MBE Rules · Business Associations
Partnership Property
Cal. Corp. Code §§ 16203, 16501
The rule
Property acquired by the partnership belongs to the entity, not the partners; a partner's only transferable interest is the share of profits and distributions — creditors reach it by charging order, not by seizing partnership assets.
In plain English
In a partnership, any property that is acquired is owned by the partnership as a whole, rather than by individual partners. This means that partners cannot individually sell or transfer partnership property; they only have rights to their share of profits and distributions, which can be reached by creditors through a charging order.
Worked example
Partnership A acquires a commercial building for its business operations. When Partner B faces personal debts, creditors cannot seize the building but can obtain a charging order against Partner B's share of the profits from the partnership. Thus, the creditors can only access Partner B's financial interest, not the partnership's property.
Memory hook
Partnership property is for the partnership, not the partners!
The trap
Exams may present scenarios where students confuse individual partner rights with partnership rights, leading them to incorrectly assume that personal creditors can seize partnership assets.
How examiners test it
This rule often appears in questions that involve creditor claims against individual partners, testing the distinction between personal and partnership property rights.
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