In this article, we discuss liability and proper conduct between partners in an Iowa partnership and answer the following questions:
A partnership is a legal form of business operation entered into between two or more people. Partnerships make up a significant portion of the business entities in Iowa. The ability to structure the partnership with how the partners see fit through a partnership agreement and the various tax incentives available for each type of partnership makes it an ideal form of business entity. Partnerships come in three different forms: general partnerships (GP), limited liability partnerships (LLP), and limited partnerships (LP). All three types of partnerships are pass-through entities, meaning the income earned by the business, and thus the partners, is considered the owner’s personal income for tax purposes.
It’s not uncommon for business disputes to arise between the principles of a partnership. Iowa partnership law accounts for certain disputes, liability, and access to information, but the best way to avoid major disputes that throw partnership liability into question is to execute a partnership agreement that will govern the partners’ relationship. The partners can structure the agreement however they see fit, but there are certain rules that Iowa partnership law places on modifying partner access to information and the duties that partners owe to each other and the partnership. The partnership agreement will be the primary document referenced should a disagreement end up in court, questioning one or more partners’ conduct and/or liability.
Iowa code 486.403A describes the rules governing partners’ access to information in a partnership. As mentioned above the partnership agreement can stipulate guidelines for each partner to follow, but with reference to accessing the information the agreement is limited by the following regulations:
Duties and conduct owed to the partnership by the partner under Iowa partnership law fall into two categories: loyalty and care. They are covered in Iowa code 486A.404 and include:
Violating the stipulations written in a partnership agreement or the rules set forth in Iowa partnership law may render a partner liable for any damages that occur as a result of the behavior. If you feel that a violation has occurred at your place of business, need defense against a potential allegation, or just have questions about structuring your partnership agreement give our office a call at 563-503-6910 and speak with one of our experienced Iowa business attorneys.
O'Flaherty Law is happy to meet with you by phone or at our office locations in: