General partnership
Encyclopedia : G : GE : GEN : General partnership
|
| Business law |
|---|
| Business organizations |
| Common law business forms: |
| Sole proprietorship |
| Partnership · Corporation |
| General partnership |
| Business trust |
| Statutory business forms: |
| Limited partnership |
| Proprietary limited company |
| Public limited company |
| Limited liability partnership |
| Limited liability company |
| Civil law corporate forms: |
| AB · AG · ANS · A/S · GmbH |
| K.K. · N.V. · OY · S.A. |
| EU law: |
| SE · SCE |
| Doctrines |
| Corporate governance |
| Limited liability · Ultra vires |
| Business judgment rule |
| De facto corporation and corporation by estoppel |
| Piercing the corporate veil |
| Related areas of law |
| Contract · Civil procedure |
In the commercial and legal parlance of most countries, a General partnership or simply a Partnership refers to an association of persons or an unincorporated company with the following major main features:
- Formed by two or more persons
- The owners are all liable for legal actions and debts the company may face personally
- Created by agreement, proof of existence and estoppel.
Contents
Characteristics
In contrast to the main attribute of limited liability of the owners as stakeholders of public and private companies, partners of a general partnership or partnership have unlimited liability. The major characteristics of a general partnership include the following:
- In General: A form of business entity in which 2 or more co-owners engage in business for profit. For the most part, the partners own the business assets together and are personally liable for business debts.
- Sharing Profits: In the absence of a partnership agreement, profits are shared equally amongst the partners. A partnership agreement, however, will usually provide for the manner in which profits and losses are to be shared.
- Unlimited Personal Liability for Losses: Each Partner is, jointly and severally, personally liable for debts and taxes of the partnership. For example, if the partnership assets are insufficient to satisfy a creditor's claims, the partners' personal assets are subject to attachment and liquidation to pay the business debts.
- Liability for a partner's debts: Each general partner is deemed the agent of the partnership. Therefore, if that partner was apparently carrying on partnership business, all general partners can be held liable for his dealings with third persons.
- Liability for a partner's wrongdoing: Each partner may be held jointly and severally liable for a co-partner's wrongdoing or tortious act (e.g. the misapplication of another person's money or property).
- Duration: Technically, a partnership terminates upon the death, disability, or withdrawal of any one partner. However, most partnership agreements provide for these types of events with the share of the departed partner being purchased by the remaining partners in the partnership.
- Management and Control: In the absence of a partnership agreement, each general partner has an equal right to participate in the management and control of the business. Disagreements in the ordinary course of partnership business are decided by a majority of the partners. Disagreements of extraordinary matters and amendments to the partnership agreement require the consent of all partners
- Transferability: Unless otherwise provided in the partnership agreement, no one can become a member of the partnership without the consent of all partners. However, a partner may assign his share of the profits and losses and right to receive distributions ("transferable interest"). Further a partner's judgment creditor may obtain an order charging the partner's "transferable interest" to satisfy a judgment.
The general partnership and the issue of separate legal personality
There has been considerable debate in most states as to whether a partnership should remain aggregate or be allowed to become a business entity with a separate legal personality. In Europe, France, Luxembourg, Norway, Czech republic and Sweden grant some degree of legal personality to commercial partnerships. Belgium, Germany, Switzerland, and Poland do not allow partnerships to acquire a separate legal personality, but permit partnerships the rights to sue and be sued, to hold property, and to postpone a creditor’s lawsuit against the partners until he or she has exhausted all remedies against the partnership assets. In December 2002 the Netherlands proposed to replace their ordinary partnership, which does not have legal personality, with a public partnership which allows the partners to opt for legal personality. In the United States and the United Kingdom, the original roots of the law were contained in the common law, then enacted into the Uniform Partnership Law 1914 and the Partnership 1890 respectively. Now section 201 of the Revised Uniform Partnership Ac1 (RUPA) 1994, provides: "A partnership is an entity distinct from its partners." and the UK Law Commission in Report 283 [link] has proposed to amend the law to create separate personality for all general partnerships (the Limited Liability Partnerships Act 2000 does confer separate personality on LLPs).The two main consequences of allowing separate personality are that one partnership will be able to become a partner in another partnership in the same way that a registered company can, and a partnership will not be bound by the doctrine of ultra vires but will have unlimited legal capacity like any other natural person.
See also
References
DeMott, Deborah A. “Transatlantic Perspectives on Partnership Law: Risk and Instability”, (2001) 26 Journal of Corporation Law. 879-895.[link]
From Wikipedia, the Free Encyclopedia. Original article here. Support Wikipedia by contributing or donating.
All text is available under the terms of the GNU Free Documentation License See Wikipedia Copyrights for details.