Pick Your Partner versus the United States Bankruptcy Code

24 Pages Posted: 6 Nov 2015 Last revised: 29 Nov 2016

See all articles by Herrick K. Lidstone

Herrick K. Lidstone

Burns, Figa & Will, P.C.; University of Denver Sturm College of Law

Allen Sparkman

Sparkman + Foote LLP

Date Written: November 4, 2015

Abstract

Partnership law from the beginning contained provisions implementing what has come to be known as the “pick your partner” principle, reflecting the early development of the partnership law provision that admission of a partner to a partnership requires unanimous consent of the partners. As limited partnership and limited liability company statutes developed, the pick your partner principle was embodied in those statutes. The Colorado, Delaware, and Texas limited liability company statutes provide that the interest a member has in a limited liability company is personal property and, subject to agreement, may be assigned. These same provisions, however, also state that, absent agreement otherwise, the assignee only receives the assignor’s rights to profits and losses and distributions and does not receive any rights to participate in management.

State laws generally allow the owners of a business to pick their partners and maintain the partnership relationships. As discussed in the article, however, the impact of the U.S. Bankruptcy Code, when an owner (member or partner) files bankruptcy, may dramatically impact “pick your partner” and suggests careful drafting of the operative agreements.

Suggested Citation

Lidstone, Herrick K. and Sparkman, Allen, Pick Your Partner versus the United States Bankruptcy Code (November 4, 2015). Texas Journal of Business Law vol. 46:2 at p. 23 (2015), Available at SSRN: https://ssrn.com/abstract=2686418

Herrick K. Lidstone (Contact Author)

Burns, Figa & Will, P.C. ( email )

6400 S Fiddlers Green Circle
Suite 1000
Greenwood Village, CO 80111
United States
303-796-2626 (Phone)
303-796-2777 (Fax)

HOME PAGE: http://www.bfwlaw.com

University of Denver Sturm College of Law ( email )

2255 E. Evans Avenue
Denver, CO 80208
United States

Allen Sparkman

Sparkman + Foote LLP ( email )

1200 Binz St Ste 650
Houston, TX 77004
United States

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