TENANCY IN PARTNERSHIP

TENANCY IN PARTNERSHIP

At the time of initial codification in California Law of the various forms of ownership of property interests, the
recognized entity for ownership was a partnership. Tenancy in partnership exists if two or more persons, as
partners, own property for partnership purposes. Under the Uniform Partnership Act, the incidents of tenancy in
partnership are such that:

1. A partner has an equal right with all other partners to possession of specific partnership property for
partnership purposes. Unless the other partners agree, however, no partner has a right to possession for any
other purpose.

2. A partner’s right in specific partnership property is not assignable except in connection with the
assignment of rights of all the partners in the same property.

3. A partner’s right in specific partnership property is not subject to attachment or execution, except on a
claim against the partnership.

4. On death, a partner’s right in specific partnership property vests in the surviving partner (or partners). The
rights in the property of the last surviving partner would vest in the decedent’s legal representative. In
either case, the vesting creates a right to possess the partnership property only for partnership purposes.

5. A partner’s right in specific partnership property is not subject to dower or curtesy (both have been
abolished in California by statute) nor allowance to widows, heirs, or next of kin. Even when married, a
partner’s right is not community property. On the other hand, a partner’s interest in the partnership as such
(that is, a partner’s share of profits and of surplus) is governed by community property rules for some
purposes.

These incidents make sense because two or more persons are attempting to carry on a business for profit.
Without these incidents, continuity and unified, efficient operation would be difficult. Partners are not,
however, prevented from owning different fractional parts of the business. Thus, although each partner has
unlimited liability to third parties for firm debts, each partner’s interest in profits and losses may be any
percentage to which the parties agreed.

Partners may also structure the business relationship as a partnership in many different ways. By agreement,
one partner may have greater authority than the other partners. An example that is often used is a limited
partnership. The general partner or partners manage and control the partnership and the limited partners (in
exchange for limited liability) give up management and control. In a partnership where all partners have equal
rights of management and control, the partnership is commonly referred to as a general or co-partnership.

The Uniform Partnership Act set forth in 15001 et seq. of the Corporations Code and the Limited Uniform
Partnership Act set forth in 15501 et seq. of the Corporations Code each have been or will be repealed effective
January 1, 2010. The Uniform Partnership Act of 1994, commencing with Section 16100 of the Corporations
Code, remains operative and describes, among other issues, the scope of and limitations imposed on general or
co-partnerships in California. This law includes language describing the relationships between partners, the
handling of charging orders and claims of creditors against the partnership or an individual partner, and how
the partnership is to be wound-up and dissolved.

Limited Liability Partnerships are described in the Corporations Code, commencing with Section 16951.
However, the Uniform Limited Partnership Act of 2008 (enacted subsequent to the previous sections of the
Corporations Code describing Limited Liability Partnerships) is set forth in the Corporations Code,
commencing with Section 15900.

The foregoing body of law is complex and comprehensive. Understanding what portions have been or will be
repealed and what portions remain operative is essential. Furthermore, to establish partnership relationships

requires an understanding of practical, legal, tax and other important issues. Accordingly, the advice of
knowledgeable legal counsel is recommended before proceeding to form a partnership or determining to hold
title to real property or interests therein in a partnership entity.