I know that historically–before the Great Depression, perhaps even before the 20th Century–courts considered joint ventures and partnerships to be distinct business forms (for reasons that will become apparent, note my use of "forms" instead of "entities"). To be sure, the two were "similar" and courts usually applied partnership law to joint ventures. As the Idaho Supreme Court recently put it in its opinion in Costa v. Borges, 2008 Op. No. 23, at 4, 179 P.3d 316 (Idaho February 15, 2008) (citations omitted):
Because of the similarities between partnerships and joint ventures, partnership law generally governs joint ventures. A partnership is "an association of two (2) or more persons to carry on as co-owners a business for profit." "A joint adventure is generally a relationship analogous to but not identical with a partnership, and is often defined as an association of two or more persons to carry out a single business enterprise with the objective of realizing a profit."
The opinion in Costa v. Borges then took an unexpected turn. Because RUPA Section 201 declares a partnership to be an entity separate from its partners, the Idaho Supreme Court concluded that partnership and joint venture law have parted company:
Although a partnership is now an entity distinct from its partners, "a joint venture is not an entity separate and apart from the parties composing it." There is no statute providing that a joint venture is an entity distinct from its members. There is no statutory provision allowing for the dissociation of a member from a joint venture and the continuation of the joint venture in business as a separate entity. That portion of RUPA providing for the continuation of a partnership as a separate legal entity after dissociation of a partner has no application to a joint venture.
Slip. Op. at 5 (citations omitted) (emphasis added). Later, the Court indicated that, even in a three-member joint venture,
However, even if the joint venture had three members it could not continue doing business after the withdrawal of one member. Because "a joint venture is not an entity separate and apart from the parties composing it," a joint venture cannot continue in business as a separate legal entity after one joint venturer withdraws.
Id. at 4-5 (citation omitted).
The same could have been said of mid-(20th) century partnerships. Not only does the Costas v. Borges freeze joint-venture law, it also ignores Rights of partners under UP)A Section 38(2). A joint venture is only a partnership for a particular purpose. Under UPA Section 38(2), after the early withdrawal of a partner in a partnership for a particular purpose, the remaining partner(s) may
continue the business of the partnership, either by themselves or jointly with others ….
That is, the question is not whether a partnership may continue after the withdrawal of one of two partners, but whether the remaining partners may continue the business without dissolution. That said, with its emphasis on continuation of the entity, the RUPA does not adequately address continuation of the business of two-partner partnerships after the premature withdrawal of one of the partners.
Hat tip to Marc Ward.
posted by Gary Rosin
This entry was posted on Thursday, February 19th, 2009 at 7:50 pm and is filed under Commentary, LLCs. You can follow any responses to this entry through the RSS 2.0 feed.
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Joint Ventures vs. Partnerships. Costa v. Borges (Idaho 2008)
I know that historically–before the Great Depression, perhaps even before the 20th Century–courts considered joint ventures and partnerships to be distinct business forms (for reasons that will become apparent, note my use of "forms" instead of "entities"). To be sure, the two were "similar" and courts usually applied partnership law to joint ventures. As the Idaho Supreme Court recently put it in its opinion in Costa v. Borges, 2008 Op. No. 23, at 4, 179 P.3d 316 (Idaho February 15, 2008) (citations omitted):
The opinion in Costa v. Borges then took an unexpected turn. Because RUPA Section 201 declares a partnership to be an entity separate from its partners, the Idaho Supreme Court concluded that partnership and joint venture law have parted company:
Slip. Op. at 5 (citations omitted) (emphasis added). Later, the Court indicated that, even in a three-member joint venture,
Id. at 4-5 (citation omitted).
The same could have been said of mid-(20th) century partnerships. Not only does the Costas v. Borges freeze joint-venture law, it also ignores Rights of partners under UP)A Section 38(2). A joint venture is only a partnership for a particular purpose. Under UPA Section 38(2), after the early withdrawal of a partner in a partnership for a particular purpose, the remaining partner(s) may
That is, the question is not whether a partnership may continue after the withdrawal of one of two partners, but whether the remaining partners may continue the business without dissolution. That said, with its emphasis on continuation of the entity, the RUPA does not adequately address continuation of the business of two-partner partnerships after the premature withdrawal of one of the partners.
Hat tip to Marc Ward.
posted by Gary Rosin
This entry was posted on Thursday, February 19th, 2009 at 7:50 pm and is filed under Commentary, LLCs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.