UBE General Partnership

Last updated: May 2, 2026

General Partnership questions are one of the highest-leverage areas to study for the UBE. This guide breaks down the rule, the elements you need to recognize, the named traps that catch most students, and a memory aid that scales to test day. Read it once, then practice the same sub-topic adaptively in the app.

The rule

A general partnership is the association of two or more persons to carry on as co-owners a business for profit, whether or not the participants intend to form a partnership (RUPA § 202(a); UPA § 6(1)). No writing, filing, or subjective intent is required—sharing of profits raises a presumption of partnership unless the share is paid as wages, rent, debt service, interest, or another listed exception (RUPA § 202(c)(3)). Partners are agents of the partnership for ordinary-course business and are jointly and severally liable for all partnership obligations (RUPA §§ 301, 306(a)). Partners owe one another and the partnership the fiduciary duties of loyalty and care plus the obligation of good faith and fair dealing (RUPA § 404).

Elements breakdown

Formation of a General Partnership

A general partnership arises by operation of law whenever two or more persons in fact carry on as co-owners a business for profit, regardless of label or intent.

  • Two or more persons (entities count)
  • Association to carry on a business
  • As co-owners (sharing of control)
  • For profit
  • No requirement of writing, filing, or subjective intent

Common examples:

  • Two friends operating a food truck together without paperwork
  • Sharing of net profits raising statutory presumption of partnership

Sharing-of-Profits Presumption and Its Exceptions

Receipt of a share of net profits is prima facie evidence of partnership, but the presumption does not arise when the payment fits a statutory exception.

  • Recipient receives share of business profits
  • No exception applies
  • Burden then shifts to opponent of partnership
  • Other co-ownership indicia (control, capital contribution) reinforce finding

Common examples:

  • Wages or compensation to an employee or independent contractor
  • Rent paid to a landlord
  • Payment of a debt by installments, including interest
  • Annuity or other retirement benefit to a deceased partner's representative
  • Interest or other charge on a loan
  • Consideration for sale of goodwill of a business

Partner as Agent — Actual and Apparent Authority

Each partner is an agent of the partnership for the purpose of its business, and acts apparently carrying on the partnership's business in the ordinary course bind the partnership unless the partner lacked authority and the third party knew or had received notification of the lack of authority.

  • Actor is a partner
  • Act apparently for carrying on partnership business
  • Act is in the ordinary course of that business or business of the kind
  • Third party did not know or have notice of lack of authority
  • Acts outside ordinary course require actual authority from all partners

Liability of Partners to Third Parties

All partners are jointly and severally liable for all obligations of the partnership, whether arising in contract, tort, or otherwise, subject to the exhaustion rule for incoming partners and judgment-creditor procedures.

  • Partnership obligation arose during partnership
  • Plaintiff first obtains judgment against the partnership
  • Partnership assets exhausted (or court grants exception)
  • Then partner's personal assets reachable
  • Incoming partner not personally liable for pre-admission obligations (RUPA § 306(b))

Fiduciary Duty of Loyalty

A partner must account for partnership property, profits, and benefits; refrain from dealing as an adverse party; and refrain from competing with the partnership in the conduct of its business before dissolution.

  • Account for any benefit derived from partnership opportunity, property, or use
  • No self-dealing as adverse party without informed consent
  • No competing business before dissolution
  • Duty cannot be eliminated, but partnership agreement may identify non-violating activities if not manifestly unreasonable

Fiduciary Duty of Care

A partner's duty of care in conducting partnership business is limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

  • Conduct of partnership business
  • Standard: gross negligence, recklessness, or worse
  • Ordinary negligence is not actionable
  • Cannot be unreasonably reduced by agreement

Sharing of Profits, Losses, and Management

Absent contrary agreement, each partner shares equally in profits and bears losses in proportion to her share of profits, and each partner has equal rights in management with one vote per partner.

  • Profits shared equally per capita (not by capital contribution)
  • Losses follow profits unless agreement says otherwise
  • Equal management rights — one partner, one vote
  • Ordinary-course matters: majority vote of partners
  • Extraordinary matters or amendment of partnership agreement: unanimous consent

Dissociation Under RUPA § 601

A partner is dissociated upon the occurrence of a statutorily enumerated event, such as notice of express will to withdraw, expulsion, bankruptcy, death, or judicial determination.

  • Partner gives notice of express will to withdraw
  • Event agreed in partnership agreement triggers dissociation
  • Expulsion under partnership agreement or unanimous vote
  • Judicial expulsion for wrongful conduct or impracticability
  • Bankruptcy, death, or incapacity of an individual partner
  • Dissociation may be 'wrongful' under RUPA § 602 (e.g., breach of agreement, premature withdrawal from term partnership)

Effect of Dissociation — Buyout vs. Dissolution

Under RUPA, dissociation does not automatically dissolve the partnership; in an at-will partnership a partner's withdrawal triggers dissolution, while in most other cases the partnership continues and the dissociated partner is bought out.

  • At-will partnership + partner's express-will withdrawal → dissolution and winding up (RUPA § 801(1))
  • Otherwise → partnership continues; dissociated partner entitled to buyout at greater of liquidation or going-concern value (RUPA § 701)
  • Dissociated partner remains liable for pre-dissociation obligations
  • Lingering apparent authority for up to two years unless statement of dissociation filed (RUPA § 702)

Common patterns and traps

The 'No Paperwork, Still a Partnership' Setup

The fact pattern describes two people running a venture together with no formation documents, often calling each other 'co-owners' or 'partners' colloquially or splitting profits 50/50. The trap distractor says no partnership exists because nothing was filed or because the parties never signed an agreement. RUPA § 202(a) is explicit: subjective intent to form a partnership is irrelevant; the only question is whether the conduct fits the statutory definition.

A wrong choice that says 'No, because the parties never executed a written partnership agreement' or 'No, because they never filed with the secretary of state.'

The Sharing-of-Profits Exception Trap

The vignette involves someone receiving a percentage of profits but in a context that fits a § 202(c)(3) exception — typically a landlord taking a percentage of gross receipts as rent, an employee receiving a profit-sharing bonus, or a lender being repaid principal-plus-interest tied to profits. The trap presumes partnership from the profit share without checking whether the relationship fits an enumerated exclusion.

A wrong choice asserting that a percentage-rent landlord or a profit-share-bonus employee 'is a partner because she shares in profits.'

The Ordinary-Course / Apparent-Authority Cut

The question turns on whether a partner's unauthorized act binds the partnership through apparent authority. The correct analysis asks whether the act was apparently for carrying on the partnership's business in the ordinary course AND whether the third party knew of any limitation. Distractors substitute 'the partner had no actual authority' for the apparent-authority analysis or ignore the ordinary-course filter.

A wrong choice that says 'the partnership is not bound because the other partner objected' (ignores apparent authority) or 'the partnership is bound because partners can always bind the partnership' (ignores ordinary-course requirement).

The Care Standard Substitution

A partner makes a careless but not grossly negligent business decision and the question asks whether other partners can recover for breach of duty of care. The trap substitutes the corporate-director ordinary-negligence standard or a tort 'reasonable person' standard for RUPA's gross-negligence/recklessness floor.

A wrong choice that says 'Yes, because the partner failed to act as a reasonably prudent partner would have' — applying ordinary negligence rather than the RUPA § 404(c) gross-negligence standard.

The Dissolution-vs-Buyout Switch

A partner withdraws and the question asks the consequence. The cut depends on whether the partnership is at-will (express-will withdrawal triggers dissolution and winding up under RUPA § 801) or for a definite term/undertaking (withdrawal is dissociation, partnership continues, and the partner is bought out under § 701). Distractors flip the rule or apply pre-RUPA UPA dissolution-on-any-dissociation logic.

A wrong choice that says 'the partnership must wind up and liquidate' when the partnership was for a fixed term, or one that says 'the remaining partners must buy out the withdrawing partner' when the partnership was at-will and dissolution is the actual result.

How it works

Spotting a general partnership on the bar usually starts with people who never said the word 'partnership.' Two acquaintances pool money, share profits, and make joint decisions about a small business — under RUPA § 202 that is a partnership by operation of law, even with no agreement and no filing. Once you have a partnership, almost every issue collapses into three buckets: (1) is the act within a partner's actual or apparent authority so that it binds the partnership; (2) what fiduciary duty (loyalty or care) is implicated; and (3) what happens when someone leaves. Imagine Reyes and Patel running an unincorporated landscaping business, splitting profits 50/50. If Patel signs a contract with a nursery for plants — clearly ordinary course — the partnership is bound and both partners are personally on the hook. If Patel secretly takes a side job mowing for a competitor, he has breached the duty of loyalty (competing with the partnership before dissolution). If Patel walks away in their at-will arrangement, that triggers dissolution and winding up, not a buyout — a high-yield distinction the MEE loves to test.

Worked examples

Worked Example 1

Is Reyes personally liable on the contract with Patel Flour Co.?

  • A No, because Reyes and Liu never signed a partnership agreement and never filed any formation document with the state.
  • B No, because Liu acted unilaterally without first obtaining Reyes's consent to the purchase.
  • C Yes, because Reyes and Liu were carrying on as co-owners a business for profit, and the flour purchase was apparently for carrying on the business in the ordinary course. ✓ Correct
  • D Yes, but only to the extent of partnership assets, because partners are not personally liable for ordinary-course contracts.

Why C is correct: Under RUPA § 202(a), Reyes and Liu formed a general partnership by operation of law — they were two persons carrying on as co-owners a business for profit, evidenced by sharing profits equally and jointly managing the bakery. Liu, as a partner, had apparent authority under RUPA § 301 to bind the partnership for any act apparently carrying on partnership business in the ordinary course; ordering wholesale flour for a bakery squarely qualifies. Under RUPA § 306(a), partners are jointly and severally liable for all partnership obligations, so Reyes is personally liable.

Why each wrong choice fails:

  • A: This applies the wrong rule. Partnership formation under RUPA does not require a written agreement, a state filing, or even subjective intent — co-ownership of a profit-seeking business is enough. The 'No paperwork, still a partnership' premise the bar tests directly. (The 'No Paperwork, Still a Partnership' Setup)
  • B: This confuses actual authority with apparent authority. Liu didn't need Reyes's prior consent because the act was apparently carrying on partnership business in the ordinary course; apparent authority alone binds the partnership under RUPA § 301(1). (The Ordinary-Course / Apparent-Authority Cut)
  • D: This invents a limited-liability rule for general partnerships that does not exist. Partners in a general partnership are jointly and severally liable in their personal capacity for all partnership obligations under RUPA § 306(a); only LLPs and LLCs provide that kind of shield.
Worked Example 2

Will Okafor and Sato most likely prevail?

  • A No, because Brennan used her own personal funds and did not misappropriate any partnership assets to acquire the property.
  • B No, because the partnership had not yet entered into a binding contract to purchase the property.
  • C Yes, because Brennan breached her fiduciary duty of loyalty by usurping a partnership business opportunity and must account for the benefit to the partnership. ✓ Correct
  • D Yes, because Brennan breached her duty of care by failing to act as a reasonably prudent partner would have in disclosing the opportunity.

Why C is correct: Under RUPA § 404(b)(1), a partner's duty of loyalty includes accounting to the partnership for any property, profit, or benefit derived from a partnership opportunity. Brennan diverted to herself an opportunity squarely within the scope of the partnership's expansion plans and intends to use it to compete — which also violates § 404(b)(3)'s prohibition on competing with the partnership before dissolution. The standard remedy is a constructive trust requiring Brennan to hold the property for the partnership.

Why each wrong choice fails:

  • A: Use of personal funds is no defense to usurpation of a partnership opportunity. The duty of loyalty requires the partner to first present the opportunity to the partnership; using personal money simply means the remedy includes reimbursement of Brennan's outlay along with the constructive trust.
  • B: A partnership opportunity does not require a binding contract or even an existing right to acquire the asset. The doctrine reaches opportunities the partnership is actively pursuing or that fall within its line of business — both true here.
  • D: Wrong duty and wrong standard. The misconduct is self-dealing/competition, which is governed by the duty of loyalty under § 404(b), not the duty of care. And the duty of care under § 404(c) is gross negligence or worse, not ordinary 'reasonably prudent partner' negligence. (The Care Standard Substitution)
Worked Example 3

How should the court rule?

  • A For Kim and Ahmadi, because under RUPA dissociation never causes dissolution; the dissociated partner is always entitled only to a buyout.
  • B For Garcia, because in an at-will partnership a partner's notice of express will to withdraw causes dissolution and winding up. ✓ Correct
  • C For Kim and Ahmadi, because two of the three partners voted to continue the business, which under RUPA overrides the dissociating partner's wishes.
  • D For Garcia, because Garcia's withdrawal was wrongful and a wrongfully dissociating partner is always entitled to liquidation.

Why B is correct: Under RUPA § 801(1), in an at-will partnership a partner's notice of express will to withdraw is one of the few dissociation events that triggers dissolution and winding up rather than a buyout. Garcia's signed letter is precisely such a notice. The partnership therefore must be wound up under § 803, its assets liquidated, and the net proceeds distributed.

Why each wrong choice fails:

  • A: This overstates the RUPA reform. RUPA shifted away from the old UPA rule that any dissociation dissolves, but it preserved dissolution for at-will-partner withdrawals under § 801(1). The buyout rule of § 701 governs only when § 801 does not call for dissolution. (The Dissolution-vs-Buyout Switch)
  • C: There is no RUPA provision allowing a majority of remaining partners to override § 801(1) dissolution by vote in an at-will partnership. The continuation-by-vote mechanism under § 801(2) applies in different circumstances (e.g., wrongful dissociation in a term partnership), not here. (The Dissolution-vs-Buyout Switch)
  • D: Garcia's withdrawal was not wrongful — RUPA § 602(b) makes dissociation wrongful only in narrow circumstances, primarily breach of an express agreement or premature withdrawal from a term partnership. Withdrawal from an at-will partnership is rightful. The reasoning is wrong even though the outcome (winding up) is correct.

Memory aid

Use 'CABL' for formation: Co-ownership, Association of two+, Business, for profit — Look for sharing of profits as the giveaway. For partner duties remember 'LCG': Loyalty, Care, Good-faith. For dissociation: at-will withdrawal = Dissolution; everything else under RUPA = Buyout.

Key distinction

Distinguish ordinary-course acts (bind partnership through apparent authority alone) from extraordinary acts (require unanimous actual authority). The single most-tested fork — and the one that determines whether a third party can hold the partnership liable when one partner went rogue — is whether the act was 'apparently for carrying on in the ordinary course' the kind of business the partnership conducts.

Summary

A general partnership forms whenever two or more persons co-own a profit-seeking business; partners are agents with apparent authority for ordinary-course acts, owe fiduciary duties of loyalty and care, share profits and management equally absent agreement, and face joint-and-several personal liability — with dissociation triggering either dissolution (at-will) or buyout (everything else) under RUPA.

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Frequently asked questions

What is general partnership on the UBE?

A general partnership is the association of two or more persons to carry on as co-owners a business for profit, whether or not the participants intend to form a partnership (RUPA § 202(a); UPA § 6(1)). No writing, filing, or subjective intent is required—sharing of profits raises a presumption of partnership unless the share is paid as wages, rent, debt service, interest, or another listed exception (RUPA § 202(c)(3)). Partners are agents of the partnership for ordinary-course business and are jointly and severally liable for all partnership obligations (RUPA §§ 301, 306(a)). Partners owe one another and the partnership the fiduciary duties of loyalty and care plus the obligation of good faith and fair dealing (RUPA § 404).

How do I practice general partnership questions?

The fastest way to improve on general partnership is targeted, adaptive practice — working questions that focus on your specific weak spots within this sub-topic, getting immediate feedback, and revisiting items you missed on a spaced-repetition schedule. Neureto's adaptive engine does this automatically across the UBE; start a free 7-day trial to see your sub-topic mastery climb in real time.

What's the most important distinction to remember for general partnership?

Distinguish ordinary-course acts (bind partnership through apparent authority alone) from extraordinary acts (require unanimous actual authority). The single most-tested fork — and the one that determines whether a third party can hold the partnership liable when one partner went rogue — is whether the act was 'apparently for carrying on in the ordinary course' the kind of business the partnership conducts.

Is there a memory aid for general partnership questions?

Use 'CABL' for formation: Co-ownership, Association of two+, Business, for profit — Look for sharing of profits as the giveaway. For partner duties remember 'LCG': Loyalty, Care, Good-faith. For dissociation: at-will withdrawal = Dissolution; everything else under RUPA = Buyout.

What's a common trap on general partnership questions?

Treating partnership as requiring intent or a writing

What's a common trap on general partnership questions?

Confusing the at-will dissolution rule with the buyout rule for term partnerships

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