According to RUPA “Property transferred to or otherwise acquired by a partnership is property of the partnership and not of the partners individually.” Also, property is considered “partnership property” if it is purchased in the name of the partnership or by one or more partners as long as there is an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership.
Overall, if property is purchased with partnership assets, it will be presumed to belong to the partnership and not the partners in common. However, property is considered separate from the partnership even if it’s used for partnership purposes when it is purchased by one or more partners without touching the business assets and it involves no indication of partnership capacity or of the existence of the partnership.
Additionally, partnership interest given to a prospective business associate is personal property that allows the new partner to share the partnership’s profits and a piece of the pie in regards to the net assets upon dissolution.
Creditors are not allowed to dig the funds out of the partnership if a partner owes them money. Creditors should deal directly with the individual partner instead of involving the partnership to satisfy their debts. However, there are two ways creditors could claim what’s owed to them (charging order and assignment).
With a charging order, a judge could order the other partners to pay the creditors any distribution due to the debtor partners. On the other hand, with the assignment, the debtor partners may assign some of their own personal partnership interests to the creditors such as profits and net assets.
Keep in mind that partnership property may not be either assigned by the debtor partners or seized by the creditors to satisfy the debtor partners debts, only the individual partner’s interest could be assigned instead. Also, assigning interest to a debtor or anyone else in a partnership does not make someone else a partner, it solely gives the third party the right to receive the partner’s share in partnership profits in case there is a distribution.
In most states, a partnership creditor can proceed against the individual assets of each partner only after the partnership’s assets prove to not be sufficient to cover the debts.
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