The Partner’s Ownership Interest in the Partnership

Question 1

The Partner’s Ownership Interest in the
Partnership

Answer 1

A partner’s ownership interest in a partnership is called his “partnership interest” (just like a shareholder’s ownership interest in a corporation
is called “stock”). The partnership interest is the personal property of the partner. Although it is personal property, there are restrictions on what a partner can do with it.

Question 2

Comprised of Management Rights and Financial Rights

Answer 2

A partnership interest is comprised of (1) management rights (that is, a partner’s right to participate in the management of the business, to
obtain information about the partnership, and to be recognized as “partner”); and (2) financial rights (that is, the partner’s right to receive his share of any profit distributions made by the partnership).

Question 3

No Unilateral Transfer of Management Rights

Answer 3

Unless otherwise agreed, a partner cannot unilaterally transfer his management rights and thereby make the transferee a “partner.”

Question 4

Unilateral Transfer of Financial Rights Permitted

Answer 4

Unless otherwise agreed, a partner can unilaterally transfer his financial rights. The transferee merely has the right to receive profit distributions from the partnership that would have otherwise gone to the
partner. The transferee is not a partner; the transferor is still a partner and retains all of the management rights of a partner.