporation’s principals.

A failure to segregate funds could also result in loss of tax-exempt status. See the discussion in the next chapter on private inurement. A principal of a corporation (usually is an officer or director) may also become personally liable for the liabilities of the corporation if the principal fails to make clear to persons with whom the principal is dealing that he or she is in fact acting as an agent of the corporation and not individually. All business transactions of a corporation should clearly indicate that they are corporate, not individual, transactions and the representative capacity of the officers or directors acting on behalf of the corporation should always be disclosed.…

Understanding the Virginia Uniform Partnership Act

HOW TO MAINTAIN YOUR NONPROFIT CORPORATION